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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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    <TD STYLE="font-size: 10pt; font-weight: bold">As Filed with the Securities and Exchange Commission on May 4, 2012</TD>
    <TD STYLE="font-size: 10pt; font-weight: bold; text-align: right">Registration No. 333- &nbsp;</TD></TR>
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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>UNITED STATES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>SECURITIES AND EXCHANGE COMMISSION</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Washington, D.C. 20549</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>FORM S-1</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>DEYU AGRICULTURE CORP.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><I>(Name of Registrant As Specified in
its Charter)</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
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    <TD STYLE="font-weight: bold; text-align: center; width: 33%">Nevada</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: center; width: 32%">3080</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: center; width: 33%">80-0329825</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-style: italic; text-align: center">(State&nbsp;or&nbsp;Other&nbsp;Jurisdiction&nbsp;of</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="font-style: italic; text-align: center">(Primary&nbsp;Standard&nbsp;Industrial</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="font-style: italic; text-align: center">(I.R.S.&nbsp;Employer&nbsp;Identification&nbsp;No.)</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-style: italic; text-align: center">Incorporation</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="font-style: italic; text-align: center">Classification&nbsp;Code&nbsp;Number)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-style: italic; text-align: center">or&nbsp;Organization)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Headquarters in China</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">8th Floor, Block 5, Aolinjiatai Building</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">1 Kehuiqian Street</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Chaoyang District, Beijing, China</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Zip Code: 100192<B> </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Telephone: 86-10-5224 1802</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Office in the United States</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Columbus Circle 5</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">1790 Broadway, 8th Floor</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">New York, New York</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Zip Code: 10019</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Telephone: (646) 820-8060</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><I>&nbsp;(Address and Telephone Number
of Principal Executive Offices)</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

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    <TD STYLE="text-align: left; padding-right: 9pt; padding-left: 9pt"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Val-U-Corp Services, Inc.</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>1802 North Carson Street. Suite
        108</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Carson City, NV 89701</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Telephone: (800) 555-9141</B></P></TD></TR>
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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><I>&nbsp;(Name, Address and Telephone Number
of Agent for Service)</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><I>Copies to:</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: bold; text-align: center">Clayton&nbsp;E.&nbsp;Parker,&nbsp;Esq.</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: bold; text-align: center">Matthew Ogurick, Esq.</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: bold; text-align: center">K&amp;L&nbsp;Gates&nbsp;LLP</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center"><B>200&nbsp;South&nbsp;Biscayne&nbsp;Boulevard,&nbsp;Suite&nbsp;3900</B></TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: bold; text-align: center">Miami,&nbsp;Florida&nbsp;33131-2399</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: bold; text-align: center">Telephone:&nbsp;(305)&nbsp;539-3306</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: bold; text-align: center">Facsimile:&nbsp;(305)&nbsp;358-7095</TD></TR>
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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Approximate Date of Proposed Sale to the Public:</B> As
soon as practicable after this Registration Statement becomes effective.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">If any of the 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. <FONT STYLE="font-family: Wingdings">x</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">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. <FONT STYLE="font-family: Wingdings">&uml;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">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. <FONT STYLE="font-family: Wingdings">&uml;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">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 the same offering. <FONT STYLE="font-family: Wingdings">&uml;</FONT></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">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 &ldquo;large accelerated filer,&rdquo; &ldquo;accelerated filer&rdquo; and &ldquo;smaller reporting company&rdquo; in Rule
12b-2 of the Exchange Act. (Check one):</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: center">Large&nbsp;accelerated&nbsp;filer&nbsp;<FONT STYLE="font-family: Wingdings">&uml;</FONT></TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">Accelerated&nbsp;filer&nbsp;<FONT STYLE="font-family: Wingdings">&uml;</FONT></TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">Non-accelerated&nbsp;filer&nbsp;<FONT STYLE="font-family: Wingdings">&uml;</FONT></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><I>(Do&nbsp;not&nbsp;check&nbsp;if&nbsp;a&nbsp;smaller<BR>
        &nbsp;reporting company)</I></P></TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">Smaller&nbsp;reporting&nbsp;company&nbsp;<FONT STYLE="font-family: Wingdings">&thorn;</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>CALCULATION OF REGISTRATION FEE</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Title&nbsp;of&nbsp;Each&nbsp;Class&nbsp;of
    <BR>Securities&nbsp;to&nbsp;be <BR>Registered</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Amount <BR>to&nbsp;be <BR>Registered&nbsp;(1)</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Proposed<BR>
Maximum <BR>Offering
    <BR>Price&nbsp;per&nbsp;Unit&nbsp;(2)</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Proposed<BR>
Maximum <BR>Aggregate
    <BR>Offering&nbsp;Price&nbsp;(2)</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Amount&nbsp;of <BR>Registration<BR>Fee</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 52%">Common Stock, $0.001 par value per share</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 9%; text-align: right">250,000</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">1.65</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">412,500</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">48</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
</TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(1) Pursuant to Rule&nbsp;416 under the Securities Act, the
shares being registered hereunder include such indeterminate number of shares of common stock as may be issuable with respect
to the shares being registered hereunder as a result of stock splits, stock dividends or similar transactions.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(2) Estimated solely for purposes of calculating the registration
fee in accordance with Rule 457(c) and Rule 457(g) under the Securities Act of 1933, using the average of the high and low price
as reported on the OTC Markets-OTC Pink on April 27, 2012, which was $1.65 per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>&nbsp;</B>&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>The Registrant 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 hereafter 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 Section 8(a), may determine.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>The information in this prospectus is not complete and may
be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission
becomes effective. This prospectus is not an offer to sell these securities and we are not soliciting offers to buy these securities
in any state where&nbsp;the offer or sale is not permitted.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 34%; border-top: black 1.5pt solid">&nbsp;</TD>
    <TD STYLE="width: 2%; border-top: black 1.5pt solid">&nbsp;</TD>
    <TD STYLE="width: 31%; border-top: black 1.5pt solid">&nbsp;</TD>
    <TD STYLE="width: 2%; border-top: black 1.5pt solid">&nbsp;</TD>
    <TD STYLE="width: 31%; border-top: black 1.5pt solid; text-align: right">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="font-weight: bold">PRELIMINARY PROSPECTUS</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: center">SUBJECT TO COMPLETION</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: right">MAY 4, 2012</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="border-bottom: black 1.5pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1.5pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1.5pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1.5pt solid; text-align: right">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1.5pt solid; text-align: right">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Up to 250,000 Shares </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Of</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>DEYU AGRICULTURE CORP.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Common Stock</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">This prospectus relates to the sale of
up to 250,000<B> </B>shares of our common stock, par value $0.001 per share, which may be offered by the selling stockholder from
time to time. All of the shares of common stock offered by this prospectus are being sold by the selling stockholder, and such
shares consist of shares which had been previously issued by us to the selling stockholder on April 27, 2010 pursuant to a share
exchange transaction. Such registration does not mean that the selling stockholder will actually offer or sell any of these shares.
We will not receive any proceeds from the sales of shares of our common stock by the selling stockholder.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The selling stockholder
has advised us that it will sell the shares of common stock from time to time in the open market, on the OTC Markets-OTC Pink,
in privately negotiated transactions or a combination of these methods, at market prices prevailing at the time of sale or at
prices related to the prevailing market prices or at negotiated prices.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 23pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>Investing in our securities involves
a high degree of risk. See &ldquo;Risk Factors&rdquo; beginning on page 12 of this prospectus for a discussion of information
that should be considered in connection with an investment in our securities.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">The selling stockholder
may sell the common shares to or through underwriters, brokers or dealers or directly to purchasers. Underwriters, brokers or
dealers may receive discounts, commissions or concessions from the selling stockholder, purchasers in connection with sales of
the common shares, or both. Additional information relating to the distribution of the common shares by the selling stockholder
can be found in this prospectus under the heading &ldquo;Plan of Distribution.&rdquo; If underwriters or dealers are involved
in the sale of any securities offered by this prospectus, their names, and any applicable purchase price, fee, commission or discount
arrangement between or among them, will be set forth, or will be calculable from the information set forth, in a supplement to
this prospectus. We will pay the expenses of registering these shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We are a reporting company pursuant to
Section 12(g) of the Securities Exchange Act of 1934, or the Exchange Act, and our common stock is currently quoted on the OTC
Markets-OTC Pink under the symbol &ldquo;DEYU.PK&rdquo;. &nbsp;On April 27, 2012, the last reported sale price of our common stock
was $1.65<B> </B>per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.4in"><B>You should rely
only on the information contained in this prospectus or any prospectus supplement or amendment thereto.&nbsp;We have not authorized
anyone to provide you with different information.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>Neither the Securities and Exchange
Commission nor any state securities regulators have approved or disapproved of these securities or determined if this prospectus
is truthful or complete. Any representation to the contrary is a criminal offense.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">The date of this prospectus is ________
___, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: center; margin-bottom: 0pt"><B>TABLE OF CONTENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; text-align: center; margin-bottom: 0pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="width: 91%; font-weight: bold">PROSPECTUS SUMMARY</TD>
    <TD STYLE="width: 9%; text-align: right">6</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold">SUMMARY FINANCIAL DATA</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold">RISK FACTORS</TD>
    <TD STYLE="text-align: right">12</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold">SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS</TD>
    <TD STYLE="text-align: right">4</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold">USE OF PROCEEDS</TD>
    <TD STYLE="text-align: right">25</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold">CAPITALIZATION</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold">MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS</TD>
    <TD STYLE="text-align: right">26</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold">SELECTED FINANCIAL DATA</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>MANAGEMENT&rsquo;S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS</B></P></TD>
    <TD STYLE="text-align: right">29</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold">BUSINESS</TD>
    <TD STYLE="text-align: right">43</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold">MANAGEMENT</TD>
    <TD STYLE="text-align: right">59</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold">EXECUTIVE COMPENSATION</TD>
    <TD STYLE="text-align: right">66</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold">CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS</TD>
    <TD STYLE="text-align: right">70</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold">PRINCIPAL SHAREHOLDERS</TD>
    <TD STYLE="text-align: right">73</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold">SELLING STOCKHOLDER</TD>
    <TD STYLE="text-align: right">76</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold">DESCRIPTION OF SECURITIES</TD>
    <TD STYLE="text-align: right">80</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold">PLAN OF DISTRIBUTION</TD>
    <TD STYLE="text-align: right">83</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold">LEGAL MATTERS</TD>
    <TD STYLE="text-align: right">85</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold">EXPERTS</TD>
    <TD STYLE="text-align: right">85</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold">WHERE YOU CAN FIND ADDITIONAL INFORMATION</TD>
    <TD STYLE="text-align: right">85</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION
FOR SECURITIES ACT LIABILITY</B></P></TD>
    <TD STYLE="text-align: right">86</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold">FINANCIAL STATEMENTS</TD>
    <TD STYLE="text-align: right">87</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold">INFORMATION NOT REQUIRED IN PROSPECTUS</TD>
    <TD STYLE="text-align: right">89</TD></TR>
<TR STYLE="vertical-align: top; background-color: White">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold">SIGNATURES</TD>
    <TD STYLE="text-align: right">97</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>SPECIAL NOTE REGARDING FORWARD-LOOKING
STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">This prospectus contains forward-looking
statements that involve substantial risks and uncertainties. The forward-looking statements are contained principally in the sections
entitled &ldquo;Prospectus Summary&rdquo;, &ldquo;Risk Factors&rdquo;, &ldquo;Management&rsquo;s Discussion and Analysis of Financial
Condition and Results of Operations&rdquo; and &ldquo;Business&rdquo; but are also contained elsewhere in this prospectus. In
some cases, you can identify forward-looking statements by the words &ldquo;may&rdquo;, &ldquo;might&rdquo;, &ldquo;will&rdquo;,
&ldquo;could&rdquo;, &ldquo;would&rdquo;, &ldquo;should&rdquo;, &ldquo;expect&rdquo;, &ldquo;intend&rdquo;, &ldquo;plan&rdquo;,
&ldquo;objective&rdquo;, &ldquo;anticipate&rdquo;, &ldquo;believe&rdquo;, &ldquo;estimate&rdquo;, &ldquo;predict&rdquo;, &ldquo;project&rdquo;,
&ldquo;potential&rdquo;, &ldquo;continue&rdquo; and &ldquo;ongoing,&rdquo; or the negative of these terms, or other comparable
terminology intended to identify statements about the future. These statements involve known and unknown risks, uncertainties
and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different
from the information expressed or implied by these forward-looking statements. Although we believe that we have a reasonable basis
for each forward-looking statement contained in this prospectus, we caution you that these statements are based on a combination
of facts and factors currently known by us and our expectations of the future, about which we cannot be certain. Forward-looking
statements include, but are not limited to, statements about:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="font-family: Symbol">&middot;
</FONT>Our business;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="font-family: Symbol">&middot;
</FONT>Our business strategy;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="font-family: Symbol">&middot;
</FONT>Our future operating results;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="font-family: Symbol">&middot;
</FONT>Our ability to obtain external financing;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="font-family: Symbol">&middot;
</FONT>Our understanding of our competition;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="font-family: Symbol">&middot;
</FONT>Industry and market trends;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="font-family: Symbol">&middot;
</FONT>Future capital expenditures; and</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><FONT STYLE="font-family: Symbol">&middot;
</FONT>The impact of technology on our products, operations and business.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In addition, you should refer to the &ldquo;Risk
Factors&rdquo; section of this prospectus for a discussion of other important factors that may cause our actual results to differ
materially from those expressed or implied by our forward-looking statements. As a result of these factors, we cannot assure you
that the forward-looking statements in this prospectus will prove to be accurate or that we will achieve the plans, intentions
or expectations expressed or implied in our forward-looking statements. Furthermore, if our forward-looking statements prove to
be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements,
you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives
and plans in any specified time frame, or at all. Any forward-looking statements we make in this prospectus speak only as of its
date, and we undertake no obligation to publicly update any forward-looking statements, whether as a result of new information,
future events or otherwise, except as required by law.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">You should read this prospectus and the
documents that we reference in this prospectus and have filed as exhibits to the registration statement, of which this prospectus
is a part, completely and with the understanding that our actual future results may be materially different from what we expect.
We qualify all of our forward-looking statements by these cautionary statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>ABOUT THIS PROSPECTUS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">You should rely only on the information
contained in this prospectus. We have not authorized anyone to provide you with information different from that contained in this
prospectus. The selling stockholder is offering to sell and seeking offers to buy shares of our common stock only in jurisdictions
where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus,
regardless of the time of delivery of this prospectus or of any sale of our common stock. The prospectus will be updated and updated
prospectuses made available for delivery to the extent required by the federal securities laws.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">No person is authorized in connection with
this prospectus to give any information or to make any representations about us, the selling stockholder, the securities or any
matter discussed in this prospectus, other than the information and representations contained in this prospectus. If any other
information or representation is given or made, such information or representation may not be relied upon as having been authorized
by us or the selling stockholder. This prospectus does not constitute an offer to sell, or a solicitation of an offer to buy the
securities in any circumstances under which the offer or solicitation is unlawful. Neither the delivery of this prospectus nor
any distribution of securities in accordance with this prospectus shall, under any circumstances, imply that there has been no
change in our affairs since the date of this prospectus. The prospectus will be updated and updated prospectuses made available
for delivery to the extent required by the federal securities laws.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B>&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>PROSPECTUS SUMMARY</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in"><I>This summary highlights
information contained throughout this prospectus and is qualified in its entirety to the more detailed information and financial
statements included elsewhere in this prospectus. This summary does not contain all of the information that should be considered
before investing in our common stock.&nbsp;Investors should read the entire prospectus carefully, including the more detailed
information regarding our business, the risks of purchasing our common stock discussed in this prospectus under &ldquo;Risk Factors&rdquo;
beginning on page 12 of this prospectus and our financial statements and the accompanying notes beginning on page F-1 of this
prospectus.</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 35pt">In this prospectus, unless otherwise indicated,
the words &ldquo;we&rdquo;, &ldquo;us&rdquo; and &ldquo;our&rdquo; refer to Deyu Agriculture Corp., a Nevada corporation and all
entities owned or controlled by Deyu Agriculture Corp.&nbsp;&nbsp;All references to &ldquo;Deyu&rdquo; or the &ldquo;Company&rdquo;
in this prospectus mean Deyu Agriculture Corp., and all entities owned or controlled by Deyu Agriculture Corp., except where it
is made clear that the term only means the parent or a subsidiary company. References in this prospectus to the &ldquo;PRC&rdquo;
or &ldquo;China&rdquo; are to the People&rsquo;s Republic of China and references to &ldquo;SEC&rdquo; are to the U.S. Securities
and Exchange Commission.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Our Company Overview</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 35pt">We are a vertically integrated producer,
processor, marketer and distributor of organic and other agricultural products made from corn and grains operating in Shanxi Province
in the People's Republic of China. The Company has access to over 109,000 acres of farmland in Shanxi Province for breeding, cultivating,
processing, warehousing, and distributing grain and corn products. We have an extensive wholesale network in over 15 provinces
and a retail distribution network of approximately 20,000 supermarkets and convenience stores in 29 provinces across China. We
are equipped with advanced production lines and modern warehouses with production capacity of over 105,000 tons for grain products,
capacity of storage of over 100,000 tons and annual turnover of 700,000 tons for our corn products.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our farming operations are conducted through
our wholly-owned PRC subsidiaries, Jinzhong Deyu Agriculture Trading Co. Limited (&ldquo;Jinzhong Deyu&rdquo;), Jinzhong Yongcheng
Agriculture Trading Co. Limited (&ldquo;Yongcheng&rdquo;) and Jinzhong Yuliang Agriculture Trading Co. Limited (&ldquo;Yuliang&rdquo;).&nbsp;Yongcheng
and Yuliang focus on processing and distributing our corn and corn byproducts. Our grain processing and distribution are conducted
through our wholly-owned PRC subsidiaries, Jinzhong Deyu, Shanxi Taizihu Food Co. Ltd. (&ldquo;Taizihu&rdquo;), Shanxi Huichun
Bean Products Co., Ltd. Our other wholly-owned PRC subsidiaries, Detian Yu Biotechnology (Beijing) Co., Ltd. (&quot;Detian Yu&quot;)
and Tianjin Guandu Food Co., Ltd. (&quot;Tianjin Guandu&quot;), and our majority-owned PRC subsidiary Hebei Yugu Grain Co., Ltd.
(&quot;Hebei Yugu&quot;) together with Jinzhong Deyu are engaged in bulk trading of rice, flour, wheat and other agriculture products
and the distribution of our processed grain products.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">A brief description of our products is
set forth below, by division:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify"><B><I>Corn Division</I></B> &ndash;Yongcheng and Yuliang
process and distribute corn and corn byproducts. Yongcheng and Yuliang acquire unprocessed corn and perform value-added processes
to the corn such as cleaning, drying and packaging.&nbsp;&nbsp;Consumers range from livestock feed companies to corn oil/corn
starch manufacturing companies and governmental procurement agencies in China.</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.2in; text-indent: -0.2in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify"><B><I>Grain Division</I></B> &ndash;Jinzhong Deyu acquires
unprocessed grains including millet, green bean, soy bean, black rice and many other varieties of grains traditionally grown and
consumed in China and performs value-added processes to the grains such as peeling, cleaning, grinding and packaging. Taizihu
and Huichun mainly produce and distribute deep processed grain products, including bean based products, fruit vinegars and juices
and other grain products. The finished products of this division are then sold directly to supermarkets and convenience stores
in China and overseas.</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.2in; text-indent: -0.2in"><B><I>&nbsp;</I></B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify"><B><I>Bulk Trading Division</I></B> &ndash;Jinzhong Deyu,
Detian Yu, Tianjin Guandu and Hebei Yugu conduct bulk trading through procuring and wholesaling rice, flour, wheat, kidney beans,
green beans and other agricultural products. The majority of our customers for this division are food manufacturers, grain trading
companies, wholesalers and governmental procurement agencies in China.</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Operating revenue from continuing operations
for the year ended December 31, 2011 was $261,576,666, representing a 207% increase from $85,174,884 for the year ended December
31, 2010. Our net income available to common stockholders for the year ended December&nbsp;31, 2011 was $17,335,442, representing
a 50.7% increase from $11,502,253 for the year ended December 31, 2010.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Competitive Advantages</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Cultivation Base</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our grains are mainly grown in the hilly
area near Taihang Mountain, at an altitude of between 5,000 to 8,000 feet above sea level. This region has a wide temperature
variation between night and day and a long daily exposure to sunlight. These geographic characteristics produce grains that are
rich in nutrients, especially minerals, rutin, cellulose, amino acids, chlorophyll, lecithin and linoleic acid.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Partnership with Farmers</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Agricultural land for large scale farming
of grains is becoming a rarity in China. With the support of our local government, we have adopted the operation mode of &ldquo;Company
+ Farmers + Base on a large scale&rdquo;. We have the cultivation base of 109,000 acres in Jinzhong in Shanxi Province for the
supply of corn and grain by obtaining the land use rights of 17, 000 acres of farmland with average remaining use life of 38 years
and signing agricultural co-operative agreements with the governments of the counties and villages for the development of 92,000
acres for 20 years. We have established stable partnerships with over 60,000 farmers to grow crops on the farmland. We provide
instruction to the farmers for planting crops and technical support for seeding and cultivation. The scale cultivation ensures
our stable supply of raw material with high quality.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Advanced Production Lines</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We have a modern processing center for
corn with five drying cylinders and six warehouses, the construction of which was completed in 2011. Our total capacity of storage
and annual turnover of corn has exceeded 100,000 tons and 700,000 tons, respectively. We are also equipped with fully automatic
and advanced production lines for grain processing with a total production capacity of over 105,000 tons. The advanced production
lines and production technologies help produce grain products with high quality by maintaining the nutritional components of the
products.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Warehousing and Logistics</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We operate six self-owned warehouses, one
rental warehouse and some temporary warehouses with total storage capacity of over 100,000 tons of food products and an annual
turnover of 700,000 tons. This capacity helps us to reach economies of scale with low cost of processing and storage. Our production
bases are located in Jinzhong and Quwo in Shanxi Province with convenient transportation. The Jinzhong facilities and warehouses
are in proximity to Shitai Railway and Provincial Road 317. The Quwo facilities are several kilometers away from Houma, a transportation
hub. We have exclusive lease agreements with three railway lines for freight transportation in Jinzhong: (a) Shanxi Cereal &amp;
Oil Group, Mingli Reservation Depot; (b) Shanxi Yuci Cereal Reservation Depot; and (c) Yuci Dongzhao Railway Freight Station.&nbsp;&nbsp;These
advantageous geographical positions and exclusive agreements help us ensure speedy delivery of our products at a low cost.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Established Sales Network</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We have cultivated an extensive wholesale
network for corn and bulk trading with customers including various livestock feed companies, food manufacturers, corn oil/corn
starch manufacturing companies, grain trading companies, wholesalers and governmental procurement agencies in approximately 15
provinces. Meanwhile, our retail sales network for processed grain covers approximately 20,000 supermarkets and convenience stores
with distribution to over 29 provinces in China, including the cities of Beijing, Tianjin, Jinan, Fuzhou, Chengdu and Shijiazhuang,
in some of the world&rsquo;s widely known supermarkets. We believe the rapid development of our sales network has increased our
revenue as well as our brand awareness.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Recent Developments</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On June 16, 2011, Tianjin Guandu (previously
named Tianjin Detianyu Food Co., Ltd. before October 24, 2011), a newly formed wholly-owned subsidiary of Detian Yu with RMB10,000,000
($1,544,497) registered capital entered into a Cooperation Agreement with the Administrative Committee of Sino-Singapore Tianjin
Eco-city (the &ldquo;Agency&rdquo;), the representative organization of the Tianjin Municipal Government. The agreement provides
for a cooperative relationship between Tianjin Guandu and the Agency regarding Tianjin Guandu&rsquo;s establishment of its operations
in Tianing&rsquo;s Eco-city, particularly with respect to certain tax arrangements. Tianjin Guandu is in the business of wholesale
distribution of simple-processed and deep-processed packaged food products and staple foods.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On July 25, 2011, we incorporated and registered
Hebei Yugu, a 70%-owned subsidiary of Detian Yu with RMB10,000,000 ($1,563,824) in registered capital, in Gaocheng City of Shijiazhuang,
Hebei Province, China. Hebei Yugu is primarily engaged in wholesale distribution of grains, beans and potatoes.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On February 2, 2012, RedSun Technology
(Shenzhen) Co. Limited ( &ldquo;Redsun&rdquo;), a wholly-owned subsidiary of the Company, acquired 100% of the issued and outstanding
registered share capital of Taizihu and its subsidiary, Huichun (together with Taizihu, the &ldquo;Taizihu Group&rdquo;) in consideration
of RMB34,705,000 ($5,502,181). The Taizihu Group is in the business of producing and selling bean based products, fruit vinegars
and juices and other grain products. The Company will file the audited financial statements of the Taizihu Group and pro forma
financial information required to be filed with the SEC not later than April 19, 2012 in accordance with the rules of the SEC.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Corporate Information</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our principal office is located at 8th
Floor, Block 5, Aolinjiatai Building, 1 Kehuiqian Street, Chaoyang District, Beijing, China 100192. Our telephone number in China
is +(8610)-5224 1802 and our fax number is +(8610)-5224 1822. Our telephone number in the United States is (646) 820-8060. Our
corporate website is <U>www.deyuagri.com</U> (information on our website is not made a part of this prospectus).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>The Offering</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 27%">Common stock outstanding prior to the offering</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 72%">10,566,766</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>Common Stock offered by the selling stockholder</TD>
    <TD>&nbsp;</TD>
    <TD>Up to 250,000 shares</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>Common stock outstanding after the offering</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;10,566,766</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>Use of proceeds</TD>
    <TD>&nbsp;</TD>
    <TD>We will not receive any proceeds from the sale of the shares of common stock by the selling stockholder.</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>OTC Markets-OTC Pink</TD>
    <TD>&nbsp;</TD>
    <TD>DEYU.PK</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>Risk factors</TD>
    <TD>&nbsp;</TD>
    <TD>This investment involves a high degree of risk. See &ldquo;Risk Factors&rdquo; for a discussion of factors you should
    consider carefully before making an investment decision.</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The above information regarding common
stock to be outstanding after the offering is based on 10,566,766 shares of common stock outstanding as of the date of this prospectus,
and excludes 1,995,475 shares of common stock issuable upon the conversion of convertible preferred stock, 1,154,272 shares of
common stock issuance upon the exercise of warrants and 543,333 shares of common stock issuance upon the exercise of exercisable
stock options.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>2010 Share Exchange</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On April 27, 2010, we entered into a Share
Exchange Agreement (&ldquo;Exchange Agreement&rdquo;) by and among (i) City Zone Holdings Limited, an emerging organic and non-organic
agricultural products distributor in Shanxi Province, China, engaged in procuring, processing, marketing and distributing various
grain and corn products (&ldquo;City Zone&rdquo;), (ii) City Zone&rsquo;s shareholders, including, without limitation, Expert
Venture Limited, a company organized under the laws of the British Virgin Islands and the selling stockholder hereunder and (iii)
certain of our principal shareholders, whereby Expert Venture Limited and the other City Zone shareholders transferred to us all
of the shares of City Zone in exchange for the issuance of an aggregate 8,736,932 shares of our common stock, of which 6,238,205
shares were issued to Expert Venture Limited. As a result of the Exchange Agreement, Expert Venture Limited and other minority
shareholders of City Zone owned a majority of our outstanding shares, City Zone became our wholly-owned subsidiary and we acquired
100% of the processing and production operations of City Zone&nbsp;and its subsidiaries, the business and operations of which
now constitutes the primary business and operations of the Company.&nbsp;&nbsp;&nbsp;The 250,000 shares of our common stock being
registered hereunder were part of the issuance by us to Expert Venture Limited pursuant to the Exchange Agreement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>2010 Private Placement</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Simultaneously with the acquisition of
City Zone, we completed a private placement offering in the gross amount of $8,211,166 of the sale of securities to accredited
investors at $4.40 per unit, with each &ldquo;Unit&rdquo; consisting of one share of our Series A convertible preferred stock
and one warrant to purchase 0.4 shares of our common stock with an exercise price of $5.06 per share. On May 10, 2010, we&nbsp;closed
on the second and final round of the private placement offering as disclosed in our Current Report on Form 8-K filed with the
SEC on May 3, 2010 through the sale of 589,689 Units comprised of 589,689 shares of our Series A convertible preferred stock and
235,882 five-year warrants with an exercise price of $5.06 per share, to certain accredited investors for total gross proceeds
of $2,594,607. We raised an aggregate amount of $10,805,750 in the two rounds of offerings.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In connection with the financing transaction,
we entered into (i) a Securities Purchase Agreement, (ii) a Registration Rights Agreement, (iii) a Lock-Up Agreement and (iv)
a Securities Escrow Agreement for a make good arrangement with our management (collectively, the &ldquo;Financing Documents&rdquo;).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The private placement closed simultaneously
with the signing of the Financing Documents and our issuing of 2,455,863 shares of Series A convertible preferred stock and warrants
exercisable into 982,362 shares of common stock to certain investors (collectively, the &ldquo;Investors&rdquo;).&nbsp;&nbsp;Pursuant
to its terms, the Series A convertible preferred stock receive cumulative dividends at a rate of 5% per annum and can be converted
into common stock on a 1:1 basis, subject to applicable adjustments.&nbsp;&nbsp;Pursuant to its terms, the warrants can be converted
into 982,362 shares of common stock at an exercise price of $5.06 per share (the &quot;Warrants&quot;).&nbsp;&nbsp;The Warrants
will expire on April 27, 2015.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Pursuant to the Registration Rights Agreement,
we agreed to file a registration statement on Form S-1 (or other applicable Form) within 60 days of the close of such financing.&nbsp;&nbsp;We
filed a Registration Statement on Form S-1 with the SEC on June 15, 2010 (, and on October 21, 2010, the&nbsp;SEC declared the
Form S-1 effective.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We also entered into a Lock-Up Agreement
with the Investors, pursuant to which the common stock owned by the management of City Zone was locked-up for the six (6) month
period following the effectiveness of the Registration Statement is declared effective. The Lock-Up Agreement expired on April
21, 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Lastly, pursuant to the Securities Escrow
Agreement, Expert Venture Limited pledged 2,455,863 shares of&nbsp;common stock of the Company (the &ldquo;Make Good Shares&rdquo;)
to secure the obligation that we reach certain earnings thresholds for the fiscal years ended 2010 and 2011. One half (or 1,227,932
shares) of the Make Good Shares were allocated to the 2010 earnings requirement and the other half (1,227,931 shares) of the Make
Good Shares were allocated to the 2011 earnings requirement. For the fiscal year 2010, we met our threshold requirement of reporting
net income of at least 95% of $11,000,000. If we meet the threshold in 2011 of reporting net income of at least 95% of $15,000,000
(i.e., at least $14,250,000), the remainder of the Make Good Shares will be returned to Expert Venture Limited, however if we
fail to meet our threshold, then the Make Good Shares will be released from escrow based on the following terms and conditions:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>If we achieve net
                                                                                                          income of less than
                                                                                                          50% of $15,000,000 (or
                                                                                                          $7,500,000), then 1,227,931
                                                                                                          shares shall be released
                                                                                                          to the investors on
                                                                                                          a pro rata basis (based
                                                                                                          on the amount of each
                                                                                                          investors investment).</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>If we achieve net
                                                                                                          income of between 50%
                                                                                                          and less than 95% of
                                                                                                          $15,000,000, then a
                                                                                                          portion of the 1,227,931
                                                                                                          shares held in escrow
                                                                                                          shall be disbursed to
                                                                                                          the Investors (the remaining
                                                                                                          shares will be returned
                                                                                                          to Expert Venture Limited).&nbsp;
                                                                                                          The number of shares
                                                                                                          released to the investors
                                                                                                          shall be determined
                                                                                                          by doubling the percentage
                                                                                                          missed between the actual
                                                                                                          net income as compared
                                                                                                          to the make good target
                                                                                                          and then multiplying
                                                                                                          that by the 1,227,931
                                                                                                          escrow shares.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The 250,000 shares being registered hereunder
are not part of the 2,455,863 shares pledged by Expert Venture Limited pursuant to the Securities Escrow Agreement.<B> </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Share Transfer Agreements</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Pursuant to a share transfer agreement
dated April 26, 2010, Mr.&nbsp;Hong Wang, a Director of the Company, has the option, subject to certain performance targets (discussed
in more detail below), to purchase from Mr.&nbsp;Yam Sheung Kwok, the current sole shareholder of Expert Venture Limited, up to
120 shares of Expert Venture Limited. Accordingly, upon exercise of such option, Mr.&nbsp;Wang will indirectly (through his ownership
of Expert Venture Limited) own and control 664,142 shares, which equal 4.66% of the fully-diluted percentage of outstanding shares
as of the date of this prospectus. Since the performance targets set forth in the share transfer agreement have been met, the
option has vested and become exercisable to Mr. Wang. As a result, the number of shares of beneficial ownership has included 664,142
shares of common stock that have become transferrable to Mr. Wang after adjusting proportionally to the reduction of total number
of shares held by Expert Venture Limited since April 2010.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Pursuant to a share transfer agreement
dated April 26, 2010, Mr.&nbsp;Jianming Hao, the Chairman of the Board and the President and Chief Executive Officer of the Company,
has the option, subject to certain performance targets, to purchase from Mr.&nbsp;Yam Sheung Kwok, the current sole shareholder
of Expert Venture Limited, up to 101 shares of Expert Venture Limited. Accordingly, upon exercise of such option, Mr.&nbsp;Hao
will indirectly (through his ownership of Expert Venture Limited) own and control&nbsp;558,986&nbsp;shares, which equal 3.92%
of the fully-diluted percentage of outstanding shares as of the date of this prospectus. Since the performance targets set forth
in the share transfer agreement have been met, the option has vested and become exercisable to Mr. Hao. As a result, the number
of shares of beneficial ownership has included 558,986 shares of common stock that have become transferrable to Mr. Hao after
adjusting proportionally to the reduction of total number of shares held by Expert Venture Limited since April 2010.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Pursuant to a share transfer agreement
dated April 26, 2010, Mr.&nbsp;Wenjun Tian, a former Director and former President of the Company, will have an option, subject
to certain performance targets (discussed in more detail below), to purchase from Mr.&nbsp;Yam Sheung Kwok, the current sole shareholder
of Expert Venture Limited, up to 300 shares of Expert Venture Limited, which constitutes 30% of Expert Venture Limited. Accordingly,
upon exercise of such option, Mr.&nbsp;Tian will indirectly (through his ownership of Expert Venture Limited) own and control
1,660,354 shares, which equal 11.64% of the fully-diluted percentage of outstanding shares as of the date of this prospectus.
Since the performance targets set forth in the share transfer agreement have been met, the option has vested and become exercisable
to Mr. Tian. As a result, the number of shares of beneficial ownership has included 1,660,354 shares of common stock that have
become transferrable to Mr. Tian after adjusting proportionally to the reduction of total number of shares held by Expert Venture
Limited since April 2010.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Pursuant to a share transfer agreement
dated April 26, 2010, Mr.&nbsp;Yongqing Ren, Vice President of the Corn Division of the Company, will have an option, subject
to certain performance targets (discussed in more detail below), to purchase from Mr.&nbsp;Yam Sheung Kwok, the current sole shareholder
of Expert Venture Limited, up to 200 shares of Expert Venture Limited. Accordingly, upon exercise of such option, Mr.&nbsp;Ren
will indirectly (through his ownership of Expert Venture Limited) own and control 1,106,903 shares, which equal 7.76% of the fully-diluted
percentage of outstanding shares as of the date of this prospectus. Since the performance targets set forth in the share transfer
agreement have been met, the option has vested and become exercisable to Mr. Ren. As a result, the number of shares of beneficial
ownership has included 1,106,903 shares of common stock that have become transferrable to Mr. Ren after adjusting proportionally
to the reduction of total number of shares held by Expert Venture Limited since April 2010.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">Pursuant to a share
transfer agreement dated April 26, 2010, Mr.&nbsp;Junde Zhang, Vice President of the Grain Division of the Company, will have
an option, subject to certain performance targets (discussed in more detail below), to purchase from Mr.&nbsp;Yam Sheung Kwok,
the current sole shareholder of Expert Venture Limited, up to 200 shares of Expert Venture Limited. Accordingly, upon exercise
of such option, Mr.&nbsp;Zhang will indirectly (through his ownership of Expert Venture Limited) own and control 1,106,903 shares,
which equal 7.76% of the fully-diluted percentage of outstanding shares of common stock. Since the performance targets set forth
in the share transfer agreement have been met, the option has vested and become exercisable to Mr. Zhang. As a result, the number
of shares of beneficial ownership has included 1,106,903 shares of common stock that have become transferrable to Mr. Zhang after
adjusting proportionally to the reduction of total number of shares held by Expert Venture Limited since April 2010.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Plan of Distribution</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">This offering is not being underwritten.&nbsp;The
selling stockholder will sell its shares of our common stock at prevailing market prices or privately negotiated prices.&nbsp;The
selling stockholder itself directly, or through its agents, or through its brokers or dealers, may sell its shares from time to
time, in (i)&nbsp;privately negotiated transactions, (ii)&nbsp;in one or more transactions, including block transactions in accordance
with the applicable rules of the OTC Markets-OTC Pink or (iii)&nbsp;otherwise in accordance with the section of this prospectus
entitled &ldquo;Plan of Distribution.&rdquo;&nbsp;To the extent required, the specific shares to be sold, the name of the selling
stockholder, the respective purchase prices and public offering prices, the names of any agent, broker or dealer and any applicable
commission or discounts with respect to a particular offer will be described in an accompanying prospectus supplement.&nbsp;In
addition, any securities covered by this prospectus which qualify for sale pursuant to Rule 144 may be sold under Rule 144 rather
than pursuant to this prospectus.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">For additional information
on the methods of sale, you should refer to the section of this prospectus entitled &ldquo;Plan of Distribution&rdquo; beginning
on page 83.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>RISK FACTORS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B><I>Before you make a decision to invest
in our securities, you should consider carefully the risks described below, together with other information in this prospectus.
If any of the following events actually occur, our business, operating results, prospects or financial condition could be materially
and adversely affected. This could cause the trading price of our common stock to decline and you may lose all or part of your
investment. The risks described below are not the only ones that we face. Additional risks not presently known to us or that we
currently deem immaterial may also significantly impair our business operations and could result in a complete loss of your investment.
</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Risks Relating to Our Business</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Substantially all of our business, assets and operations
are located in PRC and substantially all of our revenue is derived from our operations in PRC which subjects us to the risks related
to&nbsp;economic, political and legal developments in PRC.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Substantially all of our business, assets
and operations are located in China. The economy of the PRC differs from the economies of most developed countries in many respects.
The economy of PRC has been transitioning from a planned economy to a market-oriented economy. Although in recent years the PRC
government has implemented measures 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 the PRC is still owned by the PRC government. In addition, the PRC 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. Some of these measures benefit the overall economy of China, but
may have a negative effect on us.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Our success depends on our management team and other key
personnel, the loss of any of whom could disrupt our business operations.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our future success will depend in substantial
part on the continued services of our senior management. The loss of the services of one or more of our key personnel could impede
implementation of our business plan and result in reduced profitability. Our future success will also depend on the continued
ability to attract, retain and motivate highly qualified technical sales and marketing customer support. Because of the rapid
growth of the economy in the PRC, competition for qualified personnel is intense. We cannot guarantee that we will be able to
retain our key personnel or that we will be able to attract, assimilate or retain qualified personnel in the future. If we are
unsuccessful in our efforts in this regard, it could have an adverse effect on our business, financial condition and results of
operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Any disruption of the operations in our factories would
damage our business<I>.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our operations could be interrupted by
fire, flood, earthquake and other events beyond our control for which we may not carry adequate insurance. Any disruption of the
operations in our factories would have a significant negative impact on our ability to store, package, manufacture, and deliver
products which would cause a potential diminution in sales, the cancellation of orders, damage to our reputation and potential
lawsuits.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Adverse weather conditions could reduce supply and/or demand
for our products<I>.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The supply of and demand for our corn and
grain products fluctuate significantly with weather conditions, which could have either a positive or negative effect on production.
If any natural disasters, such as flood, drought, hail, tornadoes or earthquakes, occur, supply for our products would likely
be reduced.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>We may encounter substantial competition in our business
and our failure to compete effectively may adversely affect our ability to generate revenue<I>.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We believe that existing and new competitors
will continue to improve their products and to introduce new products with competitive price and performance characteristics.
We expect that we will be required to continue to invest in product development and productivity improvements to compete effectively
in our markets. Our competitors could develop a more efficient product or undertake more aggressive and costly marketing campaigns
than ours, which may adversely affect our marketing strategies and could have a material adverse effect on our business, results
of operations and financial condition.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our major competitors may be better able
than we to successfully endure downturns in our sector. In periods of reduced demand for our products, we can either choose to
maintain market share by reducing our selling prices to meet competition or maintain selling prices, which would likely sacrifice
market share. Sales and overall profitability would be reduced in either case. In addition, we cannot assure you that additional
competitors will not enter our existing markets, or that we will be able to compete successfully against existing or new competition.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>We may not be able to obtain regulatory or governmental
approvals for our products which may delay or suspend the production, packaging and/or distribution of our products<I>.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The manufacture and sale of our agricultural
products in the PRC is regulated by the PRC and the local Provincial Government. The legal and regulatory regime governing our
industry is evolving, and we may become subject to different, including more stringent, requirements than those currently applicable
to us. We may be vulnerable to local and national government agencies or other parties who wish to renegotiate the terms and conditions
of, or terminate their agreements or other understandings with us, or implement new or more stringent requirements, which may
require us to suspend or delay production of their products. Our many permits and licenses related to the agricultural and food
industries may expire and there is not guarantee the government or certifying agency will renew our licenses and/or certifications.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Potential environmental liability could have a material
adverse effect on our operations and financial condition<I>.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">To the knowledge of our management team,
neither the production nor the sale of our products constitutes activities, or generates materials that create any environmental
hazards or violates PRC environmental laws. Although it has not been alleged by PRC government officials that we have violated
any current environmental regulations, we cannot assure you that the PRC government will not amend the current PRC environmental
protection laws and regulations. Our business and operating results may be materially and adversely affected if we were to be
held liable for violating existing environmental regulations or if we were to increase expenditures to comply with environmental
regulations affecting our operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>We do not have key man insurance on our Chairman and CEO,
on whom we rely for the management of our business and any loss of service by our Chairman and CEO could cause a material adverse
effect on our business<I>.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We depend, to a large extent, on the abilities
and participation of our current management team, but have a particular reliance upon Mr. Jianming Hao, our CEO and Chairman of
the Board. The loss of the services of Mr. Hao, for any reason, may have a material adverse effect on our business and prospects.
We cannot assure you that the services of Mr. Hao will continue to be available to us, or that we will be able to find a suitable
replacement for him. We do not carry key man life insurance for any key personnel.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Any significant fluctuation in price of our raw materials
may substantially increase our manufacturing costs<I>.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The prices for the raw materials that we
use in the manufacture of our fertilizer products are subject to market forces largely beyond our control, including the price
of coal, our energy costs, organic chemical feedstock costs, market demand, and freight costs. The prices for these raw materials
may fluctuate significantly based upon changes in these forces. If we are unable to pass any raw material price increases through
to our customers, we could incur significant losses and a diminution of the market price of our common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Our plans to build additional plants and to improve and
upgrade our internal control and management system will require capital expenditures in the future which could result in a shortage
of cash.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our plans to build additional plants and
to improve and upgrade our internal control and management system will require capital expenditures in the future. We may also
need further funding for working capital, investments, potential acquisitions and joint ventures and other corporate requirements.
We cannot assure you that cash generated from our operations will be sufficient to fund these development plans, or that our actual
capital expenditures and investments will not significantly exceed our current planned amounts. If either of these conditions
arises, we may have to seek external financing to satisfy our capital needs. Our ability to obtain external financing at reasonable
costs is subject to a variety of uncertainties. Failure to obtain sufficient external funds for our development plans could adversely
affect our business, financial condition and operating performance.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Our planned expansion and technical
improvement projects could be delayed or adversely affected by, among other things, failures to receive regulatory approvals,
difficulties in obtaining sufficient financing, technical difficulties, or human or other resource constraints.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our planned expansion and technical improvement
projects could be delayed or adversely affected by, among other things, failures to receive regulatory approvals, difficulties
in obtaining sufficient financing, technical difficulties, or human or other resource constraints. Moreover, the costs involved
in these projects may exceed those originally contemplated. Costs savings and other economic benefits expected from these projects
may not materialize as a result of any such project delays, cost overruns or changes in market circumstances. Failure to obtain
intended economic benefits from these projects could adversely affect our business, financial condition and operating performances.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>We need to manage growth in operations to maximize our potential
growth and achieve our expected revenues and our failure to manage growth will cause a disruption of our operations resulting
in the failure to generate revenue at levels we expect.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In order to maximize potential growth in
our current and potential markets, we believe that we must expand our manufacturing and marketing operations. This expansion will
place a significant strain on our management and our operational, accounting, and information systems. We expect that we will
need to continue to improve our financial controls, operating procedures, and management information systems. We will also need
to effectively train, motivate, and manage our employees. Our failure to manage our growth could disrupt our operations and ultimately
prevent us from generating the revenues we expect.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>We cannot assure you that our organic growth strategy will
be successful which may result in a negative impact on our growth, financial condition, results of operations and cash flow.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">One of our strategies is to grow organically
through increasing the distribution and sales of our products by penetrating existing markets in PRC and entering new geographic
markets in PRC. However, many obstacles to entering such new markets exist including, but not limited to, established companies
in such existing markets in the PRC. We cannot, therefore, assure you that we will be able to successfully overcome such obstacles
and establish our products in any additional markets. Our inability to implement this organic growth strategy successfully may
have a negative impact on our growth, future financial condition, results of operations or cash flows.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>If we need additional capital to fund our growing operations,
we may not be able to obtain sufficient capital and may be forced to limit the scope of our operations.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">If adequate additional financing is not
available on reasonable terms, we may not be able to undertake plant expansion, purchase additional machinery and purchase equipment
for our operations and we would have to modify our business plans accordingly. There is no assurance that additional financing
will be available to us.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In connection with our growth strategies,
we may experience increased capital needs and accordingly, we may not have sufficient capital to fund our future operations without
additional capital investments. Our capital needs will depend on numerous factors, including (i) our profitability; (ii) the release
of competitive products by our competition; (iii) the level of our investment in research and development; and (iv) the amount
of our capital expenditures. We cannot assure you that we will be able to obtain capital in the future to meet our needs.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In recent years, the securities markets
in the United States have experienced a high level of price and volume volatility, and the market price of securities of many
companies have experienced wide fluctuations that have not necessarily been related to the operations, performances, underlying
asset values or prospects of such companies. For these reasons, our shares of common stock can also be expected to be subject
to volatility resulting from purely market forces over which we will have no control. If we need additional funding we will, most
likely, seek such funding in the United States (although we may be able to obtain funding in the PRC) and the market fluctuations
affect on our stock price could limit our ability to obtain equity financing.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">If we cannot obtain additional funding,
we may be required to: (i) limit our plant expansion; (ii) limit our marketing efforts; and (iii) decrease or eliminate capital
expenditures.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Such reductions could materially adversely
affect our business and our ability to compete.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Even if we do find a source of additional
capital, we may not be able to negotiate terms and conditions for receiving the additional capital that are acceptable to us.
Any future capital investments could dilute or otherwise materially and adversely affect the holdings or rights of our existing
shareholders. In addition, new equity or convertible debt securities issued by us to obtain financing could have rights, preferences
and privileges senior to the units. We cannot give you any assurance that any additional financing will be available to us, or
if available, will be on terms favorable to us.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Labor disputes could significantly affect our operations.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Labor disputes with our employees or labor
disputes, work stoppages or slowdowns at any of its subcontractors or suppliers could significantly disrupt operations or expansion
plans. Delays caused by any such disruptions could materially affect projections for increased capacity, production and revenues,
which could have a material adverse effect on our business, financial condition, results of operations and prospects.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Because all of our operations and most of our directors
and officers may reside in the PRC and outside the United States and because we may not consent to service of process in the United
States or to the jurisdiction of any United States court, it may be difficult for you to enforce your rights against us or enforce
United States judgments against us in the PRC.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">After the completion of this reverse merger,
substantially all of our operations and all of our directors and officers may reside outside of the United States.&nbsp;&nbsp;Foreign
officers or directors may not consent to service of process in the United States or to the jurisdiction of any United States Court.&nbsp;&nbsp;It
may therefore be difficult for investors in the United States to enforce their legal rights, to effect service of process upon
us, our directors or officers or to enforce judgments of United States courts predicated upon civil liabilities and criminal penalties
of our directors and officers under United States federal securities laws.&nbsp;&nbsp;Moreover, we have been advised that the
PRC does not have treaties providing for the reciprocal recognition and enforcement of judgments of courts with the United States.&nbsp;&nbsp;Further,
it is unclear if extradition treaties now in effect between the United States and the PRC would permit effective enforcement of
criminal penalties of the United States federal securities laws.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Risks Relating to the People's Republic
of China</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Certain political, geographic and economic factors relating
to operating in the PRC could adversely affect our business operations.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The PRC is transitioning from a planned
economy to a market economy. While the PRC government has pursued economic reforms since its adoption of the open-door policy
in 1978, a large portion of the PRC economy is still operating under five-year plans and annual state plans. Through these plans
and other economic measures, such as control on foreign exchange, taxation and restrictions on foreign participation in the domestic
market of various industries, the PRC government exerts considerable direct and indirect influence on the economy. Many of the
economic reforms carried out by the PRC government are unprecedented or experimental, and are expected to be refined and improved.
Other political, economic and social factors can also lead to further readjustment of such reforms. This refining and readjustment
process may not necessarily have a positive effect on our operations or future business development. Our operating results may
be adversely affected by changes in the PRC's economic and social conditions as well as by changes in the policies of the PRC
government, such as changes in laws and regulations (or the official interpretation thereof), measures which may be introduced
to control inflation, changes in the interest rate or method of taxation, and the imposition of restrictions on currency conversion
in addition to those described below.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>The uncertain application of many relatively new PRC laws
that may apply to us create an unpredictable environment for our business operations and could have a material adverse effect
on us.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The PRC legal system is a civil law system.
Unlike the common law system, the civil law system is based on written statutes in which decided legal cases have little value.
In 1979, the PRC began to promulgate a comprehensive system of laws and has since introduced many laws and regulations to provide
general guidance on economic and business practices in the PRC and to regulate foreign investment. Progress has been made in the
promulgation of laws and regulations dealing with economic matters such as corporate organization and governance, foreign investment,
commerce, taxation and trade. The promulgation of new laws, changes of existing laws and the abrogation of local regulations by
national laws could have a negative impact on our business and business prospects.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Labor costs may be increased due to the implementation of
the new PRC Labor Contract Law.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The PRC Labor Contract Law was adopted
by the Standing Committee of the National People&rsquo;s Congress of PRC on June 29, 2007 and became effective on January 1, 2008.
The implementation of the new law, especially the following provisions, may increase our labor costs: (a) an employer shall make
monetary compensation, which shall be based on the number of an employee&rsquo;s working years with the employer at the rate of
one month&rsquo;s wage for each year, to the employee upon termination of the employment contract with certain exceptions (for
example, in the circumstances where the term of a fixed-term employment contract expires and the employee does not agree to renew
the contract even though the conditions offered by the employer are the same as or better than those stipulated in the current
contract); (b) the wages of an employee on probation may not be less than the lowest wage level for the same job with the employer
or less than 80% of the wage agreed upon in the employment contract, and may not be less than the local minimum wage rate; (c)
if an employee has been working for the employer for a consecutive period of not less than 10 years, or if a fixed-term employment
contract with an employee was entered into on two consecutive occasions, generally the employer should enter into an open-ended
employment with such employee, unless the employee requests for a fixed-term employment contract; (d) if an employer fails, in
violation of the related provisions, to enter into an open-ended contract with an employee, it shall each month pay to the employee
twice his wage, starting from the date on which an open-ended employment contract should have been entered into; (e) if an employer
fails to enter into a written employment contract with an employee more than one month but less than one year after the date on
which the employer started using him, the employer shall each month pay to the employee twice his wage; and (f) if an employer
hires an employee whose employment contract with another employer has not yet been terminated or ended, causing the other employer
to suffer a loss, it shall be jointly and severally liable with the employee for the compensation of such loss. Our labor costs
may increase due to the implementation of the new PRC Labor Contract Law and our business and results of operations may be materially
and adversely affected.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Fluctuations in the exchange rate could have an adverse
effect upon our business and reported financial results.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We conduct our business in Renminbi, thus
our functional currency is the Renminbi, while our reporting currency is the U.S. dollar.&nbsp;&nbsp;The value of the Renminbi
against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, the political situation as
well as economic policies and conditions. On July 21, 2005, the PRC government changed its decade old policy of pegging its currency
to the U.S. currency. Under that policy, the Renminbi is permitted to fluctuate within a narrow and managed band against a basket
of certain foreign currencies. This change in policy has resulted in an approximate 21% appreciation of the Renminbi against the
U.S. dollar between 2005 and 2008. However, the PRC government decided to repeg the Renminbi to U.S. Dollars in response to the
financial crisis in 2008.&nbsp;&nbsp;On June 19, 2010, China ended the peg of Renminbi to the U.S. Dollar which allowed a greater
flexibility of its exchange rate.&nbsp;&nbsp;There remains significant international pressure on the appreciation of the Renminbi
against the U.S. Dollar.&nbsp;&nbsp;To the extent any of our future revenues are denominated in currencies other than the United
States dollar, we would be subject to increased risks relating to foreign currency exchange rate fluctuations which could have
a material adverse affect on our financial condition and operating results since operating results are reported in United States
dollars and significant changes in the exchange rate could materially impact our reported earnings.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The PRC government imposes control over
the conversion of Renminbi into foreign currencies. Under the current unified floating exchange rate system, the People's Bank
of China publishes an exchange rate, which we refer to as the PBOC exchange rate, based on the previous day's dealings in the
inter-bank foreign exchange market. Financial institutions authorized to deal in foreign currency may enter into foreign exchange
transactions at exchange rates within an authorized range above or below the PBOC exchange rate according to market conditions.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Pursuant to the Foreign Exchange Control
Regulations of the PRC issued by the State Council which came into effect on April 1, 1996, and the Regulations on the Administration
of Foreign Exchange Settlement, Sale and Payment of the PRC which came into effect on July 1, 1996, regarding foreign exchange
control, conversion of Renminbi into foreign exchange by Foreign Investment Enterprises, or FIEs, for use on current account items,
including the distribution of dividends and profits to foreign investors, is permissible. FIEs are permitted to convert their
after-tax dividends and profits to foreign exchange and remit such foreign exchange to their foreign exchange bank accounts in
the PRC. Conversion of Renminbi into foreign currencies for capital account items, including direct investment, loans, and security
investment, is still under certain restrictions. On January 14, 1997, the State Council amended the Foreign Exchange Control Regulations
and added, among other things, an important provision, which provides that the PRC government shall not impose restrictions on
recurring international payments and transfers under current account items.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Enterprises in the PRC (including FIEs)
which require foreign exchange for transactions relating to current account items, may, without approval of the State Administration
of Foreign Exchange, or &ldquo;SAFE,&rdquo; effect payment from their foreign exchange account or convert and pay at the designated
foreign exchange banks by providing valid receipts and proofs.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Convertibility of foreign exchange in respect
of capital account items, such as direct investment and capital contribution, is still subject to certain restrictions, and prior
approval from the SAFE and its relevant branches must be sought.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Furthermore, the Renminbi is not freely
convertible into foreign currencies nor can it be freely remitted abroad. Under the PRC&rsquo;s Foreign Exchange Control Regulations
and the Administration of Settlement, Sales and Payment of Foreign Exchange Regulations, Foreign Invested Enterprises are permitted
either to repatriate or distribute its profits or dividends in foreign currencies out of its foreign exchange accounts, or exchange
Renminbi for foreign currencies through banks authorized to conduct foreign exchange business. The conversion of Renminbi into
foreign exchange by Foreign Invested Enterprises for recurring items, including the distribution of dividends to foreign investors,
is permissible. The conversion of Renminbi into foreign currencies for capital items, such as direct investment, loans and security
investment, is subject, however, to more stringent controls.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>The PRC government exerts substantial influence over the
manner in which we must conduct our business activities and any increased scrutiny or regulation could have a material adverse
impact over our operations.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We are dependent on our relationship with
the local government in the province in which we operate our business. Chinese government has exercised and continues to exercise
substantial control over virtually every sector of the Chinese economy through regulation and state ownership. Our ability to
operate in the PRC may be harmed by changes in its laws and regulations, including those relating to taxation, environmental regulations,
land use rights, property and other matters. We believe that our operations in PRC are in material compliance with all applicable
legal and regulatory requirements. However, the central or local governments of these jurisdictions may impose new, stricter regulations
or interpretations of existing regulations that would require additional expenditures and efforts on our part to ensure our compliance
with such regulations or interpretations. Accordingly, government actions in the future, including any decision not to continue
to support recent economic reforms and to return to a more centrally planned economy or regional or local variations in the implementation
of economic policies, could have a significant effect on economic conditions in the PRC or particular regions thereof, and could
require us to divest ourselves of any interest we then hold in Chinese properties.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Future inflation in the PRC may inhibit
our ability to conduct business in China. In recent years, the Chinese economy has experienced periods of rapid expansion and
high rates of inflation. Rapid economic growth can lead to growth in the money supply and rising inflation. If prices for our
products rise at a rate that is insufficient to compensate for the rise in the costs of supplies, it may have an adverse effect
on profitability. These factors have led to the adoption by Chinese government, from time to time, of various corrective measures
designed to restrict the availability of credit or regulate growth and contain inflation. High inflation may in the future cause
Chinese government to impose controls on credit and/or prices, or to take other action, which could inhibit economic activity
in China, and thereby harm the market for our products.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Since most of our assets are located in the PRC, any dividends
of proceeds from liquidation is subject to the approval of the relevant Chinese government agencies.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our assets are predominantly located inside
PRC. Under the laws governing Foreign Invested Enterprises in PRC, dividend distribution and liquidation are allowed but subject
to special procedures under the relevant laws and rules. Any dividend payment will be subject to the decision of the board of
directors and subject to foreign exchange rules governing such repatriation. Any liquidation is subject to the relevant government
agency's approval and supervision as well as the foreign exchange control. This may generate additional risk for our investors
in case of dividend payment and liquidation.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Risks Associated with our Securities</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>We may be subject to penny stock rules which will make the
shares of our common stock more difficult to sell.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We may be subject now and in the future
to the SEC&rsquo;s &ldquo;penny stock&rdquo; rules if our shares of common stock sell below $5.00 per share. Penny stocks generally
are equity securities with a per share price of less than $5.00. The penny stock rules require broker-dealers to deliver a standardized
risk disclosure document prepared 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&nbsp;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&rsquo;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&rsquo;s confirmation.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In addition, the penny stock rules require
that prior to a transaction the broker 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 shares of our common stock. As long as our shares of common
stock are subject to the penny stock rules, the holders of such shares of common stock may find it more difficult to sell their
securities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>FINRA sales practice requirements may limit a stockholder&rsquo;s
ability to buy and sell our stock.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">FINRA has adopted rules that require that
in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is
suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers
must make reasonable efforts to obtain information about the customer&rsquo;s financial status, tax status, investment objectives
and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative
low priced securities will not be suitable for certain customers. FINRA requirements will likely make it more difficult for broker-dealers
to recommend that their customers buy our common stock, which may have the effect of reducing the level of trading activity in
our common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Our shares of common stock are very thinly traded, and the
price may not reflect our value and there can be no assurance that there will be an active market for our shares of common stock
either now or in the future.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our shares of common stock are thinly traded.
Due to the illiquidity, the market price may not accurately reflect our&nbsp;&nbsp;relative value. There can be no assurance that
there will be an active market for our shares of common stock either now or in the future. Investors may not be able to liquidate
their investment or liquidate it at a price that reflects the value of the business. If a more active market should develop, the
price may be highly volatile. Because there may be a low price for our shares of common stock, many brokerage firms may not be
willing to effect transactions in the securities. Even if an investor finds a broker willing to effect a transaction in the shares
of our common 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 such shares of common stock as collateral for
a loans.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Because we became public by means of a &ldquo;reverse merger,&rdquo;
we may not be able to attract the attention of major brokerage firms.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Additional risks may exist because we became
public through a &ldquo;reverse merger&rdquo;. Security analysts of major brokerage firms may not cover us since there is no incentive
to brokerage firms to recommend the purchase of our common stock. No assurance can be given that brokerage firms will want to
conduct any secondary offerings on our behalf in the future.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>CHINA REGULATIONS AFFECTING OUR BUSINESS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">This section sets forth a summary of the
most significant Chinese regulations or requirements that may affect our business activities in China or our shareholders&rsquo;
right to receive dividends and other distributions of profits from the PRC subsidiaries.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Foreign Investment in PRC Operating Companies</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The <I>Foreign Investment Industrial Catalogue
</I>jointly issued by the Ministry of Commerce for the People&rsquo;s Republic of China and the National Development and Reform
Commission in 2011 classified various industries/business into three different categories: (i) encouraged for foreign investment;
(ii) restricted to foreign investment; and (iii) prohibited from foreign investment. For any industry/business not covered by
any of these three categories, they will be deemed industries/business permitted to have foreign investment. Except for those
expressly provided restrictions, encouraged and permitted industries/business are usually 100% open to foreign investment and
ownership. With regard to those industries/business restricted to or prohibited from foreign investment, there is always a limitation
on foreign investment and ownership. The PRC Subsidiary&rsquo;s business does not fall under the industry categories that are
restricted to, or prohibited from foreign investment and is not subject to limitation on foreign investment and ownership.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Regulation of Foreign Currency Exchange</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Foreign currency exchange in the PRC is
governed by a series of regulations, including the <I>Foreign Currency Administrative Rules</I> (1996), as amended, and the <I>Administrative
Regulations Regarding Settlement, Sale and Payment of Foreign Exchange</I> (1996), as amended. Under these regulations, the Renminbi
is freely convertible for trade and service-related foreign exchange transactions, but not for direct investment, loans or investments
in securities outside the PRC without the prior approval of China&rsquo;s State Administration of Foreign Exchange. Pursuant to
the <I>Administrative Regulations Regarding Settlement, Sale and Payment of Foreign Exchange</I> (1996), Foreign Investment Entities
may purchase foreign exchange without the approval of the State Administration of Foreign Exchange for trade and service-related
foreign exchange transactions by providing commercial documents evidencing these transactions. They may also retain foreign exchange,
subject to a cap approved by the State Administration of Foreign Exchange, to satisfy foreign exchange liabilities or to pay dividends.
However, the relevant Chinese government authorities may limit or eliminate the ability of foreign investment entities to purchase
and retain foreign currencies in the future. In addition, foreign exchange transactions for direct investment, loan and investment
in securities outside the PRC are still subject to limitations and require approvals from the State Administration of Foreign
Exchange.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On July 21, 2005, the PRC government changed
its decade old policy of pegging its currency to the U.S. currency. Under that policy, the Renminbi is permitted to fluctuate
within a narrow and managed band against a basket of certain foreign currencies. This change in policy has resulted in an approximate
21% appreciation of the Renminbi against the U.S. dollar between 2005 and 2008. However, the PRC government decided to repeg the
Renminbi to U.S. Dollars in response to the financial crisis in 2008.&nbsp;&nbsp;On June 19, 2010, China ended the peg of Renminbi
to the U.S. Dollar which allowed a greater flexibility of its exchange rate.&nbsp;&nbsp;There remains significant international
pressure on the appreciation of the Renminbi against the U.S. Dollar.&nbsp;&nbsp;To the extent any of our future revenues are
denominated in currencies other than the United States dollar, we would be subject to increased risks relating to foreign currency
exchange rate fluctuations which could have a material adverse affect on our financial condition and operating results since operating
results are reported in United States dollars and significant changes in the exchange rate could materially impact our reported
earnings.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Regulation of Foreign Investment Entities&rsquo; Dividend
Distribution</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The principal laws and regulations in the
PRC governing distribution of dividends by foreign investment entities include:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0in"></TD><TD STYLE="width: 0.25in; text-align: left">(i)</TD><TD STYLE="text-align: justify">The <I>Sino-foreign Equity Joint Venture Law </I>(1979),
as amended, and the <I>Regulations for the Implementation of the Sino-foreign Equity Joint Venture Law</I> (1983), as amended;</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(ii)</TD><TD>The <I>Sino-foreign Cooperative Enterprise Law</I> (1988), as
                                                             amended, and the <I>Detailed Rules for the Implementation of the
                                                             Sino-foreign Cooperative Enterprise Law</I> (1995), as amended;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in">(iii)</TD><TD>The <I>Foreign Investment Enterprise Law</I> (1986), as amended,
                                                              and the <I>Regulations of Implementation of the Foreign Investment
                                                              Enterprise Law </I>(1990), as amended.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Under these regulations, foreign investment
entities in the PRC may pay dividends only out of their accumulated profits, if any, determined in accordance with Chinese accounting
standards and regulations. In addition, foreign-invested enterprises in the PRC are required to set aside at least 10% of their
respective accumulated profits each year, if any, to fund certain reserve funds unless such reserve funds have reached 50% of
their respective registered capital. These reserves are not distributable as cash dividends. The board of directors of a foreign
investment entity has the discretion to allocate a portion of its after-tax profits to staff welfare and bonus funds, which may
not be distributed to equity owners except in the event of liquidation.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Regulation of a Foreign Currency&rsquo;s Conversion into
Renminbi and Investment by Foreign Investment Entities</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On August 29, 2008, the State Administration
of Foreign Exchange issued a <I>Notice of the General Affairs Department of the State Administration of Foreign Exchange on the
Relevant Operating Issues concerning the Improvement of the Administration of Payment and Settlement of Foreign Currency Capital
of Foreign-Invested Enterprises</I> or Notice 142, to further regulate the foreign exchange of foreign investment entities. According
to the Notice 142, foreign investment entities shall obtain verification report from a local accounting firm before converting
its registered capital of foreign currency into Renminbi, and the converted Renminbi shall be used for the business within its
permitted business scope. The Notice 142 explicitly prohibits foreign investment entities from using Renminbi converted from foreign
capital to make equity investments in the PRC, unless the domestic equity investment is within the approved business scope of
the foreign investment entity and has been approved by the State Administration of Foreign Exchange in advance.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Regulation of Foreign Exchange in Certain Onshore and
Offshore Transactions</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In October 2005, the State Administration
of Foreign Exchange issued the <I>Notice on Issues Relating to the Administration of Foreign Exchange in Fund-raising and Return
Investment Activities of Domestic Residents Conducted via Offshore Special Purpose Companies</I>, or the State Administration
of Foreign Exchange Notice 75, which became effective as of November 1, 2005, and was further supplemented by three implementation
notices issued by the State Administration of Foreign Exchange on November 24, 2005 May 29, 2007 and May 20, 2011, respectively.
The State Administration of Foreign Exchange Notice 75 states that PRC residents, whether natural or legal persons, must register
with the relevant local State Administration of Foreign Exchange branch prior to establishing or taking control of an offshore
entity established for the purpose of overseas equity financing involving onshore assets or equity interests held by them. The
term &ldquo;PRC legal person residents&rdquo; as used in the State Administration of Foreign Exchange Notice 75 refers to those
entities with legal person status or other economic organizations established within the territory of the PRC. The term &ldquo;PRC
natural person residents&rdquo; as used in the State Administration of Foreign Exchange Notice 75 includes all PRC citizens and
all other natural persons, including foreigners, who habitually reside in the PRC for economic benefit. The State Administration
of Foreign Exchange implementation notice of November 24, 2005 further clarifies that the term &ldquo;PRC natural person residents&rdquo;
as used under the State Administration of Foreign Exchange Notice 75 refers to those &ldquo;PRC natural person residents&rdquo;
defined under the relevant PRC tax laws and those natural persons who hold any interests in domestic entities that are classified
as &ldquo;domestic-funding&rdquo; interests.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">PRC residents are required to complete
amended registrations with the local State Administration of Foreign Exchange branch upon: (i) injection of equity interests or
assets of an onshore enterprise to the offshore entity, or (ii) subsequent overseas equity financing by such offshore entity.
PRC residents are also required to complete amended registrations or filing with the local State Administration of Foreign Exchange
branch within 30 days of any material change in the shareholding or capital of the offshore entity, such as changes in share capital,
share transfers and long-term equity or debt investments and these changes do not relate to return investment activities. PRC
residents who have already organized or gained control of offshore entities that have made onshore investments in the PRC before
the State Administration of Foreign Exchange Notice 75 was promulgated must register their shareholdings in the offshore entities
with the local State Administration of Foreign Exchange branch on or before March 31, 2006.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Under the State Administration of Foreign
Exchange Notice 75, PRC residents are further required to repatriate into the PRC all of their dividends, profits or capital gains
obtained from their shareholdings in the offshore entity within 180 days of their receipt of such dividends, profits or capital
gains. The registration and filing procedures under the State Administration of Foreign Exchange Notice 75 are prerequisites for
other approval and registration procedures necessary for capital inflow from the offshore entity, such as inbound investments
or shareholders loans, or capital outflow to the offshore entity, such as the payment of profits or dividends, liquidating distributions,
equity sale proceeds, or the return of funds upon a capital reduction.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Government Regulations Relating to Taxation</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On March 16, 2007, the National People&rsquo;s
Congress, approved and promulgated the <I>PRC Enterprise Income Tax Law</I>. The <I>PRC Enterprise Income Tax Law</I> took effect
on January 1, 2008. Under the <I>PRC Enterprise Income Tax Law</I>, foreign investment entities and domestic companies are subject
to a uniform tax rate of 25%. The <I>PRC Enterprise Income Tax Law</I> provides a five-year transition period starting from its
effective date for those enterprises which were established before the promulgation date of the <I>PRC Enterprise Income Tax Law
</I>and which were entitled to a preferential lower tax rate under the then-effective tax laws or regulations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On December 26, 2007, the State Council
issued a <I>Notice on Implementing Transitional Measures for Enterprise Income Tax</I>, providing that the enterprises that have
been approved to enjoy a low tax rate prior to the promulgation of the <I>PRC Enterprise Income Tax Law</I> will be eligible for
a five-year transition period since 1 January, 2008, during which time the tax rate will be increased step by step to the 25%
unified tax rate set out in the <I>PRC Enterprise Income Tax Law</I>. From 1 January, 2008, for the enterprises whose applicable
tax rate was 15% before the promulgation of the <I>PRC Enterprise Income Tax Law</I> , the tax rate will be increased to 18% for
year 2008, 20% for year 2009, 22% for year 2010, 24% for year 2011, 25% for year 2012. For the enterprises whose applicable tax
rate was 24%, the tax rate will be changed to 25% from January 1, 2008.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The <I>PRC Enterprise Income Tax Law</I>
provides that an income tax rate of 20% may be applicable to dividends payable to non-PRC investors that are &ldquo;non-resident
enterprises&rdquo;. Non-resident enterprises refer to enterprises which do not have an establishment or place of business in the
PRC, or which have such establishment or place of business in the PRC but the relevant income is not effectively connected with
the establishment or place of business, to the extent such dividends are derived from sources within the PRC. The income tax for
non-resident enterprises shall be subject to withholding at the income source, with the payor acting as the obligatory withholder
under the <I>PRC Enterprise Income Tax Law</I>, and therefore such income taxes generally called withholding tax in practice.
The State Council of the PRC has reduced the withholding tax rate from 20% to 10% through the Implementation Rules of the <I>PRC
Enterprise Income Tax Law</I>. It is currently unclear in what circumstances a source will be considered as located within the
PRC. We are a U.S. holding company and substantially all of our income is derived from dividends we receive from our subsidiaries
located in the PRC. Thus, if we are considered as a &ldquo;non-resident enterprise&rdquo; under the <I>PRC Enterprise Income Tax
Law</I> and the dividends paid to us by our subsidiary in the PRC are considered income sourced within the PRC, such dividends
may be subject to a 10% withholding tax.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Such income tax may be exempted or reduced
by the State Council of the PRC or pursuant to a tax treaty between the PRC and the jurisdictions in which our non-PRC shareholders
reside. For example, the 10% withholding tax is reduced to 5% pursuant to the <I>Double Tax Avoidance Agreement Between Hong Kong
and Mainland China</I> if the beneficial owner in Hong Kong owns more than 25% of the registered capital in a company in the PRC.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The new tax law provides only a framework
of the enterprise tax provisions, leaving many details on the definitions of numerous terms as well as the interpretation and
specific applications of various provisions unclear and unspecified. Any increase in the combined company&rsquo;s tax rate in
the future could have a material adverse effect on its financial conditions and results of operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Regulations of Overseas Investments and Listings</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On August 8, 2006, six PRC regulatory agencies,
including the Ministry of Commerce of the People&rsquo;s Republic of China, the China Securities Regulatory Commission, the State-owned
Assets Supervision and Administration Commission of the State Council, the State Administration of Taxation, the State Administration
for Industry and Commerce, and the State Administration of Foreign Exchange, jointly amended and released the Merger &amp; Acquisition
Rules, which became effective on September 8, 2006. This regulation, among other things, includes provisions that purport to require
that an offshore special purpose vehicle formed for purposes of overseas listing of equity interest in PRC companies and controlled
directly or indirectly by PRC companies or individuals obtain the approval of the China Securities Regulatory Commission prior
to the listing and trading of such special purpose vehicle&rsquo;s securities on an overseas stock exchange.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On September 21, 2006, the China Securities
Regulatory Commission published on its official website procedures regarding its approval of overseas listings by special purpose
vehicles. The China Securities Regulatory Commission approval procedures require the filing of a number of documents with China
Securities Regulatory Commission and it would take several months to complete the approval process. The application of the Merger
&amp; Acquisition Rules with respect to overseas listings of special purpose vehicles remains unclear with no consensus currently
existing among the leading PRC law firms regarding the scope of the applicability of the China Securities Regulatory Commission
approval requirement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Regulation of Work Safety</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On June 29, 2002, the Work Safety Law of
the PRC was adopted by the Standing Committee of the 9th National People&rsquo;s Congress and came into effect on November 1,
2002, as amended on August 27, 2009. The Work Safety Law provides general work safety requirements for entities engaging in manufacturing
and business activities within the PRC. Additionally, Regulation on Work Safety Licenses, as adopted by the State Council on January
7, 2004 effective on January 13, 2004, requires enterprises engaging in the manufacture of dangerous chemicals to obtain a work
safety license with a term of three years. If a work safety license needs to be extended, the enterprise must go through extension
procedures with authorities three months prior to its expiration. In addition, on May 17, 2004, the Measures for Implementation
of Work Safety Licenses of Dangerous Chemicals Production was promulgated as implementing measures to the Regulation on Work Safety
Licenses which provides that entities producing dangerous chemicals are required to obtain work safety licenses pursuant to specific
requirements. Without work safety licenses, no entity may engage in the formal manufacture of dangerous chemicals.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The Regulations on the Safety Administration
of Dangerous Chemicals was promulgated by the State Council on January 26, 2002, effective as of March 15, 2002. It sets forth
general requirements for manufacturing and the storage of dangerous chemicals in China. The Regulations on the Safety Administration
of Dangerous Chemicals requires that companies manufacturing dangerous chemicals establish and strengthen their internal regulations
and rules on safety control and fulfill the national standards and other relevant provisions of the State. In addition, according
to the Regulations on the Safety Administration of Dangerous Chemicals, companies that manufacture, store, transport or use dangerous
chemicals shall be required to obtain corresponding approvals or licenses with the State Administration of Work Safety and its
local branches and other proper authorities. Companies that manufacture or store dangerous chemicals without approval or registration
with the proper authorities can be shut down, ordered to stop manufacturing or ordered to destroy the dangerous chemicals. Such
companies can also be subject to fines. If criminal law is violated, the persons chiefly liable, along with other personnel directly
responsible for such impropriety, shall be subject to relevant criminal liability.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Regulations on Environmental Protection</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">According to the Prevention and Control
of Water Pollution Law, as adopted by the Standing Committee of the 10th National People&rsquo;s Congress on February 28, 2008
and effective on June 1, 2008, China adopted a licensing system for pollutant discharge. Companies directly or indirectly responsible
for discharge of industrial waste water or medical sewage to waters shall be required to obtain a pollutant discharge license.
All companies are prohibited from discharging wastewater and sewage to waters without or in violation of the terms of the pollutant
discharge license.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The Regulations on the Administration of
Construction Projects Environmental Protection, as adopted by the State Council on November 18, 1998 and effective on November
29, 1998, governs construction projects and the impact such projects will have on the environment. Pursuant to the Regulations
on the Administration of Construction Projects Environmental Protection, the governing body is responsible for supervising the
implementation of a three tiered system that includes (i) reviewing and approving a construction project, (ii) overseeing the
construction project and (iii) to inspect the finished construction project and ensure that all harmful pollutants are disposed
of correctly. Manufacturing companies are required to apply for inspection with environment protection authorities upon completion
of a construction project.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Food Safety Law of the People&rsquo;s Republic of China</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The Food Safety Law of the People&rsquo;s
Republic of China as adopted at the 7th Session of the Standing Committee of the 11th National People&rsquo;s Congress of the
People&rsquo;s Republic of China and effective on June 1, 2009, governs the food safety in food production and business operation
activities. Pursuant to the Food Safety Law of the People&rsquo;s Republic of China, food producers must establish an internal
inspection and record system for raw materials and predelivery products, and food distributors must also establish internal systems
to record and inspect food products procured from suppliers. In addition, any food addictives that are not in the approved government
catalog must not be used and no food products can be sold inspection-free.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Regulations on the Implementation of the Food Safety
Law of the People&rsquo;s Republic of China</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The Regulations on the Implementation of
the Food Safety Law of the People&rsquo;s Republic of China as adopted at the 73rd Standing Committee Meeting of the State Council
on July 8, 2009 and effective on July 20, 2009, are promulgated in accordance with the Food Safety Law of the People&rsquo;s Republic
of China. The Regulations require that the local People&rsquo;s Government at or above the country level shall perform the responsibility
specified in the Food Safety Law of the People&rsquo;s Republic of China, improve the ability for supervision and administration
of food safety, ensure supervision and administration of food safety; establish and improve the coordination mechanism between
food safety regulatory authorities, integrate and improve the food safety information network, and realize the sharing of food
safety and food inspection information and other technical resources.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Law of the People&rsquo;s Republic of China on Quality
and Safety of Agricultural Products</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The Law of the People&rsquo;s Republic
of China on Quality and Safety of Agricultural Products was adopted at the 21st Meeting of the Standing Committee of the Tenth
National People&rsquo;s Congress on April 29, 2006. This Law was enacted in order to ensure the quality and safety of agricultural
products, maintain the health of the general public, and promote the development agriculture and rural economy. Pursuant to this
Law, agricultural products distribution enterprises shall establish a sound system of inspection and acceptance for their purchases.
In addition, agricultural products that fail to pass the inspection based on the quality and safety standards of agricultural
products cannot be marketed.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Regulations for Export Food Manufacturers</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The Administrative Provisions on the Filing
of Export Food Manufacturers, promulgated by the General Administration of Quality Supervision, Inspection and Quarantine of the
People&rsquo;s Republic of China and effective as of October 1, 2011, implements a filing system on enterprises producing, processing
or storing food for export. For those export food covered by the List of Products for Carrying out Filing of Export Food Manufacturers,
enterprises can be allowed to produce, process or store the food for export only after obtaining the filing certificates.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">According to the Safety and Hygiene Requirements
for Export Food Manufacturers, export food manufacturers shall establish safety and hygiene control system pursuant to the requirements
listed in Safety and Hygiene Requirements for Export Food Manufacturers. Enterprises whose products are also covered by the List
of Products for Carrying out Filing of Export Food Manufacturers shall further establish and implement HACCP system in accordance
with the requirements of Hazard Analysis and Critical Control Point (HACCP) system and its Application.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B>&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>USE OF PROCEEDS </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The selling stockholder will receive all
proceeds from the sale of the shares of our common stock in this offering. We will not receive any proceeds from the sale of the
shares of our common stock offered pursuant to this Prospectus by the selling stockholder. We will bear all expenses other than
transfer taxes of registration incurred in connection with this offering, but all commissions, selling and other expenses incurred
by the selling stockholder to underwriters, agents, brokers and dealers will be borne by the selling stockholder.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

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    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>MARKET FOR COMMON EQUITY AND RELATED
SHAREHOLDER MATTERS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Market Information</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our common stock is quoted on the OTC Markets-OTC
Pink under the symbol &ldquo;DEYU.PK&rdquo;.&nbsp;&nbsp;There can be no assurance that a liquid market for our securities will
ever develop.&nbsp;&nbsp;Transfer of our common stock may also be restricted under the securities or blue sky laws of various
states and foreign jurisdictions.&nbsp;&nbsp;Consequently, investors may not be able to liquidate their investments and should
be prepared to hold the common stock for an indefinite period of time.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The following table summarizes the high
and low closing sales prices per share of the common stock for the periods indicated as reported:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><U>Closing Bid Prices</U></B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">High ($)</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">Low ($)</TD><TD STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold">Fiscal Year Ending December 31, 2012</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 76%">1<SUP>St</SUP> Quarter (January 2 &ndash; March 30)</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 9%; text-align: right">1.75</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 9%; text-align: right">1.25</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold">Fiscal Year Ended December 31, 2011</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">1st Quarter (January 3 &ndash; March 31):</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4.08</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2.75</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">2rd Quarter (April 1 &ndash; June 30):</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3.01</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1.50</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">3nd Quarter (July 1 &ndash; September 30):</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2.20</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1.01</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">4th Quarter (October 3 &ndash; December 30):</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2.10</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1.01</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD><B>Fiscal Year Ended December 31, 2010</B>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">1st Quarter (January 4 &ndash; March 31):</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">NONE</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">NONE</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">2rd Quarter (April 1 &ndash; June 30):</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">7.10</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">5.00</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">3nd Quarter (July 1 &ndash; September 30):</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">7.75</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">6.00</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">4th Quarter (October 1 &ndash; December 31):</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">7.00</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3.00</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The following table presents certain information
with respect to our equity compensation plan as of December 31, 2011:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2"></TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2"></TD><TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">Number&nbsp;of</TD><TD STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2"></TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2"></TD><TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">securities&nbsp;remaining</TD><TD STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">Number&nbsp;of&nbsp;securities</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">available&nbsp;for&nbsp;future</TD><TD STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">to&nbsp;be&nbsp;issued</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">Weighted-average</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">issuance&nbsp;under&nbsp;equity</TD><TD STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">upon&nbsp;exercise&nbsp;of</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">exercise&nbsp;price&nbsp;of</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">compensation&nbsp;plans</TD><TD STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">outstanding&nbsp;options,</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">outstanding&nbsp;options,</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">(excluding&nbsp;securities</TD><TD STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">warrants&nbsp;and&nbsp;rights</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">warrants&nbsp;and&nbsp;rights</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">reflected&nbsp;in&nbsp;column&nbsp;(a))</TD><TD STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Plan&nbsp;Category</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">(a)</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">(b)</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">(c)</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Equity compensation plans</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt">approved by security holders</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&mdash;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Equity compensation plans</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 46%; text-align: left; padding-bottom: 1pt; padding-left: 9pt">not approved by security holders(1)</TD><TD STYLE="width: 1%; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="width: 15%; border-bottom: Black 1pt solid; text-align: right">971,000</TD><TD STYLE="width: 1%; padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="width: 15%; border-bottom: Black 1pt solid; text-align: right">4.40</TD><TD STYLE="width: 1%; padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="width: 1%; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="width: 15%; border-bottom: Black 1pt solid; text-align: right">29,000</TD><TD STYLE="width: 1%; padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;&nbsp;&nbsp;&nbsp;Total</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">971,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">4.40</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">29,000</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(1) On November 4, 2010, the Company&rsquo;s Board of Directors
approved the Company&rsquo;s 2010 Share Incentive Plan.&nbsp;&nbsp;Under the Plan, 1,000,000 shares of the Company&rsquo;s common
stock were originally allocated to and authorized for use pursuant to the terms of the Plan.&nbsp;&nbsp;On November 8, 2010, a
total of 931,000 non-qualified incentive stock options were approved by our Board of Directors and granted under the Plan to executives,
key employees, independent directors, and consultants at an exercise price of $4.40 per share and on December 15, 2010, 40,000
non-qualified incentive stock shares were approved by our Board of Directors and granted under the Plan to a consultant at an
exercise price of $4.40 per share, of which shall vest as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">33 1/3% of the option grants vested one (1) month
after the date of grant;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">33 1/3% of the option grants vested twelve (12) months
after the date of grant; and</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">33 1/3% of the option grants will vest twenty-four
(24) months after the date of grant.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On March 8, 2012, the Company&rsquo;s Board
of Directors allocated to and authorized for use the maximum number of shares allowable pursuant to the terms of the Plan and
granted 420,000 options under the Plan, of which 264,000 were new options and 156,000 were re-granted after such options were
forfeited by employees as a result of their resignations from the Company in accordance with the terms of their option agreements.
All of the newly granted options vest as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">50% of the options granted will vest six
(6) months after the date of the grant; and</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">50% of the options granted will vest twelve
(12) months after the date of the grant.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On November 5, 2010, we filed a Registration
Statement with the SEC on Form S-8 covering up to 1,000,000 shares underlying options which may be granted under the Plan. As
of March 28, 2012, none of the options granted pursuant to the Plan have been exercised.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Recent Sales of Unregistered Securities; Use of Proceeds
from Registered Securities</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In connection with the Share Exchange,
on April 27, 2010, we issued an aggregate of 8,736,932 shares of our common stock to the shareholders of City Zone.&nbsp;&nbsp;We
received in exchange from the City Zone shareholders 100% of the shares of City Zone, which exchange resulted in City Zone becoming
our wholly owned subsidiary. The issuance of such securities was exempt from registration pursuant to Section 4(2) of, and Regulation
D and/or Regulation S promulgated under the Securities Act of 1933, as amended.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Simultaneous with the closing the Share
Exchange, we entered into the Purchase Agreement with certain accredited Investors for the issuance and sale in a private placement
of Units, consisting of 2,455,863 shares of our Series A convertible preferred stock, par value $0.001 per share and Series A
warrants to purchase up to 982,362 shares of our common stock, for aggregate gross proceeds of approximately $10,805,750. The
issuances of the aforementioned securities were exempt from registration pursuant to Section 4(2) of, and Regulation D and/or
Regulation S promulgated under the Securities Act of 1933, as amended.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On November 4, 2010, the Company&rsquo;s
Board of Directors approved the Company&rsquo;s 2010 Share Incentive Plan.&nbsp;&nbsp;Under the Plan, 1,000,000 shares of the
Company&rsquo;s common stock shall be allocated to and authorized for use pursuant to the terms of the Plan.&nbsp;&nbsp;On November
8, 2010, a total of 931,000 non-qualified incentive stock options were approved by our Board of Directors and granted under the
Plan to executives, key employees, independent directors, and consultants at an exercise price of $4.40 per share and on December
15, 2010, 40,000 non-qualified incentive stock shares were approved by our Board of Directors and granted under the Plan to a
consultant at an exercise price of $4.40 per share, of which shall vest as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">33 1/3% of the option grants vested one (1) month
after the date of grant;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">33 1/3% of the option grants vested twelve (12) months
after the date of grant; and</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">33 1/3% of the option grants will vest twenty-four
(24) months after the date of grant.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On March 8, 2012, the Company&rsquo;s Board
of Directors allocated to and authorized for use the maximum number of shares allowable pursuant to the terms of the Plan and
granted 420,000 options under the Plan, of which 264,000 were new options and 156,000 were re-granted after such options were
forfeited by employees as a result of their resignations from the Company in accordance with the terms of their option agreements.
All of the newly granted options vest as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">50% of the options granted will vest six
(6) months after the date of the grant; and</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">50% of the options granted will vest twelve
(12) months after the date of the grant.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On November 5, 2010, we filed a Registration Statement with
the SEC on Form S-8 covering up to 1,000,000 shares underlying options which may be granted under the Plan. As of March 28, 2012,
none of the options granted pursuant to the Plan have been exercised.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Holders of Common Equity</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On April 27, 2012, we had 10,566,766 shares
of common stock issued and outstanding to 84 holders of record, and the closing price of our common stock as quoted on the OTC
Markets-OTC Pink was $1.65 per share.&nbsp;&nbsp;The number of record holders does not include beneficial owners of common stock
whose shares are held in the names of banks, brokers, nominees or other fiduciaries.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Dividends</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We have not paid cash dividends on any
class of common equity since formation.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In connection with our private placement
in May 2010, we issued an aggregate 2,455,863 shares of our Series A convertible preferred shares and warrants exercisable into
982,362 shares of common stock to Investors.&nbsp;&nbsp;Pursuant to the terms of our Series A convertible preferred share designations,
the holders of our Series A convertible preferred shares are entitled to receive cumulative dividends at a rate of 5% per annum,
and such shares of Series A convertible preferred stock are convertible into shares of our common stock on a 1:1 basis, subject
to applicable adjustments.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On July 29, 2011, we distributed 66,379
shares of Series A convertible preferred shares as a cumulative Series A convertible preferred share dividend of $212,420 in aggregate,
to such holders of Series A convertible preferred stock on a pro rata basis and on January 27, 2012, we issued a Series A convertible
preferred share dividend equal to $219,721, in the aggregate, to such holders of Series A convertible preferred stock on a pro
rata basis.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>MANAGEMENT&rsquo;S DISCUSSION AND ANALYSIS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Forward Looking Statements</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The following is management&rsquo;s discussion
and analysis of certain significant factors which have affected our financial position and operating results during the periods
included in the accompanying consolidated financial statements, as well as information relating to the plans of our current management.
This prospectus includes forward-looking statements. Generally, the words &ldquo;believes &rdquo;, &ldquo;anticipates&rdquo;,
&ldquo; may &rdquo;, &ldquo; will &rdquo;, &ldquo; should &rdquo;, &ldquo; expect &rdquo;, &ldquo; intend &rdquo;, &ldquo;estimate&rdquo;,
&ldquo;continue&rdquo; and similar expressions or the negative thereof or comparable terminology are intended to identify forward-looking
statements. Such statements are subject to certain risks and uncertainties, including the matters set forth in this prospectus
or other reports or documents we file with the SEC from time to time, which could cause actual results or outcomes to differ materially
from those projected. Undue reliance should not be place on these forward-looking statements which speak only as of the date hereof.
We undertake no obligation to update these forward-looking statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The following discussion and analysis should
be read in conjunction with our consolidated financial statements and the related notes thereto and other financial information
contained elsewhere in this prospectus.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Summary of our Business</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 35pt">We are a vertically integrated producer,
processor, marketer and distributor of organic and other agricultural products made from corn and grains operating in Shanxi Province
in the PRC. The Company has access to over 109,000 acres of farmland in Shanxi Province for breeding, cultivating, processing,
warehousing and distributing grain and corn products. We have an extensive wholesale network in over 15 provinces and retail distribution
network of around 20,000 supermarkets and convenience stores in 29 provinces across China. We are equipped with advanced production
lines and modern warehouses with production capacity of over 105,000 tons for grain products, capacity of storage of over 100,000
tons and annual turnover of 700,000 tons for corn products.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We have experienced high growth in both
revenue and net income.&nbsp;&nbsp;Operating revenue from continuing operations for the year ended December 31, 2011 was $261,576,666,
representing a 207% increase from $85,174,884 for the year ended December 31, 2010. Our net income attributable to common stockholders
for the year ended December&nbsp;31, 2011 was $17,335,442, representing a 50.7% increase from $11,502,253 for the year ended December
31, 2010.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Restructuring of Business Divisions</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In the fourth quarter of 2011, we adjusted
the structure of our business divisions in order to better allocate resources and to assess the performance of the group according
to our growth strategy. Our Deep Processed Division was dissolved because of the termination of our control agreements with the
VIE Group on December 20, 2011, which conducted most of the business of our Deep Processed Division. We changed the name of our
Simple Processed Grain Division to the Grain Division, which conducts processed grain products being sold through our retail sales
network. With the rapid growth of our bulk trading business, we set up a new division called the Bulk Trading Division, the activities
of which were previously conducted in the Grain Division. We now have three business divisions: the Corn Division, the Grain Division
and the Bulk Trading Division. According to FASB Accounting Standard Codification Topic 280, we prepared the financial information
for these segments for the year ended December 31, 2011 and restated the comparable information for the year ended December 31,
2010.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Because our control over the VIE Group
terminated on December 20, 2011, the operations results of the VIE Group have been presented as discontinued operations. Therefore,
management&rsquo;s discussion and analysis set forth herein below are based on the results of continuing operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On February 2, 2012, we acquired the Taizihu
Group, which is in business of producing and selling bean-based products, fruit vinegars and juices and other grain products.
The business of Taizihu Group is conducted as part of the business of the Grain Division. However, management&rsquo;s discussion
and analysis of results of operations for the years ended December 31, 2011 and 2010 set forth herein below do not include the
operations results of Taizihu Group, for the Taizihu Group&rsquo;s financial statements are not required to be consolidated prior
to February 2, 2012, the acquisition date according to US GAAP.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Results of Operations for the Year Ended December 31, 2011
as Compared to the Year Ended December 31, 2010</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center">For The Years Ened</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">December 31,</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2010</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Change</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">%</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 52%; text-align: left">Net revenue</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">261,576,666</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">85,174,884</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">176,401,782</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 9%; text-align: right">207.1</TD><TD STYLE="width: 1%; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Cost of goods sold</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(218,480,009</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(63,250,363</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(155,229,646</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: right">245.4</TD><TD STYLE="padding-bottom: 1pt; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Gross Profit</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right">43,096,657</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right">21,924,521</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right">21,172,136</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: right">96.6</TD><TD STYLE="padding-bottom: 1pt; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Selling expenses</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(13,231,094</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(6,281,768</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(6,949,326</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">110.6</TD><TD STYLE="text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">General and administrative expenses</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(8,222,182</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(3,627,860</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(4,594,322</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: right">126.6</TD><TD STYLE="padding-bottom: 1pt; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 13.5pt">Total Operating Expense</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right">(21,453,276</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">)</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right">(9,909,628</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">)</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right">(11,543,648</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: right">116.5</TD><TD STYLE="padding-bottom: 1pt; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Operating income</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right">21,643,381</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right">12,014,893</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right">9,628,488</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: right">80.1</TD><TD STYLE="padding-bottom: 1pt; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Interest income</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">42,159</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">17,505</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">24,654</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">140.8</TD><TD STYLE="text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Interest expense</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(805,601</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(341,555</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(464,046</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">135.9</TD><TD STYLE="text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt">Non-operating income</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(180,294</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(18,174</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(162,120</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: right">892.0</TD><TD STYLE="padding-bottom: 1pt; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 13.5pt">Total Other Expense</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right">(943,736</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">)</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right">(342,224</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">)</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right">(601,512</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: right">175.8</TD><TD STYLE="padding-bottom: 1pt; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Income from continuing operations before income taxes</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">20,699,645</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">11,672,669</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">9,026,976</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">77.3</TD><TD STYLE="text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Income taxes</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(184,384</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">913,785</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(1,098,169</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: right">(120.2</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Income from continuing operations</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">20,515,261</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">12,586,454</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">7,928,807</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">63.0</TD><TD STYLE="text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Loss from discontinued operations, net of income taxes</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right">(3,891,830</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">)</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right">(756,480</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">)</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right">(3,135,350</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: right">414.5</TD><TD STYLE="padding-bottom: 1pt; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Net income</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">16,623,431</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">11,829,974</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">4,793,457</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">40.5</TD><TD STYLE="text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Net loss attributable to noncontrolling interests</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,139,928</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,139,928</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Net income attributable to Deyu Agriculture Corp.</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">17,763,359</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">11,829,974</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">5,933,385</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">50.2</TD><TD STYLE="text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Preferred stock dividends</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(427,917</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(327,721</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(100,196</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; text-align: right">30.6</TD><TD STYLE="padding-bottom: 1pt; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Net income available to common stockholders</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">17,335,442</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">11,502,253</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">5,833,189</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: right">50.7</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">%</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Net Revenue</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our net revenue for the year ended December
31, 2011 was $261.6 million compared with $85.2 million for the year ended December 31, 2010, an increase of $176.4 million, or
207%, of which $108.2 million was attributable to corn sales, $29 million to grain sales and the remaining $39.2 million to bulk
trading sales.&nbsp;Sales derived from our Corn Division, Grain Division and Bulk Trading Division for the year ended December
31, 2011 were $177.7 million, $40.5 million and $43.3 million respectively, accounting for 67.9%, 15.5% and 16.6% of total net
revenue, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The following table breaks down the distribution
of our sales volume and amount by division and as a percentage of gross sales:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="22" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">For The Years Ended December 31,</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="10" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="10" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2010</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Volume<BR> (ton)</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Net Revenue</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">% of <BR> total <BR> sales</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Volume<BR> (ton)</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Net Revenue</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">% of <BR> total <BR> sales</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Changes</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">%</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 20%; text-align: left">Corn Division</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 7%; text-align: right">531,165</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 7%; text-align: right">177,723,149</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 7%; text-align: right">67.9</TD><TD STYLE="width: 1%; text-align: left">%</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 7%; text-align: right">240,375</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 7%; text-align: right">69,516,954</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 7%; text-align: right">81.6</TD><TD STYLE="width: 1%; text-align: left">%</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 7%; text-align: right">108,206,195</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 7%; text-align: right">155.7</TD><TD STYLE="width: 1%; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Grain Division</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">31,878</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">40,507,527</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">15.5</TD><TD STYLE="text-align: left">%</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">8,565</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">11,474,912</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">13.5</TD><TD STYLE="text-align: left">%</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">29,032,615</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">253.0</TD><TD STYLE="text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Bulk Trading Division</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">76,125</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">43,345,990</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">16.6</TD><TD STYLE="padding-bottom: 1pt; text-align: left">%</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,470</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">4,183,018</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">4.9</TD><TD STYLE="padding-bottom: 1pt; text-align: left">%</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">39,162,971</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">936.2</TD><TD STYLE="padding-bottom: 1pt; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 2.5pt">Total</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">639,168</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">261,576,666</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">100.0</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">%</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">250,410</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">85,174,884</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">100.0</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">%</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">176,401,782</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">207.1</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">%</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Net revenue from our Corn Division for
the year ended December 31, 2011 was approximately $177.7 million, an increase of $108.2 million, or approximately 155.7%, as
compared the year ended December 31, 2010.&nbsp;This growth was attributable to the expansion of our sales network, the increase
in our storage capacity and turnover and the obtainment of sufficient working capital. Further, our corn sales network has been
extended to approximately 15 provinces in 2011 from 7 provinces in 2010, which now include sales to more livestock feed companies,
corn oil/corn starch manufacturing companies and governmental procurement agencies. Our capacity of storage and turnover increased
from 50,000 tons and 250,000 tons to over 100,000 tons and 700,000 tons, respectively, when the new processing center with five
drying cylinders and six warehouses went into operation in June 2011. We obtained sufficient working capital from bank loans and
bank notes to support corn purchases from farmers and suppliers. The average balance of our bank loans and bank notes increased
to $9.3 million for the year ended December 31, 2011 from $2.2 million for the year ended December 31, 2010. Our sales volume
and revenue from the Corn Division for the year ended December 31, 2011 reached 531,165 tons and $177.7 million, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Net revenue from our Grain Division for
the year ended December 31, 2011 was $40.5 million, an increase of $29 million, or 253%, as compared to the year ended December
31, 2010. The increase was primarily due to growth of our market share through the expansion of our sales network and promotional
activities. Our retail distribution network covered approximately 20,000 supermarkets and convenience stores as of December 31,
2011, as compared to approximately 10,000 stores as of December 31, 2010. We developed special counters in over 200 supermarkets
with open and loose grains in baskets where customers can scoop the grains into plastic bags to determine the volume they want.
This sales strategy targets a large number of consumers and significantly contributes to our net revenue increase. Our marketing
initiatives such as promotion and hosting new product press conferences also increased our brand awareness among customers as
well as sales revenue. The sales volume and revenue from our Grain Division for the year ended December 31, 2011 reached 31,878
tons and $40.5 million, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Revenue from our Bulk Trading Division
for the year ended December 31, 2011 was $43 million, an increase of $39 million, or 936.2%, as compared to the year ended December
31, 2010. Our bulk trading of grain was a newly-added business commencing from the fourth quarter of 2010, which we found can
fully utilize our existing resources including our supply and sales networks, warehousing and logistics. Based on our extensive
wholesale network in 15 provinces and sufficient working capital from bank loans and bank notes, the sales volume and revenue
from our Bulk Trading Division grew rapidly, reaching 76,124 tons and $43 million, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Cost of Goods Sold</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Cost of goods sold mainly consisted of
cost of raw materials, labor, utilities, manufacturing costs, manufacturing related depreciation and packaging costs.&nbsp;Our
cost of goods sold increased by 245.4% from $63.3 million in the year ended December 31, 2010 to $218.5 million for the year ended
December 31, 2011, due to increases in sales volume and purchase prices. Our total sales volume for the year ended December 31,
2011 increased to 639, 168 tons, or 155.2%, from 250,410 tons for the year ended December 31, 2010.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">As a percentage of net revenue, cost of
goods sold increased by 920 basis points from 74.3% for the year ended December 31, 2010 to 83.5% for the year ended December
31, 2011. We experienced a purchase cost increase on both corn and grains caused by the inflation in prices of raw materials in
China. Our sales expansion strategies that we implemented by lowering the average selling price compared with the market price
reduced our profit margin. The increasing percentage by 1170 basis points of bulk trading of total sales with a margin of 8.3%
for the year ended December 31, 2011 also negatively affected our overall profit margin.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Gross Profit</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The following table breaks down the gross
profit and gross margin by division:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="22" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">For&nbsp;The&nbsp;Years&nbsp;Ened&nbsp;December&nbsp;31,</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="10" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="10" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2010</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Gross&nbsp;<BR> Profit</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">%&nbsp;of<BR> total&nbsp;<BR> Gross<BR> Profit</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Margin</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Gross&nbsp;<BR> Profit</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">%&nbsp;of<BR> total&nbsp;<BR> Gross<BR> Profit</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Margin</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 28%; text-align: left">Corn Division</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">29,388,328</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 9%; text-align: right">68.2</TD><TD STYLE="width: 1%; text-align: left">%</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 9%; text-align: right">16.5</TD><TD STYLE="width: 1%; text-align: left">%</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">15,383,113</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 9%; text-align: right">70.2</TD><TD STYLE="width: 1%; text-align: left">%</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 9%; text-align: right">22.1</TD><TD STYLE="width: 1%; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Grain Division</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">10,095,678</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">23.4</TD><TD STYLE="text-align: left">%</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">24.9</TD><TD STYLE="text-align: left">%</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">6,478,610</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">29.5</TD><TD STYLE="text-align: left">%</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">56.5</TD><TD STYLE="text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Bulk Trading Division</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">3,612,651</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">8.4</TD><TD STYLE="padding-bottom: 1pt; text-align: left">%</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">8.3</TD><TD STYLE="padding-bottom: 1pt; text-align: left">%</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">62,798</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">0.3</TD><TD STYLE="padding-bottom: 1pt; text-align: left">%</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1.5</TD><TD STYLE="padding-bottom: 1pt; text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 2.5pt">Total</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">43,096,657</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">100.0</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">%</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">16.5</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">%</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">21,924,521</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">100.0</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">%</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">25.7</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">%</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our gross profit increased by $21.2 million,
or 96.8%, from $21.9 million for the year ended December 31, 2010 to $43.1 million for the year ended December 31, 2011. The increase
was attributable to an increase in sales volume, including an increase of $14 million in the Corn Division, $3.6 million in the
Grain Division and $3.6 million in the Bulk Trading Division.&nbsp;&nbsp;Our gross margin decreased from 25.7% in the year ended
December 31, 2010 to 16.5% in the year ended December 31, 2011. The decrease in gross margin was the combined result of a drop
in gross margin in our Corn Division, a drop in grain sales and a low margin contributed by our bulk trading business, a newly-added
business in the fourth quarter of 2010.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Gross profit in Corn Division was $29.4
million, contributing to 68.2% of total gross profit for the year ended December 31, 2011.&nbsp;&nbsp;Gross margin for our Corn
Division was 16.5% for the year ended December 31, 2011, down by 560 basis points from 22.1% for the year ended December 31, 2010.&nbsp;The
decrease of gross margin was mainly due to the continuous increase in the purchase price of raw corn and supplemental procurement
from suppliers. The purchase price of raw corn increased by about 12% during the year ended December 31, 2011, but the selling
price did not increase consistently. Due to our rapid growth in corn sales, we supplemented the supply of raw materials from farmers
by purchasing from other corn traders, of which the purchasing price was usually higher and it negatively affected the gross margin
of the Corn Division.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Gross profit in the Grain Division was
$10.1 million, contributing to 23.4% of total gross profit for the year ended December 31, 2011.&nbsp;&nbsp;Gross margin for the
Grain Division was 24.9% for the year ended December 31, 2011, compared with 56.5% for the year ended December 31, 2010.&nbsp;The
decrease was mainly attributable to our sales expansion strategies that we implemented by lowering the average selling price compared
with the market price in 2011 and increasing sales percentages of certain types of grains with lower margins such as millet and
flour.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Gross profit in the Bulk Trading Division
was $3.6 million, contributing to 8.4% of total gross profit for the year ended December 31, 2011. We began to conduct bulk trading
business in the fourth quarter of 2010 and its gross profit for the year ended December 31, 2010 was immaterial. The gross margin
for the year ended December 31, 2011 was 8.3%, which was relatively lower compared with grain retail business due to its nature
of high turnover rate.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Selling Expenses</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Selling expenses increased by $6.9 million,
or 109.5%, for the year ended December 31, 2011 as compared to $6.3 million for the year ended December 31, 2010.&nbsp;&nbsp;Such
increase was mainly attributable to the increase of freight charges, slotting fees for entering more stores and marketing personnel
expenses due to increased sales volume.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>General and Administrative Expenses</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">General and administrative expenses&nbsp;increased
by $4.6 million to $8.2 million in the year ended December 31, 2011, or 127.8%, compared to $3.6 million for the year ended December
31, 2010.&nbsp;This increase was attributable to increased employee bonuses for good business performance, increased expenses
spent on professional services for us as a U.S. public company and other increased expenses due to our business expansion.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Interest Expense</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Interest expense for the year ended December
31, 2011 was $806,000 compared to interest expense of $341,000 for the year ended December 31, 2010, an increase of $464,000,
or 136%.&nbsp; This increase was mainly due to&nbsp;the increase in short-term loans for working capital.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Provision for Income Taxes</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Under the Enterprise Income Tax (&ldquo;EIT&rdquo;)
Law of the PRC, the standard EIT rate is 25%.&nbsp; Our PRC subsidiaries are subject to PRC income taxes on an entity basis on
income arising in or derived from the tax jurisdiction in which they operate.&nbsp; According to the Tax Pronouncement [2008]
No. 149 issued by the State Administration of Tax of the PRC, the preliminary processing industry of agricultural products is
entitled to EIT exemption starting January 1, 2008.&nbsp; Three of the Company&rsquo;s wholly-owned subsidiaries located in Shanxi
Province, namely Jinzhong Deyu, Jinzhong Yongcheng and Jinzhong Yuliang, are subject to the EIT exemption.&nbsp; All of our other
subsidiaries are subject to the 25% EIT rate.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Despite the fact that we earned net income
from continuing operations before income tax of $20.7 million, income tax expenses were $184,000 for the year ended December 31,
2011, because most of the net income before income tax was from Jinzhong Deyu and Jinzhong Yuliang, which are subject to the EIT
exemption. We recorded income tax benefit of $914,000 for the year ended December 31, 2010 mainly derived from net operating losses
carry-forwards for the next five years.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Loss From Discontinued Operations, Net of Income Taxes</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Loss from discontinued operations, net
of income taxes was incurred from the VIE Group, which we terminated our control over on December 20, 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Net Income</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">As a result of the above, we had net income
available to common stockholders of $17.3 million for the year ended December 31, 2011 compared to a net income of $11.5 million
for the year ended December 31, 2010, an increase of $5.8 million, or 50.7%.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Liquidity and Capital Resources</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The following summarizes the key components
of our cash flows for the year ended December 31, 2011 and 2010:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">For&nbsp;the&nbsp;Years&nbsp;Ended<BR> December&nbsp;31,</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2010</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 76%; text-align: left">Net cash (used in) provided by operating activities of continuing operations</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">(7,774,378</TD><TD STYLE="width: 1%; text-align: left">)</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">3,933,743</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Net cash used in investing activities of continuing operations</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(4,032,327</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(12,843,958</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Net cash provided by financing activities of continuing operations</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">14,542,773</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">11,866,345</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Net cash (used in) provided by discontinued operations</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(415,860</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">432,520</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Net increase in cash and cash equivalents</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">2,320,208</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">3,388,650</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">For the year ended December 31, 2011, net
cash used in operating activities of continuing operations totaled approximately $7.7 million, while net cash provided by operating
activities of continuing operations was $3.9 million for the year ended December 31, 2010. This increase of net cash used in operating
activities was primarily attributable to an increase of cash used in expanding sales by granting credit to customers and purchasing
inventory as a result of the key driver of continuous sales growth of our corn and grain businesses. Our corn and grain business
requires immediate cash payments to farmers and their agents before our accounts receivable can be collected from customers.&nbsp;As
our business continued to grow, our supply of raw material was supplemented by grain traders or wholesalers, some of which require
advanced payments for purchasing, and more cash was used in inventory purchases accordingly. The increase in accounts receivable
was $23.8 million for the year ended December 31, 2011 as compared to $6.6 million in the year ended December 31, 2010 as a result
of growth of our net revenue and credit offered to new retailers and wholesalers. The continuous increase in inventories and advance
to suppliers also contributed to the increase in net cash used in our operating activities of continuing operations, which was
$8.7 million and $8.8 million for the years ended December 31, 2011 and 2010 respectively.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">For the year ended December 31, 2011, net
cash used in investing activities of continuing operations was approximately $4 million, a decrease of approximately $8.8 million,
or 68.8%, from approximately $12.8 million for the year ended December 31, 2010.&nbsp;&nbsp;The decrease was the result of the
less payments made in 2011 as prepayments were made primarily in 2010 for acquisition of farmland use rights, for majority construction
cost of the warehouses, office building and cylinder units in Shanxi Province which commenced in 2010 and was completed in 2011.&nbsp;&nbsp;Cash
used in investing activities of continuing operations in the year ended December 31, 2011 was primarily for purchasing machinery
and equipment, while cash used in investing activities of continuing operations in year ended December 31, 2010 was primarily
for paying for land use rights and construction of warehouses.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Net cash provided by financing activities
of continuing operations for the year ended December 31, 2011 was approximately $14.5 million, an increase of approximately $2.6
million, or 21.8%, from approximately $11.9 million for the year ended December 31, 2010.&nbsp; This net cash provided by financing
activities of continuing operations for the year ended December 31, 2011 mainly consisted of net proceeds from short term loans
from banks, related parties and bank acceptance notes, while the net cash provided by financing activities of continuing operations
for the year ended December 31, 2010 was mainly consisted of net proceeds from private placement, short term loans from banks
and related parties.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Net cash used by discontinued operations
for the year ended December 31, 2011 was $416,000 and net cash provided by discontinued operations for the year ended December
31, 2010 was $433,000.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We believe that our current levels of cash,
cash flows from operations, and bank, related party and unrelated party borrowings will be sufficient to meet our anticipated
cash needs for at least the next 12 months. However, we may need additional cash resources in the future if we experience changed
business conditions or other developments. We may also need additional cash resources in the future if we find and wish to pursue
opportunities for investment, acquisition, strategic cooperation or other similar actions. If we ever determine that our cash
requirements exceed our amounts of cash and cash equivalents on hand, we may seek to issue debt or equity securities or obtain
a credit facility. Any future issuance of equity securities could cause dilution to our shareholders. Any incurrence of indebtedness
could increase our debt service obligations and cause us to be subject to restrictive operating and financial covenants. It is
possible that, when we need additional cash resources, financing will only be available to us in amounts or on terms that would
not be acceptable to us, if at all.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Summary of Certain Liquidity Events</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In connection with an exchange agreement,
on April 27, 2010, we issued an aggregate of 8,736,932 shares of our common stock to the shareholders of City Zone.&nbsp;&nbsp;We
received in exchange from the City Zone shareholders 100% of the shares of City Zone, which exchange resulted in City Zone becoming
our wholly owned subsidiary.&nbsp;&nbsp;Immediately after the Exchange, we entered into a Purchase Agreement with certain accredited
Investors for the issuance and sale in a private placement of units, consisting of, 2,455,863 shares of our Series A convertible
preferred stock and Series A warrants to purchase up to 982,362 shares of our common stock, for aggregate gross proceeds of approximately
$10,805,750.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On November 4, 2010, the Company&rsquo;s
Board of Directors approved the Company&rsquo;s 2010 Share Incentive Plan.&nbsp;&nbsp;Under the Plan, 1,000,000 shares of the
Company&rsquo;s common stock shall be allocated to and authorized for use pursuant to the terms of the Plan.&nbsp;&nbsp;On November
8, 2010, a total of 931,000 non-qualified incentive stock options were approved by our Board of Directors and granted under the
Plan to executives, key employees, independent directors, and consultants at an exercise price of $4.40 per share and on December
15, 2010, 40,000 non-qualified incentive stock shares were approved by our Board of Directors and granted under the Plan to a
consultant at an exercise price of $4.40 per share, of which shall vest as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">33 1/3% of the option grants vested one (1) month
after the date of grant;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">33 1/3% of the option grants vested twelve (12) months
after the date of grant; and</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">33 1/3% of the option grants will vest twenty-four
(24) months after the date of grant.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On March 8, 2012, the Company&rsquo;s Board
of Directors allocated to and authorized for use the maximum number of shares allowable pursuant to the terms of the Plan and
granted 420,000 options under the Plan, of which 264,000 were new options and 156,000 were re-granted after such options were
forfeited by employees as a result of their resignations from the Company in accordance with the terms of their option agreements.
All of the newly granted options vest as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">50% of the options granted will vest six
(6) months after the date of the grant; and</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">50% of the options granted will vest twelve
(12) months after the date of the grant.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On November 5, 2010, we filed a Registration
Statement with the SEC on Form S-8 covering up to 1,000,000 shares underlying options which may be granted under the Plan. As
of March 19, 2012, none of the options granted pursuant to the Plan have been exercised.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Contractual Obligations</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The following table presents the Company&rsquo;s
material contractual obligations as of December 31, 2011:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Contractual&nbsp;Obligations</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Total</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Less&nbsp;than&nbsp;<BR> 1&nbsp;year</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">1-3&nbsp;years</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">3-5&nbsp;years</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">More&nbsp;than&nbsp;<BR> 5&nbsp;years</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 40%; text-align: left">&nbsp;Bank Loans</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">14,413,480</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">14,413,480</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">-</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">-</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">-</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">&nbsp;Notes payable</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,588,840</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,588,840</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">&nbsp;Operating Lease Obligations</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,389,727</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">134,402</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">175,615</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">170,819</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">908,892</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">17,392,047</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">16,136,722</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">175,615</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">170,819</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">908,892</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Off-Balance Sheet Arrangements</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We do not have any off-balance sheet arrangements,
financings, or other relationships with unconsolidated entities or other persons, also known as &ldquo;special purpose entities&rdquo;
(SPEs).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Critical Accounting Policies and Estimates</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">This discussion and analysis of financial
condition and results of operations has been prepared by management based on our consolidated financial statements, which have
been prepared in accordance with U.S. GAAP.&nbsp;&nbsp;The preparation of these financial statements requires management to make
estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses, and related disclosure
of contingent assets and liabilities. On an ongoing basis, management evaluates our critical accounting policies and estimates,
including those related to revenue recognition, valuation of accounts receivable, property and equipment, long-lived assets, intangible
assets, derivative liabilities and contingencies.&nbsp;&nbsp;Estimates are based on historical experience and on various assumptions
believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying
values of assets and liabilities that are not readily apparent from other sources. These judgments and estimates affect the reported
amounts of assets and liabilities and the reported amounts of revenue and expenses during the reporting periods. We consider the
following accounting policies important in understanding our operating results and financial condition:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Use of Estimates</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The preparation of the consolidated financial
statements in conformity with generally accepted accounting principles 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 period. Management makes its estimates based
on historical experience and various other assumptions and information that are available and believed to be reasonable at the
time the estimates are made. Therefore, actual results could differ from those estimates under different assumptions and conditions.</P>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;<B>Cash and Cash Equivalents</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Cash and cash equivalents consist of cash
on hand, cash in bank and all highly liquid investments with original maturities of three months or less.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">As a result of the financings associated
with the Exchange, we had, as of December 31, 2010, $125,560 in a trust account. The use of these funds requires the written approval
of our placement agent and us. The funds in the escrow account were designated for certain expenses, such as investor relations,
accounting/consulting fees, SEC fees, and stock transfer agent fees. This amount was classified as restricted cash under current
assets on our balance sheet as of December 31, 2010, while the restriction was released in 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">As of December 31, 2011, $1,588,840 of
cash was restricted as a pledge for $1,588,840 (RMB 10,000,000) of notes payable obtained from Jinzhong City Yuci District Rural
Credit Union Co., Ltd. in August 2011 and $262,159 of cash was restricted as a pledge for $2,121,101 (RMB13,350,000) for a bank
loan obtained from China Merchants Bank (Dongzhimen branch) in November 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Accounts Receivable</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Accounts receivable are recorded at net
realizable value consisting of the carrying amount less allowance for doubtful accounts, as needed.&nbsp;&nbsp;We assess the collectability
of accounts receivable based primarily upon the creditworthiness of the customer as determined by credit checks and analysis,
as well as the customer&rsquo;s payment history.&nbsp;&nbsp;Management reviews the composition of accounts receivable and analyzes
historical bad debts, customer concentrations, customer credit worthiness, current economic trends, and changes in customer payment
patterns to evaluate the adequacy of these reserves.&nbsp;&nbsp;As of December 31, 2011 and 2010, there were no customers with
accounts receivable greater than six months past due.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Inventories</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The Company's inventories are stated at
lower of cost or market.&nbsp;&nbsp;Cost is determined on moving-average basis.&nbsp;&nbsp;Costs of inventories include purchase
and related costs incurred in delivering the products to their present location and condition.&nbsp;&nbsp;Market value is determined
by reference to selling prices after the balance sheet date or to management&rsquo;s estimates based on prevailing market conditions.&nbsp;&nbsp;Management
periodically evaluates the composition of its inventories at least quarterly to identify slow-moving and obsolete inventories
to determine if valuation allowance is required.&nbsp;&nbsp;As of December 31, 2011 and 2010, management did not identify any
slow moving or obsolete inventory. For the years ended December 31, 2011 and 2010, loss on reduction of inventory to the lower
of cost or market was $56,140 and $0, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Assets Held for Sales</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">A long-lived asset to be sold shall be
classified as held for sale in the period in which all of the following criteria are met: (a) Management, having the authority
to approve the action, commits to a plan to sell the asset. (b) The asset is available for immediate sale in its present condition
subject only to terms that are usual and customary for sales of such assets. (c) An active program to locate a buyer and other
actions required to complete the plan to sell the asset have been initiated. (d) The sale of the asset is probable, and transfer
of the asset is expected to qualify for recognition as a completed sale, within one year, except as permitted by paragraph ASC
360-10-45-11. The term probable refers to a future sale that is likely to occur. (e) The asset is being actively marketed for
sale at a price that is reasonable in relation to its current fair value. The price at which a long-lived asset is being marketed
is indicative of whether the entity currently has the intent and ability to sell the asset. A market price that is reasonable
in relation to fair value indicates that the asset is available for immediate sale, whereas a market price in excess of fair value
indicates that the asset is not available for immediate sale. (f) Actions required to complete the plan indicate that it is unlikely
that significant changes to the plan will be made or that the plan will be withdrawn.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">A loss shall be recognized for any initial
or subsequent write-down to fair value less cost to sell. A gain shall be recognized for any subsequent increase in fair value
less cost to sell, but not in excess of the cumulative loss previously recognized (for a write-down to fair value less cost to
sell). The loss or gain shall adjust only the carrying amount of a long-lived asset, whether classified as held for sale individually
or as part of a disposal group.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Property, Plant, and Equipment</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Property, plant, and equipment are stated
at cost less accumulated depreciation.&nbsp;&nbsp;Expenditures for maintenance and repairs are charged to earnings as incurred;
additions, renewals and betterments are capitalized.&nbsp;&nbsp;When property, plant, and equipment are retired or otherwise disposed
of, the related cost and accumulated depreciation are removed from the respective accounts, and any gain or loss is included in
operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;Depreciation is computed using the
straight-line method over the estimated useful lives of the assets as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 90%; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="width: 80%; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 20%; border-bottom: Black 1pt solid; font-weight: bold; text-align: center">Useful&nbsp;Life<BR> (in&nbsp;years)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.8pt">Automobiles</TD>
    <TD STYLE="padding-right: 0.8pt; text-align: center">5</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.8pt">Buildings</TD>
    <TD STYLE="padding-right: 0.8pt; text-align: center">10-30</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.8pt">Office equipment</TD>
    <TD STYLE="padding-right: 0.8pt; text-align: center">5</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.8pt">Machinery and equipment</TD>
    <TD STYLE="padding-right: 0.8pt; text-align: center">5-10</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-right: 0.8pt">Furniture &amp; fixtures</TD>
    <TD STYLE="padding-right: 0.8pt; text-align: center">5</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Construction-In-Progress</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Construction-in-progress consists of amounts
expended for warehouse construction.&nbsp;&nbsp;Construction-in-progress is not depreciated until such time as the assets are
completed and put into service.&nbsp;&nbsp;Once warehouse construction is completed, the cost accumulated in construction-in-progress
is transferred to property, plant, and equipment.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Long-Lived Assets</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The Company applies the provisions of FASB
ASC Topic 360 (ASC 360), &quot;Property, Plant, and Equipment&quot; which addresses financial accounting and reporting for the
impairment or disposal of long-lived assets.&nbsp;&nbsp;The Company periodically evaluates the carrying value of long-lived assets
to be held and used in accordance with ASC 360, at least on an annual basis.&nbsp;&nbsp;ASC 360 requires the impairment losses
to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows
estimated to be generated by those assets are less than the assets' carrying amounts.&nbsp;&nbsp;In that event, a loss is recognized
based on the amount by which the carrying amount exceeds the fair market value of the long-lived assets.&nbsp;&nbsp;Loss on long-lived
assets to be disposed of is determined in a similar manner, except that fair market values are reduced for the cost of disposal.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Goodwill and Intangible Assets</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Good is calculated as the purchase premium
after adjusting for the fair value of net assets acquired.&nbsp;&nbsp;Goodwill is not amortized but is reviewed for potential
impairment on an annual basis, or when events or circumstances indicate a potential impairment, at the reporting unit level.&nbsp;&nbsp;A
reporting unit, as defined under applicable accounting guidance, is a business segment or one level below a business segment.&nbsp;&nbsp;Under
applicable accounting guidance, the goodwill impairment analysis is a two-step test.&nbsp;&nbsp;The first step of the goodwill
impairment test involves comparing the fair value of each reporting unit with its carrying amount including goodwill.&nbsp;&nbsp;If
the fair value of the reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired; however,
if the carrying amount of the reporting unit exceeds its fair value, the second step must be performed to measure potential impairment.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The second step involves calculating an
implied fair value of goodwill for each reporting unit for which the first step indicated possible impairment.&nbsp;&nbsp;The
implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination,
which is the excess of the fair value of the reporting unit, as determined in the first step, over the aggregate fair values of
the assets, liabilities and identifiable intangibles as if the reporting unit was being acquired in a business combination.&nbsp;&nbsp;Measurement
of the fair values of the assets and liabilities of a reporting unit is consistent with the requirements of the fair value measurements
accounting guidance, which defines fair value as the price that would be received to sell an asset or paid to transfer a liability
in an orderly transaction between market participants at the measurement date.&nbsp;&nbsp;The adjustments to measure the assets,
liabilities, and intangibles at fair value are for the purpose of measuring the implied fair value of goodwill and such adjustments
are not reflected in the consolidation balance sheet.&nbsp;&nbsp;If the implied fair value of goodwill exceeds the goodwill assigned
to the reporting unit, there is no impairment.&nbsp;&nbsp;If the goodwill assigned to a reporting unit exceeds the implied fair
value of goodwill, an impairment charge is recorded for the excess.&nbsp;&nbsp;An impairment loss recognized cannot exceed the
amount of goodwill assigned to a reporting unit.&nbsp;&nbsp;An impairment loss establishes a new basis in the goodwill and subsequent
reversals of goodwill impairment losses are not permitted under applicable accounting guidance.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The goodwill in the balance sheet as of
December 31, 2010 was generated from the acquisition of Haoliangxin by Deyufarm on July 24, 2010. In 2010, goodwill was tested
for impairment and it was determined that goodwill was not impaired as of December 31, 2010. Pursuant to the Termination Agreements
for the VIE Group, the Company deconsolidated the VIE Group and no goodwill was presented on the balance sheet as of December
31, 2011, and either as of December 31, 2010 after reclassification of the assets and liabilities of discontinued operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">For intangible assets subject to amortization,
an impairment loss is recognized if the carrying amount of the intangible asset is not recoverable and exceeds fair value.&nbsp;&nbsp;The
carrying amount of the intangible asset is considered not recoverable if it exceeds the sum of the undiscounted cash flows expected
to result from the use of the asset.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Fair Value Measurements</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">FASB ASC 820, &ldquo;Fair Value Measurements&rdquo;
(formerly SFAS No. 157) defines fair value for certain financial and nonfinancial assets and liabilities that are recorded at
fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements.&nbsp;&nbsp;It
requires that an entity measure its financial instruments to base fair value on exit price and maximize the use of observable
units and minimize the use of unobservable inputs to determine the exit price.&nbsp;&nbsp;It establishes a hierarchy which prioritizes
the inputs to valuation techniques used to measure fair value.&nbsp;&nbsp;This hierarchy increases the consistency and comparability
of fair value measurements and related disclosures by maximizing the use of observable inputs and minimizing the use of unobservable
inputs by requiring that observable inputs be used when available.&nbsp;&nbsp;Observable inputs are inputs that reflect the assumptions
market participants would use in pricing the assets or liabilities based on market data obtained from sources independent of the
Company.&nbsp;&nbsp;Unobservable inputs are inputs that reflect the Company&rsquo;s own assumptions about the assumptions market
participants would use in pricing the asset or liability developed based on the best information available in the circumstances.&nbsp;&nbsp;The
hierarchy prioritizes the inputs into three broad levels based on the reliability of the inputs as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Level 1 &ndash;
                                                                                                               Inputs are quoted
                                                                                                               prices in active
                                                                                                               markets for identical
                                                                                                               assets or liabilities
                                                                                                               that the Company
                                                                                                               has the ability
                                                                                                               to access at the
                                                                                                               measurement date.&nbsp;&nbsp;Valuation
                                                                                                               of these instruments
                                                                                                               does not require
                                                                                                               a high degree of
                                                                                                               judgment as the
                                                                                                               valuations are
                                                                                                               based on quoted
                                                                                                               prices in active
                                                                                                               markets that are
                                                                                                               readily and regularly
                                                                                                               available.</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Level 2 &ndash;
                                                                                                               Inputs other than
                                                                                                               quoted prices in
                                                                                                               active markets
                                                                                                               that are either
                                                                                                               directly or indirectly
                                                                                                               observable as of
                                                                                                               the measurement
                                                                                                               date, such as quoted
                                                                                                               prices for similar
                                                                                                               assets or liabilities;
                                                                                                               quoted prices in
                                                                                                               markets that are
                                                                                                               not active; or
                                                                                                               other inputs that
                                                                                                               are observable
                                                                                                               or can be corroborated
                                                                                                               by observable market
                                                                                                               data for substantially
                                                                                                               the full term of
                                                                                                               the assets or liabilities.</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Level 3 &ndash;
                                                                                                               Valuations based
                                                                                                               on inputs that
                                                                                                               are unobservable
                                                                                                               and not corroborated
                                                                                                               by market data.&nbsp;&nbsp;The
                                                                                                               fair value for
                                                                                                               such assets and
                                                                                                               liabilities is
                                                                                                               generally determined
                                                                                                               using pricing models,
                                                                                                               discounted cash
                                                                                                               flow methodologies,
                                                                                                               or similar techniques
                                                                                                               that incorporate
                                                                                                               the assumptions
                                                                                                               a market participant
                                                                                                               would use in pricing
                                                                                                               the asset or liability.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">This guidance applies to other accounting
pronouncements that require or permit fair value measurements.&nbsp;&nbsp;On February 12, 2008, the FASB finalized FASB Staff
Position (FSP) No. 157-2, Effective Date of FASB Statement No. 157 (ASC 820).&nbsp;&nbsp;This Staff Position delays the effective
date of SFAS No. 157 (ASC 820) for nonfinancial assets and liabilities to fiscal years beginning after November 15, 2008 and interim
periods within those fiscal years, except for those items that are recognized or disclosed at fair value in the financial statements
on a recurring basis (at least annually).&nbsp;&nbsp;The adoption of SFAS No. 157 (ASC 820) had no effect on the Company's financial
position or results of operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;We also analyze all financial instruments
with features of both liabilities and equity under ASC 480-10 (formerly SFAS 150, &ldquo;Accounting for Certain Financial Instruments
with Characteristics of Both Liabilities and Equity&rdquo;) and ASC 815-40 (formerly EITF 00-19, &ldquo;Accounting for Derivative
Financial Instruments Indexed to, and Potentially Settled in, a Company&rsquo;s Own Stock&rdquo;).&nbsp;&nbsp;We have determined
ASC 480-10 (formerly SFAS 150) and ASC 815-40 (formerly EITF 00-19) has no material effect on our financial position or results
of operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Revenue Recognition</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The Company&rsquo;s revenue recognition
policies are in compliance with the SEC Staff Accounting Bulletin No. 104 (&ldquo;SAB 104&rdquo;).&nbsp;&nbsp;The Company recognizes
product revenue when the following fundamental criteria are met: (i) persuasive evidence of an arrangement exists, (ii) delivery
has occurred, (iii) our price to the customer is fixed or determinable and (iv) collection of the resulting accounts receivable
is reasonably assured.&nbsp;&nbsp;The Company recognizes revenue for product sales upon transfer of title to the customer.&nbsp;&nbsp;Customer
purchase orders and/or contracts are generally used to determine the existence of an arrangement.&nbsp;&nbsp;Shipping documents
and the completion of any customer acceptance requirements, when applicable, are used to verify product delivery or that services
have been rendered.&nbsp;&nbsp;The Company assesses whether a price is fixed or determinable based upon the payment terms associated
with the transaction and whether the sales price is subject to refund or adjustment.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The Company&rsquo;s revenue is recognized
net of value-added tax (VAT), reductions to revenue for estimated product returns, and sales discounts based on volume achieved
in the same period that the related revenue is recorded.&nbsp;&nbsp;The estimates are based on historical sales returns, analysis
of credit memo data, and other factors known at the time.&nbsp;&nbsp;For the years ended December 31, 2011 and 2010, sales discounts
from continuing operations were $70,987 and $0, respectively.&nbsp;&nbsp;Commencing from year 2010, the Company had terminated
the offering of sales discounts to customers.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We offer a right of exchange on our grain
products sold through our relationship with grocery store networks.&nbsp;&nbsp;The consumer who purchases the product may exchange
it for the same kind and quantity of product originally purchased.&nbsp;&nbsp;In accordance with FASB ASC 605-15-25-1 and 605-15-15-2,
these are not considered returns for revenue recognition purposes.&nbsp;&nbsp;For the years ended December 31, 2011 and 2010,
the returns of our product were not material.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Advertising Costs</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The Company expenses the cost of advertising
as incurred or, as appropriate, the first time the advertising takes place.&nbsp;&nbsp;Advertising costs from continuing operations
for the year ended December 31, 2011 and 2010 were $952,472 and $83,576 respectively.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Research and Development</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The Company expenses its research and development
costs as incurred.&nbsp;&nbsp;Research and development costs from continuing operations for the years ended December 31, 2011
and 2010 were $98,393 and $73,860, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Stock-Based Compensation</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In December 2004, the Financial Accounting
Standard Board, or the FASB, issued the Statement of Financial Accounting Standards, or SFAS, No. 123(R), &ldquo;Share-Based Payment&rdquo;,
which replaces SFAS No. 123 and supersedes APB Opinion No. 25.&nbsp;&nbsp;SFAS No. 123(R) is now included in the FASB&rsquo;s
ASC Topic 718, &ldquo;Compensation &ndash; Stock Compensation.&rdquo;&nbsp;&nbsp;Under SFAS No. 123(R), companies are required
to measure the compensation costs of share-based compensation arrangements based on the grant-date fair value and recognize the
costs in the financial statements over the period during which employees or independent contractors are required to provide services.&nbsp;&nbsp;Share-based
compensation arrangements include stock options and warrants, restricted share plans, performance-based awards, share appreciation
rights and employee share purchase plans.&nbsp;&nbsp;In March 2005, the SEC issued Staff Accounting Bulletin No. 107, or SAB 107,
which expresses views of the staff regarding the interaction between SFAS No. 123(R) and certain SEC rules and regulations and
provides the staff&rsquo;s views regarding the valuation of share-based payment arrangements for public companies.&nbsp;&nbsp;SFAS
No. 123(R) permits public companies to adopt its requirements using one of two methods.&nbsp;&nbsp;On April 14, 2005, the SEC
adopted a new rule amending the compliance dates for SFAS No. 123(R).&nbsp;&nbsp;Companies may elect to apply this statement either
prospectively, or on a modified version of retrospective application under which financial statements for prior periods are adjusted
on a basis consistent with the pro forma disclosures required for those periods under SFAS No. 123.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The Company has fully adopted the provisions
of FASB ASC 718 and related interpretations as provided by SAB 107.&nbsp;&nbsp;As such, compensation cost is measured on the date
of grant as the fair value of the share-based payments.&nbsp;&nbsp;Such compensation amounts, if any, are amortized over the respective
vesting periods of the option grant.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Income Taxes</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The Company accounts for income taxes in
accordance with FASB ASC Topic 740, &ldquo;Income Taxes.&rdquo;&nbsp;&nbsp;ASC 740 requires a company to use the asset and liability
method of accounting for income taxes, whereby deferred tax assets are recognized for deductible temporary differences, and deferred
tax liabilities are recognized for taxable temporary differences.&nbsp;&nbsp;Temporary differences are the differences between
the reported amounts of assets and liabilities and their tax bases.&nbsp;&nbsp;Deferred tax assets are reduced by a valuation
allowance when, in the opinion of management, it is more likely than not that some portion, or all of, the deferred tax assets
will not be realized.&nbsp;&nbsp;Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates
on the date of enactment.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Under ASC 740, a tax position is recognized
as a benefit only if it is &ldquo;more likely than not&rdquo; that the tax position would be sustained in a tax examination, with
a tax examination being presumed to occur.&nbsp;&nbsp;The amount recognized is the largest amount of tax benefit that is greater
than 50% likely of being realized on examination.&nbsp;&nbsp;For tax positions not meeting the &ldquo;more likely than not&rdquo;
test, no tax benefit is recorded.&nbsp;&nbsp;The adoption had no effect on the Company&rsquo;s consolidated financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Foreign Currency Translation and Comprehensive Income</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">U.S. GAAP requires that recognized revenue,
expenses, gains and losses be included in net income.&nbsp;&nbsp;Certain statements, however, require entities to report specific
changes in assets and liabilities, such as gain or loss on foreign currency translation, as a separate component of the equity
section of the balance sheet.&nbsp;&nbsp;Such items, along with net income, are components of comprehensive income.&nbsp;&nbsp;The
functional currency of the Company is Renminbi (&ldquo;RMB&rdquo;).&nbsp;&nbsp;The unit of RMB is in Yuan.&nbsp;&nbsp;Translation
gains are classified as an item of other comprehensive income in the stockholders&rsquo; equity section of the consolidated balance
sheet.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Statement of Cash Flows</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In accordance with FASB ASC Topic 230,
&ldquo;Statement of Cash Flows,&rdquo; cash flows from the Company&rsquo;s operations are calculated based upon the local currencies.&nbsp;&nbsp;As
a result, amounts related to assets and liabilities reported on the consolidated statement of cash flows will not necessarily
agree with changes in the corresponding balances on the consolidated balance sheets.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Discontinued Operations</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Certain prior period amounts have been
reclassified in these consolidated financial statements to conform to the 2011 presentation of discontinued operations of the
VIE Group for the deep processed grain business.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Reclassifications</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Except for the classification for discontinued
operations, certain classifications have been made to the prior year financial statements to conform to the current year presentation.&nbsp;&nbsp;The
reclassifications have no impact on the Company&rsquo;s 2010 consolidated statement of operations and retained earnings.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Recent Pronouncements</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In January 2010, FASB issued an amendment
regarding improving disclosures about fair value measurements. This new guidance requires some new disclosures and clarifies some
existing disclosure requirements about fair value measurement. The new disclosures and clarifications of existing disclosures
are effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases,
sales, issuances and settlements in the roll forward of activity in Level 3 fair value measurements. Those disclosures are effective
for fiscal years beginning after December 15, 2010 and for interim periods within those fiscal years. There was no impact from
the adoption of this guidance to our consolidated financial position or results of operations as the amendment only addresses
disclosures.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In April 2010, FASB issued an amendment
to Stock Compensation. The amendment clarifies that an employee stock-based payment award with an exercise price denominated in
the currency of a market in which a substantial portion of the entity&rsquo;s equity shares trades should not be considered to
contain a condition that is not a market, performance, or service condition. Therefore, an entity would not classify such an award
as a liability if it otherwise qualifies as equity. The amendments are effective for fiscal years, and interim periods within
those fiscal years, beginning on or after December 15, 2010. The adoption of this guidance had no impact on our consolidated financial
position or results of operations since our stock-based payment awards have an exercise price denominated in the same currency
of the market in which our Company shares are traded.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In May 2011, FASB issued an amendment (ASU
No. 2011-04) to Fair Value Measurement (ASC Topic 820). In 2006, the FASB and the International Accounting Standards Board (IASB)
published a Memorandum of Understanding, which has served as the foundation of the Board&rsquo;s efforts to a common set of high
quality global accounting standards. Consistent with the Memorandum of Understanding and the Board&rsquo;s commitment to achieving
the goal, the amendments in this Update are the result of the work by the FASB and the IASB to develop common requirements for
measuring fair value and for disclosing information about fair value measurements in accordance with U.S. GAAP and IFRS. The adoption
of this guidance had no impact on our consolidated financial position or results of operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In May 2011, FASB issued an amendment (ASU
No. 2011-05) to Comprehensive Income (ASC Topic 220). The amendment require that all nonowner changes in stockholders&rsquo; equity
be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In
the two-statement approach, the first statement should present total net income and its components followed consecutively by a
second statement that should present total other comprehensive income, the components of other comprehensive income, and the total
of comprehensive income. The Company had adopted this guidance to our consolidated financial statements as of and for the year
ended December 31, 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In September 2011, FASB issued an amendment
(ASU No. 2011-08) to Intangibles&ndash;Goodwill and Other (ASC Topic 350). The amendments in the Update permit an entity to first
assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than
its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test described
in Topic 350. If, after assessing the totality of events or circumstances, an entity determines it is not more likely than not
that the fair value of a reporting unit is less than its carrying amount, then performing the two-step impairment test is unnecessary.
However, if an entity concludes otherwise, then it is required to perform the first step of the two-step impairment test by calculating
the fair value of the reporting unit and comparing the fair value with the carrying amount of the reporting unit, as described
in paragraph 350-20-35-4. If the carrying amount of a reporting unit exceeds its fair value, then the entity is required to perform
the second step of the goodwill impairment test to measure the amount of the impairment loss, if any, as described in paragraph
350-20-35-9. The Company had adopted this guidance to our consolidated financial statements as of and for the year ended December
31, 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In December 2011, FASB issued an Update
(ASU No. 2011-10) to Property, Plant, and Equipment (ASC Topic 360). Under the amendments in this Update, when a parent (reporting
entity) ceases to have a controlling financial interest (as described in Subtopic 810-10) in a subsidiary that is in substance
real estate as a result of default on the subsidiary&rsquo;s nonrecourse debt, the reporting entity should apply the guidance
in Subtopic 360-20 to determine whether it should derecognize the in substance real estate. Generally, a reporting entity would
not satisfy the requirements to derecognize the in substance real estate before the legal transfer of the real estate to the lender
and the extinguishment of the related nonrecourse indebtedness. That is, even if the reporting entity ceases to have a controlling
financial interest under Subtopic 810-10, the reporting entity would continue to include the real estate, debt, and the results
of the subsidiary&rsquo;s operations in its consolidated financial statements until legal title to the real estate is transferred
to legally satisfy the debt. The adoption of this guidance had no impact on our consolidated financial position or results of
operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In December 2011, FASB issued an Update
(ASU No. 2011-11) to Balance Sheet (ASC Topic 210) regarding disclosures about offsetting assets and liabilities. Pursuant to
this Update, entities are required to disclose both gross information and net information about both instruments and transactions
eligible for offset in the statement of financial position and instruments and transactions subject to an agreement similar to
a master netting arrangement. This scope would include derivatives, sale and repurchase agreements and reverse sale and repurchase
agreements, and securities borrowing and securities lending arrangements. The adoption of this guidance had no impact on our consolidated
financial position or results of operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>BUSINESS </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Overview</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 35pt">We are a vertically integrated producer,
processor, marketer and distributor of organic and other agricultural products made from corn and grains operating in Shanxi Province
in the People's Republic of China. The Company has access to over 109,000 acres of farmland in Shanxi Province for breeding, cultivating,
processing, warehousing, and distributing grain and corn products. We have an extensive wholesale network in over 15 provinces
and a retail distribution network of approximately 20,000 supermarkets and convenience stores in 29 provinces across China. We
are equipped with advanced production lines and modern warehouses with production capacity of over 105,000 tons for grain products,
capacity of storage of over 100,000 tons and annual turnover of 700,000 tons for our corn products.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our farming operations are conducted through
our wholly-owned PRC subsidiaries, Jinzhong Deyu Agriculture Trading Co. Limited (&ldquo;Jinzhong Deyu&rdquo;), Jinzhong Yongcheng
Agriculture Trading Co. Limited (&ldquo;Yongcheng&rdquo;) and Jinzhong Yuliang Agriculture Trading Co. Limited (&ldquo;Yuliang&rdquo;).&nbsp;Yongcheng
and Yuliang focus on processing and distributing our corn and corn byproducts. Our grain processing and distribution are conducted
through our wholly-owned PRC subsidiaries, Jinzhong Deyu, Shanxi Taizihu Food Co. Ltd. (&ldquo;Taizihu&rdquo;), Shanxi Huichun
Bean Products Co., Ltd. Our other wholly-owned PRC subsidiaries, Detian Yu Biotechnology (Beijing) Co., Ltd. (&quot;Detian Yu&quot;)
and Tianjin Guandu Food Co., Ltd. (&quot;Tianjin Guandu&quot;), and our majority-owned PRC subsidiary Hebei Yugu Grain Co., Ltd.
(&quot;Hebei Yugu&quot;) together with Jinzhong Deyu are engaged in bulk trading of rice, flour, wheat and other agriculture products
and the distribution of our processed grain products.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">A brief description of our products is
set forth below, by division:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.2in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><B><I>Corn Division
                                                                                                         </I></B>&ndash;Yongcheng
                                                                                                         and Yuliang process and
                                                                                                         distribute corn and corn
                                                                                                         byproducts. Yongcheng
                                                                                                         and Yuliang acquire unprocessed
                                                                                                         corn and perform value-added
                                                                                                         processes to the corn
                                                                                                         such as cleaning, drying
                                                                                                         and packaging.&nbsp;&nbsp;Consumers
                                                                                                         range from livestock
                                                                                                         feed companies to corn
                                                                                                         oil/corn starch manufacturing
                                                                                                         companies and governmental
                                                                                                         procurement agencies
                                                                                                         in China.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.2in; text-indent: -0.2in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.2in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><B><I>Grain Division
                                                                                                         </I></B>&ndash;Jinzhong
                                                                                                         Deyu acquires unprocessed
                                                                                                         grains including millet,
                                                                                                         green bean, soy bean,
                                                                                                         black rice and many other
                                                                                                         varieties of grains traditionally
                                                                                                         grown and consumed in
                                                                                                         China and performs value-added
                                                                                                         processes to the grains
                                                                                                         such as peeling, cleaning,
                                                                                                         grinding and packaging.
                                                                                                         Taizihu and Huichun mainly
                                                                                                         produce and distribute
                                                                                                         deep processed grain
                                                                                                         products, including bean
                                                                                                         based products, fruit
                                                                                                         vinegars and juices and
                                                                                                         other grain products.
                                                                                                         The finished products
                                                                                                         of this division are
                                                                                                         then sold directly to
                                                                                                         supermarkets and convenience
                                                                                                         stores in China and overseas.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.2in; text-indent: -0.2in"><B><I>&nbsp;</I></B></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.2in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><B><I>Bulk Trading
                                                                                                         Division</I></B> &ndash;Jinzhong
                                                                                                         Deyu, Detian Yu, Tianjin
                                                                                                         Guandu and Hebei Yugu
                                                                                                         conduct bulk trading
                                                                                                         through procuring and
                                                                                                         wholesaling rice, flour,
                                                                                                         wheat, kidney beans,
                                                                                                         green beans and other
                                                                                                         agricultural products.
                                                                                                         The majority of our customers
                                                                                                         for this division are
                                                                                                         food manufacturers, grain
                                                                                                         trading companies, wholesalers
                                                                                                         and governmental procurement
                                                                                                         agencies in China.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Operating revenue from continuing operations
for the year ended December 31, 2011 was $261,576,666, representing a 207% increase from $85,174,884 for the year ended December
31, 2010. Our net income available to common stockholders for the year ended December&nbsp;31, 2011 was $17,335,442, representing
a 50.7% increase from $11,502,253 for the year ended December 31, 2010.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our principal office is located at 8th
Floor, Block 5, Aolinjiatai Building, 1 Kehuiqian Street, Chaoyang District, Beijing, China 100192. Our telephone number in China
is +(8610)-5224 1802 and our fax number is +(8610)-5224 1822. Our telephone number in the United States is (646) 820-8060. Our
corporate website is <U>www.deyuagri.com</U> (information on our website is not made a part of prospectus).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Corporate History</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>2010 Share Exchange and Preferred Stock Financings</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On April 27, 2010, Deyu (then known as
Eco Building International, Inc.) completed the acquisition of City Zone Holdings Limited, an emerging organic and non-organic
agricultural products distributor in Shanxi Province, China, engaged in procuring, processing, marketing and distributing various
grain and corn products (&ldquo;City Zone&rdquo;), by means of a share exchange (the &ldquo;Exchange&rdquo;).&nbsp;&nbsp;As a
result of the Exchange, City Zone became a wholly-owned subsidiary of Deyu.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Simultaneously with the acquisition, we
completed a private placement offering in the gross amount of $8,211,166 of the sale of securities to accredited investors at
$4.40 per unit, with each &ldquo;Unit&rdquo; consisting of one share of our Series A convertible preferred stock and one warrant
to purchase 0.4 shares of our common stock with an exercise price of $5.06 per share. We executed a Securities Purchase Agreement
in connection with the offering, which is referenced as Exhibit 10.1 herein.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On May 10, 2010, we&nbsp;closed on the
second and final round of the private placement offering as disclosed in our Current Report on Form 8-K filed with the SEC on
May 3, 2010 through the sale of 589,689 Units comprised of 589,689 shares of our Series A convertible preferred stock and 235,882
five-year warrants with an exercise price of $5.06 per share, to certain accredited investors for total gross proceeds of $2,594,607.
We raised an aggregate amount of $10,805,750 in the two rounds of offerings.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In connection with the financing transaction,
we entered into (i) a Registration Rights Agreement, (ii) a Lock-Up Agreement and (iii) a Securities Escrow Agreement for a make
good arrangement with our management (together with the Securities Purchase Agreement, these agreements shall be referred to as
the &ldquo;Financing Documents&rdquo;).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The private placement closed simultaneously
with the signing of the Financing Documents and our issuing of 2,455,863 shares of Series A convertible preferred stock and warrants
exercisable into 982,362 shares of common stock to certain investors (collectively, the &ldquo;Investors&rdquo;).&nbsp;&nbsp;Pursuant
to its terms, the Series A convertible preferred stock receive cumulative dividends at a rate of 5% per annum and can be converted
into common stock on a 1:1 basis, subject to applicable adjustments.&nbsp;&nbsp;Pursuant to its terms, the warrants can be converted
into 982,362 shares of common stock at an exercise price of $5.06 per share (the &quot;Warrants&quot;).&nbsp;&nbsp;The Warrants
will expire on April 27, 2015.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Pursuant to the Registration Rights Agreement,
we agreed to file a registration statement on Form S-1 (or other applicable Form) within 60 days of the close of such financing.&nbsp;&nbsp;We
filed a Registration Statement on Form S-1 with the SEC on June 15, 2010, and on October 21, 2010, the&nbsp;SEC declared the Form
S-1 effective.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We also entered into a Lock-Up Agreement
with the Investors, pursuant to which the common stock owned by the management of City Zone was locked-up for the six (6) month
period following the effectiveness of the Registration Statement is declared effective. The Lock-Up Agreement expired on April
21, 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Lastly, pursuant to the Securities Escrow
Agreement, our majority shareholder (which is also the selling stockholder in this prospectus, Expert Venture Limited) pledged
2,455,863 shares of&nbsp;common stock of the Company (the &ldquo;Make Good Shares&rdquo;) to secure the obligation that we reach
certain earnings thresholds for the fiscal years ended 2010 and 2011.&nbsp;&nbsp;Since the Make Good Shares have already been
issued to Expert Venture Limited, any transfer of the shares pursuant to the terms of the Make Good Agreement will not cause any
dilution to existing shareholders. One half (or 1,227,932 shares) of the Make Good Shares were allocated to the 2010 earnings
requirement and the other half (1,227,931 shares) of the Make Good Shares were allocated to the 2011 earnings requirement. For
the fiscal year 2010, we met our threshold requirement of reporting net income of at least 95% of $11,000,000. If we meet the
threshold in 2011 of reporting net income of at least 95% of $15,000,000 (i.e., at least $14,250,000), the remainder of the Make
Good Shares will be returned to Expert Venture Limited, however if we fail to meet our threshold, then the Make Good Shares will
be released from escrow based on the following terms and conditions:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>If we achieve net
                                                                                                          income of less than
                                                                                                          50% of $15,000,000 (or
                                                                                                          $7,500,000), then 1,227,931
                                                                                                          shares shall be released
                                                                                                          to the investors on
                                                                                                          a pro rata basis (based
                                                                                                          on the amount of each
                                                                                                          investors investment).</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-indent: -0.25in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>If we achieve net
                                                                                                          income of between 50%
                                                                                                          and less than 95% of
                                                                                                          $15,000,000, then a
                                                                                                          portion of the 1,227,931
                                                                                                          shares held in escrow
                                                                                                          shall be disbursed to
                                                                                                          the Investors (the remaining
                                                                                                          shares will be returned
                                                                                                          to Expert Venture Limited).&nbsp;
                                                                                                          The number of shares
                                                                                                          released to the investors
                                                                                                          shall be determined
                                                                                                          by doubling the percentage
                                                                                                          missed between the actual
                                                                                                          net income as compared
                                                                                                          to the make good target
                                                                                                          and then multiplying
                                                                                                          that by the 1,227,931
                                                                                                          escrow shares.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Additionally, as a result of the Exchange,
we changed our fiscal year end&nbsp;to December 31.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On May 19, 2010, we filed with the Secretary
of State for the State of Nevada a Certificate of Amendment to our Articles of Incorporation changing our name from &ldquo;Eco
Building International, Inc.&rdquo; to &ldquo;Deyu Agriculture Corp.&rdquo; FINRA declared the name change effective on June 2,
2010.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Deyufarm VIE Control Agreements</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On November 16, 2010, Detian Yu entered
into a series of control agreements (collectively, the &ldquo;Control Agreements&rdquo;) with each of (a) Beijing Jundaqianyuan
Investment Management Co., Ltd. (&ldquo;Junda&rdquo;), a PRC company and equity interest holder in Deyufarm Innovation Food (Beijing)
Co., Ltd., a PRC company (&ldquo;Deyufarm&rdquo;) and (b) Jinzhong Longyue Investment Consultancy Services Co., Ltd. (&ldquo;Longyue&rdquo;),
a PRC company and equity interest holder in Deyufarm whereby Detian Yu provided management and consulting services and business
cooperation opportunities services to each of Junda and Longyue in exchange for service fees from each of Junda and Longyue equal
to 100% (in the aggregate) of the net income after tax of each of Junda and Longyue.&nbsp;&nbsp;Together, Junda and Longyue own
64.2857% of Deyufarm, and each derive 100% of their income from the profits generated by Deyufarm through its wholly-owned subsidiary,
Sichuan Haoliangxin Instant Food Co., Ltd., a PRC company, and Beijing Xinggu Deyufarm Food Co. Ltd., a PRC company (together
with Deyufarm, Junda and Longyue, the &ldquo;VIE Group&rdquo;). A complete description of the transaction is set forth in the
Registrant&rsquo;s Current Report on Form 8-K as filed with the SEC on November 17, 2010.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On December 20, 2011, Detian Yu executed
a series of termination agreements whereby Detian Yu terminated its control over the VIE Group (collectively, the &ldquo;Termination
Agreements&rdquo;), effective immediately. The Company&rsquo;s Board of Directors and a majority of the preferred shareholders
of the Company approved the disposition of the VIE Group.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Other Recent Developments</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On June 16, 2011, Tianjin Guandu (previously
named Tianjin Detianyu Food Co., Ltd. before October 24, 2011), a newly formed wholly-owned subsidiary of Detian Yu with RMB10,000,000
($1,544,497) registered capital entered into a Cooperation Agreement with the Administrative Committee of Sino-Singapore Tianjin
Eco-city (the &ldquo;Agency&rdquo;), the representative organization of the Tianjin Municipal Government. The agreement provides
for a cooperative relationship between Tianjin Guandu and the Agency regarding Tianjin Guandu&rsquo;s establishment of its operations
in Tianing&rsquo;s Eco-city, particularly with respect to certain tax arrangements. Tianjin Guandu is in the business of wholesale
distribution of simple-processed and deep-processed packaged food products and staple foods.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On July 25, 2011, we incorporated and registered
Hebei Yugu, a 70%-owned subsidiary of Detian Yu with RMB10,000,000 ($1,563,824) in registered capital, in Gaocheng City of Shijiazhuang,
Hebei Province, China. Hebei Yugu is primarily engaged in wholesale distribution of grains, beans and potatoes.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On February 2, 2012, RedSun Technology
(Shenzhen) Co. Limited ( &ldquo;Redsun&rdquo;), a wholly-owned subsidiary of the Company, acquired 100% of the issued and outstanding
registered share capital of Taizihu and its subsidiary, Huichun (together with Taizihu, the &ldquo;Taizihu Group&rdquo;) in consideration
of RMB34,705,000 ($5,502,181). The Taizihu Group is in the business of producing and selling bean based products, fruit vinegars
and juices and other grain products. The Company will file the audited financial statements of the Taizihu Group and pro forma
financial information required to be filed with the SEC not later than April 19, 2012 in accordance with the rules of the SEC.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Corporate Structure</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The Company&rsquo;s current corporate structure
is set forth below:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><img src="pg47.jpg"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Competitive Advantages</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Cultivation Base</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our grains are mainly grown in the hilly
area near Taihang Mountain, at an altitude of between 5,000 to 8,000 feet above sea level. This region has a wide temperature
variation between night and day and a long daily exposure to sunlight. These geographic characteristics produce grains that are
rich in nutrients, especially minerals, rutin, cellulose, amino acids, chlorophyll, lecithin and linoleic acid.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Partnership with Farmers</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Agricultural land for large scale farming
of grains is becoming a rarity in China. With the support of our local government, we have adopted the operation mode of &ldquo;Company
+ Farmers + Base on a large scale&rdquo;. We have the cultivation base of 109,000 acres in Jinzhong in Shanxi Province for the
supply of corn and grain by obtaining the land use rights of 17, 000 acres of farmland with average remaining use life of 38 years
and signing agricultural co-operative agreements with the governments of the counties and villages for the development of 92,000
acres for 20 years. We have established stable partnerships with over 60,000 farmers to grow crops on the farmland. We provide
instruction to the farmers for planting crops and technical support for seeding and cultivation. The scale cultivation ensures
our stable supply of raw material with high quality.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Advanced Production Lines</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We have a modern processing center for
corn with five drying cylinders and six warehouses, the construction of which was completed in 2011. Our total capacity of storage
and annual turnover of corn has exceeded 100,000 tons and 700,000 tons, respectively. We are also equipped with fully automatic
and advanced production lines for grain processing with a total production capacity of over 105,000 tons. The advanced production
lines and production technologies help produce grain products with high quality by maintaining the nutritional components of the
products.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Warehousing and Logistics</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We operate six self-owned warehouses, one
rental warehouse and some temporary warehouses with total storage capacity of over 100,000 tons of food products and an annual
turnover of 700,000 tons. This capacity helps us to reach economies of scale with low cost of processing and storage. Our production
bases are located in Jinzhong and Quwo in Shanxi Province with convenient transportation. The Jinzhong facilities and warehouses
are in proximity to Shitai Railway and Provincial Road 317. The Quwo facilities are several kilometers away from Houma, a transportation
hub. We have exclusive lease agreements with three railway lines for freight transportation in Jinzhong: (a) Shanxi Cereal &amp;
Oil Group, Mingli Reservation Depot; (b) Shanxi Yuci Cereal Reservation Depot; and (c) Yuci Dongzhao Railway Freight Station.&nbsp;&nbsp;These
advantageous geographical positions and exclusive agreements help us ensure speedy delivery of our products at a low cost.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Established Sales Network</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We have cultivated an extensive wholesale
network for corn and bulk trading with customers including various livestock feed companies, food manufacturers, corn oil/corn
starch manufacturing companies, grain trading companies, wholesalers and governmental procurement agencies in approximately 15
provinces. Meanwhile, our retail sales network for processed grain covers approximately 20,000 supermarkets and convenience stores
with distribution to over 29 provinces in China, including the cities of Beijing, Tianjin, Jinan, Fuzhou, Chengdu and Shijiazhuang,
in some of the world&rsquo;s widely known supermarkets. We believe the rapid development of our sales network has increased our
revenue as well as our brand awareness.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Our Current Products and Product Characteristics</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our products in our Corn Division are simple
processed corn. Our products in our Grain Division include approximately 200 types of products sold for retail distribution in
supermarkets and convenience stores, including: (1) simple processed grain products packaged under our registered trademarks &ldquo;Deyu&rdquo;
and &ldquo;Shitie&rdquo;; (2) bean based products under the brand name &ldquo;Huicun&rdquo; including vegetarian products and
instant noodles made from soybeans, black beans and green beans; and (3) fruit vinegars and juices under the brand &ldquo;Longquan
Villa&rdquo;. Our products in our Bulk Trading Division include rice, flour, wheat, kidney beans, green beans, chicken and other
agricultural products. The following table lists our major products in our Grain Division:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR>
    <TD NOWRAP STYLE="width: 20%; border-bottom: windowtext 1pt solid">Category</TD>
    <TD STYLE="width: 1%; vertical-align: top; padding-bottom: 1pt">&nbsp;</TD>
    <TD NOWRAP STYLE="width: 59%; border-bottom: windowtext 1pt solid">Product</TD>
    <TD STYLE="width: 1%; vertical-align: top; padding-bottom: 1pt">&nbsp;</TD>
    <TD NOWRAP STYLE="width: 9%; border-bottom: windowtext 1pt solid">Weight/Unit</TD>
    <TD STYLE="width: 1%; vertical-align: top; padding-bottom: 1pt">&nbsp;</TD>
    <TD NOWRAP STYLE="width: 9%; border-bottom: windowtext 1pt solid">Unit</TD></TR>
<TR>
    <TD NOWRAP>Packed grains</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD NOWRAP>Millet, soy bean, mung bean, black rice and corn grits, etc.</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD NOWRAP>400 to 800g</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD NOWRAP>Bag</TD></TR>
<TR>
    <TD NOWRAP>Packed flour</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD NOWRAP>Mung bean flour, corn flour, buckwheat flour and&nbsp; sorghum flour, etc.</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD NOWRAP>800 to 2,400g</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD NOWRAP>Bag</TD></TR>
<TR>
    <TD NOWRAP>Grain gift boxes</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD NOWRAP>Millet &amp; grains mix</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD NOWRAP>400 to 425g</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD NOWRAP>Bag</TD></TR>
<TR>
    <TD NOWRAP STYLE="vertical-align: top">Vacuum-packed grains</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD>Millet, sorghum, sticky rice, black rice, black bean, soy bean, mung bean, black rice, etc.</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD NOWRAP STYLE="vertical-align: bottom">370 to 440g</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD NOWRAP STYLE="vertical-align: bottom">Bag</TD></TR>
<TR>
    <TD NOWRAP>Large-pack beans</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD NOWRAP>Soy bean, mung bean, red bean, kidney bean, black bean, etc.</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD NOWRAP>25kg</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD NOWRAP>Bag</TD></TR>
<TR>
    <TD NOWRAP>Large-pack rice</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD NOWRAP>Millet, sorghum, coix seed, black rice, sticky rice and buckwheat rice, etc.</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD NOWRAP>25kg</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD NOWRAP>Bag</TD></TR>
<TR>
    <TD NOWRAP>Large-pack flour</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD NOWRAP>Sorghum flour, corn four, mung bean flour, bulkwheat flour, oat flour, etc.</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD NOWRAP>25kg</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD NOWRAP>Bag</TD></TR>
<TR>
    <TD NOWRAP STYLE="vertical-align: top">Bean-based products</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD>Vegetarian chicken wings, vegetarian prawns, vegetarian bean mushroom, thick-strip bean-based noodles, thin-strip bean-based
    noodles and various bean-based instant noodles.</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD NOWRAP STYLE="vertical-align: bottom">60-500g</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD NOWRAP STYLE="vertical-align: bottom">Bag</TD></TR>
<TR>
    <TD NOWRAP STYLE="vertical-align: top; padding-bottom: 1pt">Fruit vinegar and juices</TD>
    <TD STYLE="vertical-align: top; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">Apple vinegar, jujube vinegar, grape vinegar, golden pear juice, kiwi vinegar, strawberry
    juice, etc.</TD>
    <TD STYLE="vertical-align: top; padding-bottom: 1pt">&nbsp;</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">250-400g</TD>
    <TD STYLE="vertical-align: top; padding-bottom: 1pt">&nbsp;</TD>
    <TD NOWRAP STYLE="vertical-align: bottom; padding-bottom: 1pt">Bottle</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE ALIGN="CENTER" CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: center; vertical-align: bottom"><img src="pg49a.jpg">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center; vertical-align: bottom"><img src="pg49b.jpg"></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 49%; text-align: center">Packaged Grains of &ldquo;Deyu&rdquo;</TD>
    <TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 49%; text-align: center">Grain Gift Boxes of &ldquo;Deyu&rdquo;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: center; vertical-align: bottom"><img src="pg49c.jpg"></TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center; vertical-align: bottom"><img src="pg49d.jpg"></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: center">Bean-based Products of &ldquo;Huichun&rdquo;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">Fruit Vinegars &amp; juices of &ldquo;Longquan Villa&rdquo;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We also sell unpackaged products of various
kinds of grains at special counters under the brand name &ldquo;Deyu&rdquo; in supermarkets where customers can scoop the grains
into plastic bags to determine the volume they want.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 100%; text-align: center"><img src="pg49e.jpg"></TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: center">Special Counter Selling Unpacked Grains in Supermarket</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our farmland is located in the center of
Shanxi Province, which has a relatively dry climate and which is ideal for grain cultivation. Grain crop growth relies principally
on the climate and rainfall, and is not dependent on the application of chemical fertilizers or pesticides. Our simple and deep
processing of grains maintain the grain&rsquo;s original nutritional components.&nbsp;&nbsp;A portion of Jinzhong Deyu&rsquo;s
grain products are certified as &ldquo;organic&rdquo; by the Beijing Zhonglu Huaxia Organic Food Certification Centre, the chief
organic food certification organization accredited and approved by the Certification and Accreditation Administration of the PRC
(CNCA).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We provide technological guidance and support
to our farmers regarding seed dissemination, cultivation methods, ecological fertilizer, irrigation, cultivation, weeding and
harvesting. We believe working closely with our farmers helps ensure that we receive high quality raw materials for production.
We also utilize an advanced product control system to help ensure high-quality finished products.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Key Customers</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">No single customer accounted for greater
than 10% of the Company&rsquo;s consolidated gross revenue or consolidated accounts receivable as of December 31, 2011. For the
year ended December 31, 2010, one customer accounted for 18% of the Company&rsquo;s consolidated gross revenue while no other
single customer accounted for greater than 10%. The same customer accounted for 3% of the Company&rsquo;s consolidated accounts
receivable as of December 31, 2010 while no single customer accounted for greater than 10%.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our customers are mainly in China, composed
mainly of (1) livestock feed companies, corn oil/corn starch manufacturing companies and governmental procurement agencies in
our Corn Division; (2) distributors, chains of supermarkets and convenience stores in our Grain Division; and (3) grain trading
companies, wholesalers and governmental procurement agencies in our Bulk Trading Division. Our bean-based products are also sold
through our export agencies to Japan, USA, Germany, Canada and other countries in Asia.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">For our Corn Division, the portion of revenues
derived from new or small customers has increased and the overall number of customers also increased. For our Grain Division,
our customers are diversified among distributors and chain of supermarkets. For our Bulk Trading Division, a newly-added business
in the fourth quarter of 2010, we have established stable relationships with Tianjin Yimingda Grain Division (a wholesaler), which
is one of our largest customers and accounts for 28.3% of gross sales of Bulk Trading Division. We believe we can continue to
keep stable relationships with existing customers and enlarge our customer base in the future.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Sources of Raw Materials and Key Suppliers</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We procure raw materials at our cultivation
base in Jinzhong, Shanxi Province, which produces grains rich in nutrients, especially minerals, rutin, cellulose, amino acids,
chlorophyll, lecithin and linoleic acid. Shanxi &#9;Province is located on the Loess Plateau in the western part of China. The
city of Jinzhong is located in the center of Shanxi Province. We believe the topography of the region creates optimal conditions
for growing grains. Favorable weather conditions, combined with our geographical conditions lead to high-quality products. There
has been no serious flood or drought in the region in the past 100 years.&nbsp;&nbsp;The temperature difference between day and
night is greater than 10 degrees Celsius. The weather is dry and cold. There are about 158 days without frost during the year
and the growing period is longer than 135 days. The weather conditions are especially favorable for growing corn and grains. Grains
are highly drought resistant. We rely on natural rainfall, and no irrigation is required throughout the year and no application
of chemical fertilizer or pesticides is needed. Irrigation by underground water is only required under exceptional circumstances.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The growing season for our corn and grain
in the Shanxi Province is 135+ days, which requires only one planting per year of the farmland.&nbsp;&nbsp;Our warehouses have
storage capacity of 100,000+ tons and a turnover capacity of 700,000+ tons. We believe that our storage capacity, combined with
our ability to expand our network of cooperative farmers and farmer&rsquo;s agents, as well as the ability to expand our purchasing
into other geographical areas in Shanxi Province, reduces our risks which may be attributable to raw material seasonality.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We purchase raw material directly from
farmers, farmer&rsquo;s agents and other various suppliers. We did not have any suppliers who accounted for 10% or more of total
purchases of raw materials or 10% or more of total trade payables during the fiscal years ended December 31, 2011 and 2010.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Market Opportunity</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Corn and Corn Byproducts</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Corn is used extensively in feeds, food
for human consumption and highly processed products. According to the United States Department of Agriculture (&ldquo;USDA&rdquo;),
the demand for corn in the global and Chinese markets has continued to increase with annual growth for 2009 through 2012 of 3%
and 7%, respectively, and the growth is expected to continue in the next five years. Further, the global demand for corn has substantially
exceeded supply from 2009 through 2012. China is the world&rsquo;s second-leading consumer and producer of corn, second only to
the United States, accounting for over 20% of the world&rsquo;s consumption. The following table shows the statistics of supply
and demand for the global and Chinese markets from 2009 to 2012 (including estimated and forecasted):</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="border-bottom: black 1pt solid">Year</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD NOWRAP COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center">Beginning <BR>
    Balance</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD NOWRAP COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center">Supply</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD NOWRAP COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center">Demand</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD NOWRAP COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center">Gap Between<BR>
    Supply&nbsp;and Demand</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD NOWRAP COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center">Closing <BR>
    Balance</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD NOWRAP COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center">Demand <BR>
    Growth Rate</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD STYLE="font-style: italic; font-weight: bold"><B><I>Global</I></B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="width: 26%">2009/2010</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 9%; text-align: right">147,340</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 9%; text-align: right">819,230</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 9%; text-align: right">822,500</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 11%; text-align: right">(3,270</TD>
    <TD STYLE="width: 1%">)&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 9%; text-align: right">144,070</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 9%; text-align: right">2</TD>
    <TD STYLE="width: 1%">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD>2010/2011 (estimated)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">144,080</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">827,350</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">843,370</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">(16,020</TD>
    <TD>)&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">128,060</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">3</TD>
    <TD>%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD>2011/2012 (forecasted)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">128,060</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">867,520</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">868,610</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">(1,090</TD>
    <TD>)&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">126,970</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">3</TD>
    <TD>%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="font-style: italic; font-weight: bold"><B><I>China</I></B></TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD>2009/2010</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">5,118</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">16,527</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">16,515</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">12 (Note)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">5,130</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">6</TD>
    <TD>%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD>2010/2011 (estimated)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">5,130</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">17,823</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">17,611</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">212 (Note)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">5,342</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">7</TD>
    <TD>%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD>2011/2012 (forecasted)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">5,342</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">19,475</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">19,120</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">355 (Note)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">5,697</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">9</TD>
    <TD>%</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 4.65pt">Note: The domestic supply is supplemented by imports.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 4.65pt">(Units: '000 tons, Source: USDA)</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Corn is primarily used as raw feed material
for pigs, cattle, chicken and other livestock. Corn byproducts, including corn stalks, are also used as an important source of
feed. Since 1997, feed production has maintained steady growth. China is now the world&rsquo;s second largest feed producer according
to USDA.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In many developed countries, corn is generally
regarded as a &ldquo;health food&rdquo;.&nbsp;&nbsp;In the United States, it is believed that over 10% of health foods are made
with corn or corn byproducts. Corn oil squeezed from corn germ contains over 10 types of fatty acids, more than 50% of which are
acids rich in vitamins A and E. Corn oil is low in cholesterol and is believed to have positive effects on high blood pressure
and heart disease. Corn oil is also widely used in the pharmaceutical and chemical industries. In recent years, demand for corn
for food products in international markets has grown.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Corn is also used as raw material for highly
processed industrial products. Corn can be used to produce ethanol as renewable fuels. Global energy shortages make corn an attractive
alternative energy source.&nbsp; With the requirement of environmental protection, the demand for corn from ethanol producers
has increased dramatically in recent years.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Grain Products </I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Grain products contain high levels of vitamin
B1, dietary fiber and trace elements. Coarse grains are believed to be beneficial to people with diabetes or high blood pressure.
The Chinese Nutrition Society, commissioned by the Ministry of Health in 2011 to formulate dietary guidelines, recommends consumption
of 250-400 grams per day of processed grain foods for adults. They also recommended that adults consume 50-100 grams per day of
coarse grains and whole grain foods and consume 30-50 grams per day of bean or bean-based products. Over 70% of adults in China,
amounting to approximately 665 million people, are urban residents. Based on these guidelines, the demand for coarse grain products
and bean-based products by people in urban cities could reach 18.2 million tons and 9.7 million tons per year, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">As a result of the economic growth and
improved living standards in China, the dietary components of the Chinese population have changed dramatically. In general, the
population pays more attention to diet and nutrition. Management believes that the increased awareness of the value and benefits
of grain products has resulted in an increased demand for our grain products.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Competitive Landscape</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In the corn market and grain bulk trading
industry, our current major competitors are smaller and local focus traders such as Jinzhong Dexinchang Trading Co., Ltd., Jinjian
Rice Industry Co., Ltd. and Beijing Guchuang Food Co., Ltd., which are mainly engaged in the corn and grain bulk procurement and
wholesale businesses.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In the grain consumption marketplace, we
primarily compete with smaller grain processers and food manufacturers, which are local in focus, have a single production line,
little brand recognition and limited distribution networks.&nbsp;&nbsp;The following table lists our competitors with their main
products:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="width: 58%; border-bottom: black 1pt solid; font-weight: bold; text-align: center">Competitors</TD>
    <TD STYLE="width: 2%; padding-bottom: 1pt; font-weight: bold">&nbsp;</TD>
    <TD STYLE="width: 40%; border-bottom: black 1pt solid; padding-bottom: 1pt; font-weight: bold; text-align: center">Products&nbsp;of&nbsp;Competitors&nbsp;Produced&nbsp;<BR>
    and&nbsp;/or&nbsp;sold&nbsp;by&nbsp;Competitors</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>Shanxi Jin Wei Yuan Grains Company Limited</TD>
    <TD>&nbsp;</TD>
    <TD>packaged and unpackaged grain</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>Shanxi Qinzhou Huang Millet Group Limited Company</TD>
    <TD>&nbsp;</TD>
    <TD>packaged and unpackaged millet, soybean</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>Heshun Xinma Grains Development Co., LTD</TD>
    <TD>&nbsp;</TD>
    <TD>packaged and unpackaged millet,beans, flour</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>Hebei Gaopaidian DouDou Food (Group) Co., Ltd.</TD>
    <TD>&nbsp;</TD>
    <TD>bean products</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>Shandong Daogongfang Food Co., Ltd.</TD>
    <TD>&nbsp;</TD>
    <TD>bean products</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>Yantai Yiyuan Beverage Co., Ltd.</TD>
    <TD>&nbsp;</TD>
    <TD>fruit vinegars, especially apple vinegars</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>Zhengzhou Luer Biotechnology Development Co., Ltd.</TD>
    <TD>&nbsp;</TD>
    <TD>fruit vinegars and fruit juices</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Sales Network</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Corn Products and Bulk Trading Products</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We have established a diversified customer
base in approximately 15 provinces in China, including Shanxi, Hebei, Henan, Shandong, Anhui, Shaanxi, Sichuan, Hunan, Hubei,
Guangdong, Jiangsu, Liaoning, Beijing, Tianjin and Chongqing, with stable partnerships with various livestock feed companies,
corn oil/corn starch manufacturing companies and food manufacturers, grain trading companies, wholesalers and governmental procurement
agencies.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Grain Products</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We have established a marketing center
in Beijing focused on promoting our products throughout China. In addition, we plan to expand our sales network to include offices
in the cities of Shenzhen, Hangzhou, Chengdu, Tianjin and Chongqing. Our main sales channels are as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.4in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><U>Supermarkets</U>:
                                                                                                         At present,&nbsp;our
                                                                                                         sales&nbsp;network covers
                                                                                                         approximately 20,000
                                                                                                         supermarkets and convenience
                                                                                                         stores with distribution
                                                                                                         to over 29 provinces
                                                                                                         in China, including the
                                                                                                         cities of Beijing, Tianjin,
                                                                                                         Jinan, Fuzhou, Chengdu
                                                                                                         and Shijiazhuang, in
                                                                                                         some of the world&rsquo;s
                                                                                                         most widely known supermarket
                                                                                                         chains.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in; text-indent: -0.4in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.4in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><U>Sales channels
                                                                                                         of unpackaged products</U>:&nbsp;&nbsp;We
                                                                                                         also sell unpackaged
                                                                                                         products of various kinds
                                                                                                         of grains at special
                                                                                                         counters under the brand
                                                                                                         name &ldquo;Deyu&rdquo;
                                                                                                         in over 200 supermarkets
                                                                                                         open and loosely in baskets
                                                                                                         where customers can scoop
                                                                                                         the grains into plastic
                                                                                                         bags to determine the
                                                                                                         volume they want, and
                                                                                                         such sales strategy targets
                                                                                                         a large number of consumers.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in; text-indent: -0.4in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.4in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD><U>Overseas sales</U>:
                                                                                                         Our bean-based products
                                                                                                         are also sold through
                                                                                                         our export agencies to
                                                                                                         Japan, USA, Germany,
                                                                                                         Canada and other countries
                                                                                                         in Asia.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>&nbsp;</I></B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Processing and Warehousing Capacities</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>General</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We maintain facilities in central and southern
Shanxi Province with total site coverage of approximately 1,780,000 square feet (approximately 165,000 square meters) and constructed
area of 482,000 square feet (approximately 45,000 square meters). Our facilities are equipped with advanced crop production, processing
and packaging lines as well as modern equipment.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Corn Production Capacity</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our Corn Division&rsquo;s warehousing,
processing and logistics center is located in Jinzhong with site coverage of 504,000 square feet (approximately 46,000 square
meters) and constructed area of 129,000 square feet (approximately 12,000 square meters). The construction of this processing
center was completed in June 2011 with five drying cylinders and six warehouses for the storage of 70,000 tons. We have a large
rental cave-type warehouse named Shanxi 661 Warehouse with storage capacity of 30,000 tons. We also have contracts for temporary
warehouses near railway stations which supplement our storage capacity. Our total capacity of storage and annual turnover reach
over 100,000 tons and 700,000 tons, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We process drying and water removal treatments
for corn before the corn is stored in our warehouses. The five drying cylinders are equipped with the most advanced equipment
for corn drying. After the drying process, the corn is packaged in bags and moved into warehouses. Then, the products undergo
insecticide and anti-bacterial treatments. After being sealed and air ventilated, the products are then stored in enclosed warehouses.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our six newly-constructed warehouses are
equipped with advanced detection and air ventilation devices to ensure cereals are being kept in good condition. Ventilation ducts
are installed on the ground level of the warehouses. Once moisture is detected, air ventilation driven by a blower will help disseminate
the overall heat on the cereals. Infrared temperature sensors and 360-degree high resolution cameras have been installed in each
warehouse to allow the control room to conduct 24-hour monitoring for real-time analysis of water, moisture, mildew and pests
so that we can quickly take corrective measures.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The cave-type warehouse that we rent is
fully enclosed and have thermostatic and moisture proof characteristics. The cave-type warehouse is built with 1.5 meter thick
walls and moisture proof layers. They maintain a temperature of 10 degrees Celsius throughout the year, which is well-suited for
food storage. Since no air conditioning is required, the operating costs of these warehouses are low. These warehouses are also
equipped with infrared sensors that can accurately detect temperature changes and the presence of rodents, insects, and other
pests.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Grain Production Capacity</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We are equipped with three fully automatic
production lines for millet, grain and flour at our Jinzhong production base in the center of Shanxi Province, with site coverage
of approximately 199,000 square feet (approximately 18,000 square meters) and a constructed area of 118,000 square feet (approximately
11,000 square meters). These lines include various kinds of rice milling machines, filtering machines, elevators, color selection
machines, exhaust fans, automatic packing machines and other equipment. The production capacity of grain is over 60,000 tons.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Another production base in Quwo, in the
southern part of Shanxi Province, has site coverage of over 1,076,000 square feet (approximately 100,000 square meters) and a
constructed area of 234,000 square feet (approximately 22,000 square meters). This base is equipped with three kinds of advanced
production lines: (1) two production lines for bean-based products with an annual production capacity of 15,000 tons; (2) two
production lines for other grain products with an annual production capacity of over 26,000 tons; and (3) two production lines
for fruit vinegar and fruit juices with an annual production capacity of 4,000 tons. These production lines are comprised of advanced
grain milling, degreasing, automatic drying, packaging, inspection and testing equipment. At present, less than one third of the
land at this production base has been developed. We believe we can develop more production lines for future demand without acquiring
land use rights for more land.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">To ensure high quality, we have installed
fully automated production equipment at our facilities.&nbsp;&nbsp;Characteristics of our production lines and equipment are as
follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Production
                                                                                                               equipment for grain
                                                                                                               processing is fully
                                                                                                               automated. We use
                                                                                                               elevators to move
                                                                                                               raw materials through
                                                                                                               the production
                                                                                                               process. The production
                                                                                                               process is fully
                                                                                                               enclosed for protection
                                                                                                               against any pollution
                                                                                                               or contamination.
                                                                                                               We have installed
                                                                                                               equipment with
                                                                                                               advanced color
                                                                                                               selection technology
                                                                                                               for grains. We
                                                                                                               believe the device
                                                                                                               is stable and reliable,
                                                                                                               and it features
                                                                                                               automatic temperature
                                                                                                               control, automatic
                                                                                                               removal of dust
                                                                                                               and impurities,
                                                                                                               automatic air pressure
                                                                                                               detection, self
                                                                                                               injection and light
                                                                                                               testing. We have
                                                                                                               a cooling system
                                                                                                               that helps millet
                                                                                                               maintain its nutritious
                                                                                                               components, color
                                                                                                               and appearance.
                                                                                                               Selective application
                                                                                                               of the polishing
                                                                                                               process helps maintain
                                                                                                               nutritional components.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Soybean food
                                                                                                               series production
                                                                                                               uses advanced technology
                                                                                                               of dry heat extrusion
                                                                                                               equipment in oil
                                                                                                               extraction, oil
                                                                                                               purification filling,
                                                                                                               milling, squeezing
                                                                                                               and other equipment
                                                                                                               which undertake
                                                                                                               processes of peeling,
                                                                                                               crushing, oil extraction,
                                                                                                               milling, forming,
                                                                                                               drying, shaping,
                                                                                                               sterilization,
                                                                                                               packaging and other
                                                                                                               processes in the
                                                                                                               production of various
                                                                                                               soybean products
                                                                                                               while retaining
                                                                                                               most of the raw
                                                                                                               nutrients.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0; margin-bottom: 6pt"><TR STYLE="vertical-align: top; text-align: justify">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in; text-align: left"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD STYLE="text-align: justify">Production lines for our fruit vinegar and fruit juice
include water treatment equipment, sugar devices, dispensing equipment, homogenization equipment, sterilization equipment and
aseptic filling equipment. We use Ro water treatment equipment and remote infrared automatic filling equipment.&nbsp; Sterilization
technology adopts aseptic filling and high temperature sterilization processes to ensure high quality of products and advanced,
reliable, automatic and stable quality for the entire production line.</TD>
</TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our modern equipment and technology, combined
with advanced processing techniques, helps to ensure that grain production is high-quality, natural, green and ecological.&nbsp;&nbsp;Additionally,
a portion of our grains can be categorized as organic by the Beijing Zhonglu Huaxia Organic Food Certification Centre. We believe
the careful management of breeding, cultivation, production, packaging and storage also leads to high quality products.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We implement strict quality control with
each process in purchasing, storage, processing, packaging and distribution. We keep all items that are examined in the course
of quality control inspections for one year in accordance with National Technology Quality Supervision Bureau requirements. We
cooperate fully with the Bureau during their random testing and examination of our products.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Research and Development</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We hire a number of agricultural experts
as consultants in sectors including food processing, breeding, cultivation, nutrition and disease prevention. Together with the
Shanxi Agricultural Sciences Institute, Shanxi Agricultural University and their Institute of Seeds and Planting, we have established
a joint laboratory for research breeding and cultivation. This laboratory also provides quality testing of our products and provides
suggestions for the improvement of our products.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our R&amp;D team and laboratory uses a
hybridization technique for breeding rather than a genetically modified approach. They have special characteristics such as strong
drought resistance and resistance to pests. None of the seeds are cultivated using pesticides or chemical fertilizers. This not
only reduces costs, but also increases the output and, most importantly, allows us to ensure that a portion of our crops are recognized
as &ldquo;organic&rdquo;.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Research and development expenses were
$98,393 and $73,860 for the years ended December 31, 2011 and 2010, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Target Market</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We focus on promoting the concept of &ldquo;healthy
and green&rdquo;.&nbsp;&nbsp;Target customers of our Grain Division include urban city residents who pursue healthy diets. Management
believes health-oriented food products are also important to families in tier 1 and tier 2 cities in China.&nbsp;&nbsp;Beijing,
Shanghai and Guangzhou are considered tier 1 cities in China because they were the first to be opened up to competitive economic
development and are the most populous, affluent and competitive.&nbsp;&nbsp;Tier 2 cities, such as Tianjin, Suzhou, Dalian, Qingdao
and Hangzhou, have a smaller population and are not as developed as tier 1 cities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Operating Model</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We have adopted the operating model of
&ldquo;Company + Farmers + Base&rdquo; supplemented by advanced production, strong warehousing capacity and exclusive logistics.
We have access to over 109,000 acres (650,000 mu) of farmland in the center of Shanxi Province as our plantation base and we have
established partnerships with over 60,000 farmers for the cultivation of high quality grains and corn. Based on our supply base,
we have developed the &ldquo;Deyu&rdquo; operating chain of breading, cultivating, processing, warehousing and distributing our
products. Our operating model is illustrated by the chart below:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><img src="pg55.jpg"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Our Growth Strategy</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our principal growth strategy is to expand
our market share in the corn and grains businesses by pursuing the following key strategies:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B><I>Increase our market share by expanding
our sales network and sales promotion</I></B><I>. </I>We plan to continue to build up our sales and marketing forces to develop
more sales outlets in supermarkets and convenience stores. We also plan to hold more promotional activities to increase sales
in each of our stores and to increase our brand awareness.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B><I>Continue to develop bulk trading
business based on our existing resources</I></B><I>.</I> We have accumulated ample resources and advantages such as extensive
network of supply and sales, strong warehousing capacity and exclusive logistics. In 2011, our newly-added bulk trading business
grew rapidly. We plan to continue to develop our bulk trading business by fully utilizing and diversifying our grain varieties,
especially certain rare grain varieties in China such as kidney beans, green beans and sunflower seeds by anticipating the demand
trend in the market.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>&nbsp;</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B><I>Extend our operating model to other
producing areas.</I></B><I> </I>During the past several years, we have operated our business through a model of &ldquo;Company
+ Farmers + Base&rdquo; supplemented by advanced production, strong warehousing capacity and exclusive logistics. Given the strong
momentum of expanding our economies of scale and increasing demand, we need to expand our supply base of raw materials. We have
begun to consider extending our operating model to other producing areas of corn and grain. We have already established subsidiaries
in Hebei and Tianjin, and we plan to form a new subsidiary in Northern China to expand our business.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B><I>Enrich our product lines through
new product innovation or business acquisition</I></B><I>. </I>We plan to continue to update existing product lines according
to consumer diet trends. We are also considering introducing new products through establishing partnerships with other grain producers
or through business acquisitions.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B><I>Expand overseas sales network and
export product portfolio. </I></B>We plan to expand our overseas sales network primarily established by Huichun as well as to
diversify our export products portfolio. We plan to focus on bean-based products, refined packaged grains and large packaged grains.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Government Regulation</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Corn Purchase and Sale Business</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We are engaged in the purchase and sale
of raw corn products. The supervising authority for the purchase and sale of raw corn products&nbsp;is the State Administration
of Grain in China. Pursuant to Regulation 6 of the Food Distribution Management Regulations announced by the State Council of
PRC, the State Council Development and Reform Department and the National Food Administration Departments (the commissions of
the National Food Authority) are responsible for the mid and long-term planning of China&rsquo;s overall balance of foods, regulation,
restructuring of important food species and food distribution. The National Food Administration Department is responsible for
food distribution, guidance to the industry, oversight of the food distribution laws, regulations, policies and implementation
of rules and regulations. Pursuant to Regulation 9, food operators must obtain permits and register pursuant to relevant registration
regulations. We have obtained the&nbsp;necessary Food Products Purchase Permit and operate in compliance with the relevant standards
of food quality, storage, logistics and facilities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Grain Production and Sales Business</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our production, purchases and sales of
grain food products are subject to the following rules and regulations in China:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.2in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>&ldquo;The Food Safety Law of the People&rsquo;s Republic of China&rdquo; (the &ldquo;Food Safety Law&rdquo;)</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.2in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>&ldquo;Regulations on the Implementation of the Food Safety Law of the People&rsquo;s Republic of China&rdquo; (the &ldquo;Regulations&rdquo;)</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.2in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>&ldquo;Law of the People&rsquo;s Republic of China on Quality and Safety of Agricultural Products&rdquo; and the Food Distribution
Management Ordinance.</TD></TR></TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We are engaged in exporting grain food products in oversea
markets and therefore our production, purchase and sales of grain food products are also subject to the following rules or regulations
as they pertain to the food products exporting business:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.2in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>&ldquo;Administrative Provisions on the Filing of Export Food Manufacturers)&rdquo;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.2in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>&ldquo;Hygiene Requirements for Export Food Manufacturers&rdquo;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.2in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>&ldquo;List of Products Requiring HACCP Audit for Filing of Export Food Manufacturers&rdquo;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.2in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>&ldquo;List of Products Requiring HACCP Audit for Filing of Export Food Manufacturers&rdquo;</TD></TR></TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We are engaged in the sale of packaged
grain products. The supervising authority&nbsp;for such products is the Beijing Bureau of the Industry and Commerce. Pursuant
to Regulation 29 of the Food Safety Laws, entities engaging in food production, food distribution and food service, must obtain
a Food Production Permit, Food Distribution Permit and Food Service Permit. Those entities that have obtained the Food Production
Permit are authorized to operate a food production business and are not required to apply for a Food Distribution Permit. However,
we have also obtained the Food Distribution Permit from the Beijing Bureau of Industry and Commerce.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We are also engaged in the production and
sale of grain foods. The supervising authority&nbsp;for such production is the Technology Quality Supervision Bureau of Shanxi
Province. Pursuant to Food Safety Laws and ancillary regulations, China&rsquo;s Head Office of the Technology Quality Supervision
Bureau supervises technology quality of enterprises which are engaged in food production. The Bureau issues Food Production Permits,
undertakes mandatory examinations of technology quality for entry into the industry and is responsible for investigation of incidents
regarding food safety. Pursuant to Regulation 29 of the Food Safety Laws, entities engaging in food production, food distribution
and food service, must obtain the Food Production Permit, Food Distribution Permit and Food Service Permit. Those who have obtained
the Food Production Permit are authorized to operate food production businesses and are not required to apply for a Food Distribution
Permit. Deyu has also obtained the nation&rsquo;s Industrial Production Permit from the Technology Quality Supervision Bureau
(Cereals: QS140701040051 and Flour: QS140701016210). Our food labeling complies with the Interim Measures for Labeling of Food
Products of Enterprises in Shanxi Province and GB7718-1994 Standards for Food Products Labeling and has obtained the relevant
registration certificate (Record number SB/1407000-009-01).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Intellectual Property</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">With the exception of our registered trademarks
&ldquo;Deyu&rdquo;, &ldquo;Shitie&rdquo;, &ldquo;Huichun&rdquo;, &ldquo;LongQhan Villa&rdquo; and &ldquo;Fushite&rdquo;, we do
not own any patents, trademarks, licenses or franchises on our products or processes.&nbsp;We produce processed foods and therefore
patents, trademarks and licenses are not necessary for our business operations.&nbsp;&nbsp;We also own the rights to the domain
name <U>www.deyuagri.com</U>, which is currently in good standing.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Employees</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We currently have approximately 690 full
time employees and various numbers of part-time employees working on a seasonal basis.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>DESCRIPTION OF OUR PROPERTIES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our production facilities are located in
Jinzhong and Quwo of Shanxi Province with total site coverage of approximately 1,780,000 square feet (approximately 165,000 square
meters) and constructed area of 482,000 square feet (approximately 45,000 square meters). We owned a modern processing center
with five drying cylinders for corn and the six warehouses for storage of 70,000 tons and have a large rental warehouse named
the Shanxi 661 Warehouse with a storage capacity of 30,000 tons, of which the total capacity of annual turnover may reach more
than 700,000 tons. We have eight production lines for grain processing with total production capacity of over 105,000 tons. Our
facilities are equipped with advanced crop production, processing and packaging lines as well as modern equipment.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">According to government regulations of
the PRC, the PRC Government owns all land.&nbsp; We own the following land use rights for farmland and/or industrial lands: (1)
land use rights of farmland in Jinzhong Shanxi consisting of 17,000 acres (approximately 70,000,000 square meters) for the remaining
average of 38 years; (2) land use right of the industrial land in Quwo, Shanxi consisting of 1,076,000 square feet (approximately
100,000 square meters) for the remaining 45 years, which belongs to the Taizihu Group acquired by the Company on February 2, 2012;
(3) land use right of the industrial land in Yuci District of Jinzhong, Shanxi consisting of 504,000 square feet (approximately
47,000 square meters) for the remaining 49 years; (4) land use right of the industrial land in Shanzhuangtou, Jinzhong Deyu of
125,000 square feet (approximately 12,000 square meters), for which the term was terminated on March 14, 2011; however according
to the Certification issued by the Jinzhong Municipal Bureau of Land and Resources on March 30, 2011, the Company holds the legal
title of the land use rights during the period of the renewal process; (5) land use right of the industrial land in Shanzhuangtou,
Jinzhong Deyu of 73,000 square feet (approximately 6,800 square meters) for estimated 50 years, which we obtained on March 19,
2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>LEGAL PROCEEDINGS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">From time to time, we may become involved
in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent
uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. We are
currently not aware of any such legal proceedings or claims that we believe will have, individually or in the aggregate, a material
adverse effect on our business, financial condition or operating results.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>MANAGEMENT</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Directors and Executive Officers</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Provided below is a list of the names,
ages and positions of all our directors and executive officers as of the date of this prospectus:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR>
    <TD STYLE="width: 24%; border-bottom: black 1pt solid; font-weight: bold">Name</TD>
    <TD STYLE="width: 1%; vertical-align: top; padding-bottom: 1pt; font-style: italic; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD STYLE="width: 8%; border-bottom: black 1pt solid; font-style: italic; font-weight: bold; text-align: center">Age</TD>
    <TD STYLE="width: 1%; vertical-align: top; padding-bottom: 1pt; font-weight: bold">&nbsp;</TD>
    <TD STYLE="width: 66%; border-bottom: black 1pt solid; font-weight: bold">Position</TD></TR>
<TR>
    <TD>Jianming Hao</TD>
    <TD STYLE="vertical-align: top; text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">37</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD>Chairman of the Board of Directors, President and Chief Executive Officer</TD></TR>
<TR>
    <TD>Amy He</TD>
    <TD STYLE="vertical-align: top; text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">33</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD>Acting Chief Financial Officer</TD></TR>
<TR>
    <TD>Jianbin Zhou</TD>
    <TD STYLE="vertical-align: top; text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">43</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD>Chief Operating Officer</TD></TR>
<TR>
    <TD>Michael Han</TD>
    <TD STYLE="vertical-align: top; text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">41</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD>Corporate Secretary</TD></TR>
<TR>
    <TD>Al Carmona</TD>
    <TD STYLE="vertical-align: top; text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">53</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD>Independent Director and member of Audit Committee</TD></TR>
<TR>
    <TD>Longjiang Yuan</TD>
    <TD STYLE="vertical-align: top; text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">48</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD>Independent Director and member of Audit Committee</TD></TR>
<TR>
    <TD>Timothy Stevens</TD>
    <TD STYLE="vertical-align: top; text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">60</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD>Independent Director and Chairman of Audit Committee</TD></TR>
<TR>
    <TD>Hong Wang</TD>
    <TD STYLE="vertical-align: top; text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">37</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD>Director</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Provided below is a list of the names,
ages and positions of certain of our significant employees as of the date of this prospectus:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR>
    <TD STYLE="width: 25%; border-bottom: black 1pt solid; font-weight: bold">Name</TD>
    <TD STYLE="width: 1%; vertical-align: top; padding-bottom: 1pt; font-style: italic; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD STYLE="width: 8%; border-bottom: black 1pt solid; font-style: italic; font-weight: bold; text-align: center">Age</TD>
    <TD STYLE="width: 1%; vertical-align: top; padding-bottom: 1pt; font-weight: bold">&nbsp;</TD>
    <TD STYLE="width: 65%; border-bottom: black 1pt solid; font-weight: bold">Position</TD></TR>
<TR>
    <TD>Junde Zhang</TD>
    <TD STYLE="vertical-align: top; text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">40</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD>Vice President for the Grain Division</TD></TR>
<TR>
    <TD>Yongqing Ren</TD>
    <TD STYLE="vertical-align: top; text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">30</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD>Vice President for the Corn Division</TD></TR>
<TR>
    <TD>Yunlin Ding</TD>
    <TD STYLE="vertical-align: top; text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">39</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD>Vice President</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Family Relationships</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">There is no family relationship between
any of the officers, directors and significant employees of the Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Election of Directors and Officers</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">All directors hold office until the next
annual meeting of shareholders and until their successors have been duly elected and qualified. Officers are elected by and serve
at the discretion of the Board.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our directors are reimbursed for expenses
incurred by them in connection with attending Board meetings, but they do not receive any other compensation for serving on the
Board.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Biographies of Officers and Directors</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Mr.&nbsp;Jianming Hao, 37, Chief Executive Officer and Chairman
of the Board of Directors</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Mr.&nbsp;Hao is our CEO and Chairman. Between
December 2001 and May 2004, Mr.&nbsp;Hao served as the Finance Manager of China Merchants Dichain (Asia) Ltd., a Hong Kong listed
company. Between May 2004 and November 2007, Mr.&nbsp;Hao served as a director and Vice President of Shenzhen Litong Investments
Ltd.&nbsp;&nbsp;Since November 2007, he has been a director of Jinzhong Deyu Agriculture Trading Co. Limited, which is now a subsidiary
of Deyu Agriculture Corp.&nbsp;&nbsp;Mr.&nbsp;Hao received a Master&rsquo;s degree in Finance from Nankai University. He is also
a certified public accountant in China.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Ms.&nbsp;Amy He, 33, Acting Chief Financial Officer</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Effective February 3, 2012, the Company
appointed Ms. Amy He to serve as the Company&rsquo;s Acting Chief Financial Officer.&nbsp;&nbsp;Ms. He, who is resident in the
Company&rsquo;s headquarters in Beijing, has served as the Company&rsquo;s Financial Controller since October 2011. Prior to that,
Ms. He served as an audit manager for Deloitte Touche Tohmatsu CPA Ltd. in China from July 2005 through September, 2011, where
she served multinational corporations and Chinese corporate clients, including private companies and public listed companies in
the United States. Ms. He earned a Master&rsquo;s Degree in Management from the Chinese Academy of Sciences and a Bachelor&rsquo;s
Degree in Accounting from Tsinghua University in China.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Mr.&nbsp;Jianbin Zhou, 43, Chief Operating Officer</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Mr.&nbsp;Zhou is our Chief Operating Officer.
Between January 2005 and December 2006, Mr.&nbsp;Zhou served as the General Manager of Beijing Kangqiaoshidai Education Development
Co., Ltd. Between January 2007 and October 2008, he was the General Manager of Antai Global (Beijing) Risk Management Co., Ltd.
Mr.&nbsp;Zhou also served as the Vice President of Dongsheng International (Beijing) Investment Co., Ltd. between October 2008
and August 2009. Mr.&nbsp;Zhou has been a director of Detian Yu since August 2009.&nbsp;&nbsp;Mr.&nbsp;Zhou is the holder of an
undergraduate degree.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Mr.&nbsp;Michael Han, 41, Corporate Secretary</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Effective January 10, 2011, the Company
appointed Mr.&nbsp;Michael Han to serve as the Company&rsquo;s Corporate Secretary. From April 2009 through January 2011, Mr.&nbsp;Han
served as Vice President for Beijing Jinhuanya Management Consulting Co., Ltd., a PRC company. From April 2006 through March 2009,
Mr.&nbsp;Han previously served as Vice President and Manager of the Administration Department of General Circuits (Beijing) Ltd.,
a PRC company, where he was in charge of Administration, Finance, Marketing and International Sales and Business Development.
From April 2001 through March 2006, Mr.&nbsp;Han served as Senior Key Account Manager of Shougang NEC Electronics Co., Ltd., a
PRC electronics company. Mr.&nbsp;Han earned his Bachelors of Science degree in Metal Forming &amp; Metal Materials from the College
of Beijing Iron &amp; Steel Technology and his Master&rsquo;s in Business Administration degree from Tsinghua University. There
is no family relationship between Mr.&nbsp;Han and any of the other officers and directors of the Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Mr.&nbsp;Al Carmona, 53, Independent Director and Member
of Audit Committee</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Mr.&nbsp;Carmona is an independent director
of the Company.&nbsp;&nbsp;During the last 25 years, Mr.&nbsp;Carmona has been with Mars &amp; Co, a high end international strategy
consulting firm, during which he served as Executive Vice President and Senior Advisor and has coordinated their Global Business
Development Council. With the assistance of Mr.&nbsp;Carmona, Mars &amp; Co. grew to over 250 professionals worldwide. Mr.&nbsp;Carmona
has deep experience in a wide variety of areas including cost and supply chain optimization, brand strategy, pricing and demand
building optimization, competitive analysis, portfolio optimization, business unit turnarounds, as well as acquisition and divestiture
analysis.&nbsp;&nbsp;Mr.&nbsp;Carmona has a Bachelor of Science degree in Chemical Engineering from Princeton University and a
MBA degree from the Wharton Business School, University of Pennsylvania.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Mr.&nbsp;Longjiangg Yuan, 48, Independent Director and Member
of Audit Committee</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Mr.&nbsp;Yuan is an independent director
of the Company. He is an acknowledged expert in agricultural technology and has been serving as the vice director of the Science
and Technology Bureau of the Chinese Academy of Agricultural Sciences, the largest and highest agriculture institute in China
(&ldquo;CAAS&rdquo;). Prior to joining the Company, Mr.&nbsp;Yuan spent 17 years in the Institute of Crop Science of the CAAS,
where he was also the senior director of the R&amp;D team for paddy rice genetic breeding technologies as well as a scientist
in the science commission. He is the director of the Crop Science Society of China and an expert for the National Crop Variety
Approval Committee. From 2002 to 2004, Mr.&nbsp;Yuan was an independent director of the board of Shanxi Tunyu Seed Industry Co.,
Ltd.&nbsp;&nbsp;Over the years, Mr.&nbsp;Yuan has participated in and led 13 national R&amp;D programs and has developed 17 new
crop breeds. He has published more than 20 academic thesis and 5 books on agricultural sciences. Mr.&nbsp;Yuan was also granted
2 scientific and technological progress awards by the Ministry of Agriculture of China.&nbsp;&nbsp;Mr.&nbsp;Longjiangg Yuan holds
a master&rsquo;s degree in Plant Genetic Breeding from the Graduate School of the Chinese Academy of Agricultural Sciences and
a bachelor&rsquo;s degree in Agriculture from Wan Nan Agriculture University.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Mr.&nbsp;Timothy C. Stevens, 60, Independent Director and
Chairman of Audit Committee</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Mr.&nbsp;Stevens is an independent director
of the Company. Mr.&nbsp;Stevens has over 30 years of executive leadership, management, and client service experience with the
world&rsquo;s leading law, public accounting, and management consulting firms. Since January 2011, Mr. Stevens has served as Chief
Operating Officer of an international law firm in Hong Kong. Prior to that since 2004, Mr.&nbsp;Stevens served as the Executive
Director of Saul Ewing LLP, a Philadelphia law firm where he oversaw all aspects of its day to day business operations with a
focus on improving the bottom line and supporting the Firm&rsquo;s growth strategy and other key objectives. From 1999 to 2003,
he served as the Chief Operating Officer and a member of the Management Committee in the Hong Kong and China offices of the international
law firm Baker &amp; McKenzie where he was responsible for all operations (other than client service) for Baker &amp; McKenzie&rsquo;s
large Hong Kong and China practice. From 1995 to 1998, Mr.&nbsp;Stevens served in the Chairman&rsquo;s office as the Finance and
Administrative Partner of PricewaterhouseCoopers China, the world&rsquo;s largest auditing firm, where he supervised the business
plans, office openings and expansions as well as the financial management of the firm.&nbsp;&nbsp;Mr.&nbsp;Stevens graduated from
Clifton College and Bristol University in the United Kingdom. He received the ACA qualification from the UK Chartered Accountants&rsquo;
Qualification Program in 1974. Mr.&nbsp;Stevens is a licensed CPA in Massachusetts as well as being a Hong Kong FCPA.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Mr. Hong Wang, 37, Director</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Mr. Wang was appointed to serve as a director
of the Company effective April 30, 2012. Mr. Wang has served as Vice President of Detian Yu since October 2009. Prior to that,
Mr. Wang served as General Manager of Shanxi Dongsheng Guarantee Company Limited from February 2009 through October 2009. Prior
to that, Mr. Wang worked for the Labaor Bureau of Jinzhong in Shanxi Province from July 1996 through January 2009. Mr. Wang received
his bachelor's degree from the Chinese Agriculture University in 1996.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Mr.&nbsp;Junde Zhang, 40, Vice President of the Grain Division</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Mr.&nbsp;Zhang is our Vice President responsible
for the operation of the Grain Division. Since April 2004, he has been the Production Director and the General Manager of our
Cereal Crops Division. Mr.&nbsp;Zhang is a successful entrepreneur and was appointed as a member of the Yuci People&rsquo;s Congress.
He was awarded the honorable title of Industrial Restructuring Leader by the Yuci Municipal Government. Mr.&nbsp;Zhang is the
holder of an undergraduate degree and has over 10 years of experience in grain breeding, cultivation, processing, marketing and
management.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Mr.&nbsp;Yongqing Ren, 30, Vice President of the Corn Division</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Mr.&nbsp;Ren has been the Vice President
and General Manager of our Corn Division since April 2004. He was conferred the honorable title of Industrial Restructuring Leader
for two consecutive years and the prize of Top Ten Youth Career Development Contributor by the Yuci Municipal Government. Mr.&nbsp;Ren
is the holder of an undergraduate degree. He is well experienced in corn breeding, cultivation, processing, marketing and management.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Mr.&nbsp;Yunlin Ding, 39, Vice President</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Effective February, 3, 2012, the Company
appointed Mr. Yunlin Ding to serve as Vice President of Company. Immediately prior to Mr. Ding&rsquo;s appointment as the Company&rsquo;s
Vice President, he served as Vice President of Detian Yu since July 2009. Mr. Ding also served as vice general manager of the
investment department of Beida Qingniao Group, a company organized under the laws of China and the holding company for three companies
listed in China and two companies listed in Hong Kong, from February 2002 to July 2009. Mr. Ding earned a Bachelor&rsquo;s Degree
and a Master&rsquo;s Degree in Economics from Nankai University in 1996 and 1999, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Director Qualifications and Experience</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The Board considers various characteristics,
such as experience, qualifications, attributes and skills, in making its decision to appoint and nominate directors to the Board.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Mr.&nbsp;Hao has the experience, qualifications,
attributes and skills to qualify him to serve as a director.&nbsp;&nbsp;His experience running the Company and its subsidiaries
has contributed to his knowledge of the business and his understanding of the grain and corn products industry.&nbsp;&nbsp;Because
of this experience, we expect that he will act in the best interest of the Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Mr.&nbsp;Carmona has the experience, qualifications,
attributes and skills to qualify him to serve as a director.&nbsp;&nbsp;His past work experience working with companies to optimize
their operations and maximize profits gives us the confidence that he will be an asset to our Board of Directors.&nbsp;&nbsp;Because
of this experience, we expect that he will act in the best interest of the Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Mr.&nbsp;Yuan has the experience, qualifications,
attributes and skills to qualify him to serve as a director.&nbsp;&nbsp;His past work experience and research experience in the
genetic breeding field will be an asset to us as we strive to maximize our grain and corn production and manufacturing. Because
of this experience, we expect that he will act in the best interest of the Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Mr.&nbsp;Stevens has the experience, qualifications,
attributes and skills to qualify him to serve as a director.&nbsp;&nbsp;His past work experience overseeing the world&rsquo;s
leading law, public accounting and management consulting firms will be an asset to us and he will be in a strong position to oversee
our operations and corporate governance.&nbsp;&nbsp;Mr. Stevens has financial management expertise, he is a certified public accountant
(Massachusetts) and he is a chartered accountant (England and Wales). Because of this experience, we expect that he will act in
the best interest of the Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Mr. Wang has the experience, qualifications,
attributes and skills to qualify him to serve as a director.&nbsp;&nbsp;His experience running the Company and its subsidiaries
has contributed to his knowledge of the business and his understanding of the grain and corn products industry.&nbsp;&nbsp;Because
of this experience, we expect that he will act in the best interest of the Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Legal Proceedings</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Unless otherwise indicated, to the knowledge
of the Company after reasonable inquiry, no current director or executive officer of the Company during the past ten years, has
(i)&nbsp;been convicted in a criminal proceeding (excluding traffic violations or other minor offenses), (ii)&nbsp;been a party
to any judicial or administrative proceeding (except for any matters that were dismissed without sanction or settlement) that
resulted in a judgment, decree or final order enjoining the person from future violations of, or prohibiting activities subject
to, U.S. federal or state securities laws, or a finding of any violation of U.S. federal or state securities laws, (iii)&nbsp;filed
a petition under federal bankruptcy laws or any state insolvency laws or has had a receiver appointed for the person&rsquo;s property
or (iv)&nbsp;been subject to any judgment, decree or final order enjoining, suspending or otherwise limiting for more than 60&nbsp;days,
the person from engaging in any type of business practice , acting as a futures commission merchant, introducing broker, commodity
trading advisor, commodity pool operator, floor broker, leverage transaction merchant, any other person regulated by the Commodity
Futures Trading Commission, or an associated person of any of the foregoing, or as an investment adviser, underwriter, broker
or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan association
or insurance company, or engaging in or continuing any conduct or practice in connection with such activity or engaging in any
activity in connection with the purchase or sale of any security or commodity or in connection with any violation of Federal or
State securities laws or Federal commodities laws, (v)&nbsp;been found by a court of competent jurisdiction in a civil action
or by the Commission to have violated any Federal or State securities law, and the judgment in such civil action or finding by
the Commission has not been subsequently reversed, suspended, or vacated, (vi)&nbsp;been found by a court of competent jurisdiction
in a civil action or by the Commodity Futures Trading Commission to have violated any Federal commodities law, and the judgment
in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed, suspended or vacated,
(vii)&nbsp;been the subject of, or a party to, any Federal or State judicial or administrative order, judgment, decree, or finding,
not subsequently reversed, suspended or vacated, relating to an alleged violation of: (a)&nbsp;any Federal or State securities
or commodities law or regulation, (b)&nbsp;any law or regulation respecting financial institutions or insurance companies including,
but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary
or permanent cease-and-desist order, or removal or prohibition order, or (c)&nbsp;any law or regulation prohibiting mail or wire
fraud or fraud in connection with any business entity, or (viii)&nbsp;been the subject of, or a party to, any sanction or order,
not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section&nbsp;3(a)(26) of the
Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section&nbsp;1(a)(29) of the Commodity Exchange Act
(7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its
members or persons associated with a member.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">There are no material pending legal proceedings
to which any of the individuals listed above is party adverse to us or any of our subsidiaries or has a material interest adverse
to us or any of our subsidiaries.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>CORPORATE GOVERNANCE</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Director Independence and Board Committees</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Director Independence</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our stock is currently quoted on the OTC
Markets-OTC Pink. The OTC Markets-OTC Pink does not have rules regarding director independence. Accordingly, although our audit
committee charter states that each member shall meet the independence requirements set out by the applicable listing standards
of the securities exchange, securities association, SRO, or stock market on which the Company&rsquo;s securities are quoted or
listed for trading, we determined that the NASDAQ Marketplace independence requirements were an appropriate standard to determine
independence because these requirements are stricter than the current OTC Markets-OTC Pink requirements. Additionally, we adopted
these stricter standards to strengthen our corporate governance and improve internal controls.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Subject to certain exceptions, under the
listing standards of the NASDAQ Marketplace, a listed company&rsquo;s board of directors must consist of a majority of independent
directors. Currently, our board of directors has determined that each of the non-management directors, Al Carmona, Longjiang Yuan
and Timothy Stevens, are &ldquo;independent&rdquo; directors as defined by the listing standards of NASDAQ currently in effect
and approved by the U.S. Securities and Exchange Commission and all applicable rules and regulations. All members of the Audit
Committee satisfy the &ldquo;independence&rdquo; standards applicable to members of such committee. The board of directors made
this affirmative determination regarding these directors&rsquo; independence based on discussions with the directors and on its
review of the directors&rsquo; responses to a standard questionnaire regarding employment and compensation history; affiliations,
family and other relationships; and transactions with the Company. The board of directors considered relationships and transactions
between each director or any member of his immediate family and the Company and its subsidiaries and affiliates. The purpose of
the board of director&rsquo;s review with respect to each director was to determine whether any such relationships or transactions
were inconsistent with a determination that the director is independent under the NASDAQ rules.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Audit Committee</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On August 19, 2010, we established our
Audit Committee. The Audit Committee consists of Timothy Stevens, Al Carmona and Longjiang Yuan, each of whom is an independent
director. Timothy Stevens, Chairman of the Audit Committee, is an &ldquo;audit committee financial expert&rdquo; as defined under
Item 407(d) of Regulation S-K. The purpose of the Audit Committee is to represent and assist our board of directors in its general
oversight of our accounting and financial reporting processes, audits of the financial statements and internal control and audit
functions. The Audit Committee&rsquo;s responsibilities include:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>The appointment,
                                                                                                              replacement, compensation,
                                                                                                              and oversight of
                                                                                                              work of the independent
                                                                                                              auditor, including
                                                                                                              resolution of disagreements
                                                                                                              between management
                                                                                                              and the independent
                                                                                                              auditor regarding
                                                                                                              financial reporting,
                                                                                                              for the purpose
                                                                                                              of preparing or
                                                                                                              issuing an audit
                                                                                                              report or performing
                                                                                                              other audit, review
                                                                                                              or attest services;
                                                                                                              and</TD></TR></TABLE>

<P STYLE="font: 10pt Symbol; margin: 0pt 0 0pt 0.75in; text-indent: -0.25in">&nbsp;&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.5in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Reviewing and
                                                                                                              discussing with
                                                                                                              management and the
                                                                                                              independent auditor
                                                                                                              various topics and
                                                                                                              events that may
                                                                                                              have significant
                                                                                                              financial impact
                                                                                                              on our company or
                                                                                                              that are the subject
                                                                                                              of discussions between
                                                                                                              management and the
                                                                                                              independent auditors.</TD></TR></TABLE>

<P STYLE="margin-top: 0pt; margin-bottom: 0pt; font: 10pt Times New Roman, Times, Serif">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The board of directors has adopted a written
charter for the Audit Committee.&nbsp;&nbsp;During the fiscal year ended December 31, 2011, the Audit Committee met six times.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Procedures for Determining Executive Compensation</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On August 19, 2010, our Board of Directors
approved the adoption of the independent director oversight of executive officer compensation.&nbsp;&nbsp;Pursuant to NASDAQ Rule
5605(d), all matters regarding executive officer compensation shall be submitted for approval or recommendation by a majority
of the independent directors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Procedures for Selection of Director Nominees</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On August 19, 2010, the Board of Directors
of the Company approved the adoption of the procedures for the selection of director nominees.&nbsp;&nbsp;Pursuant to NASDAQ Rule
5605(e)(1), a majority of the independent directors shall recommend and select the director nominees.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Section 16(a) Beneficial Ownership Reporting Compliance</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Section 16(a) of the Exchange Act requires
our officers and directors, and persons who own more than 10% of a registered class of our equity securities, to file reports
of ownership and changes in ownership with the SEC.&nbsp;&nbsp;Officers, directors and greater than ten percent shareholders are
required by SEC regulation to furnish us with copies of all Section 16(a) forms they file.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">To the Company&rsquo;s knowledge, based
solely on a review of the copies of such reports furnished to the Company, all reports under Section 16(a) required to be filed
by its officers and directors and greater than 10% beneficial owners were filed as of the date of this filing, except that Charlie
Lin failed to file a Form 3 in connection with his appointment as Chief Financial Officer of the Company on January 10, 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>Code of Ethics</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On August 19, 2010, our Board of Directors
adopted a Code of Conduct applicable to all directors, officers and employees. Pursuant to NASDAQ Rule 5610, the Code of Conduct
complies with the definition of a &ldquo;code of ethics&rdquo; set out in Section 406(c) of the Sarbanes-Oxley Act of 2002.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B>&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>EXECUTIVE COMPENSATION</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The following table sets forth all cash
compensation paid by us, as well as certain other compensation paid or accrued, in 2010 and 2011, to each of the following named
executive officers:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD NOWRAP COLSPAN="2" STYLE="font-weight: bold; text-align: center">&nbsp;</TD>
    <TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD NOWRAP COLSPAN="2" STYLE="font-weight: bold; text-align: center">&nbsp;</TD>
    <TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD NOWRAP COLSPAN="2" STYLE="font-weight: bold; text-align: center">&nbsp;</TD>
    <TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD NOWRAP COLSPAN="2" STYLE="font-weight: bold; text-align: center">Stock and Option</TD>
    <TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD NOWRAP COLSPAN="2" STYLE="font-weight: bold; text-align: center">All&nbsp;Other</TD>
    <TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD NOWRAP COLSPAN="2" STYLE="font-weight: bold; text-align: center">&nbsp;</TD>
    <TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">Fiscal</TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">Salary</TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">Bonus</TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">Awards</TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">Compensation</TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">Total</TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="border-bottom: black 1pt solid; font-weight: bold">Name&nbsp;and&nbsp;Principal&nbsp;Position</TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; font-weight: bold; text-align: center">Year</TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; font-weight: bold; text-align: center">($)</TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; font-weight: bold; text-align: center">($)</TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; font-weight: bold; text-align: center">number</TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; font-weight: bold; text-align: center">($)</TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; font-weight: bold; text-align: center">($)</TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD STYLE="width: 28%">Jianming Hao</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: center">&nbsp;</TD>
    <TD STYLE="width: 9%; text-align: center">2010</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 9%; text-align: right">26,435</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 9%; text-align: right">-</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 9%; text-align: right">150,000</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 9%; text-align: right">63,444</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 9%; text-align: right">89,879</TD>
    <TD STYLE="width: 1%">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD>(President and Chief Executive Officer) (5)</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">2011</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">16,695</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">64,985</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">81,680</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD>Wenjun Tian (4)</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">2010</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">26,435</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">150,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">63,444</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">89,879</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD>(Former President)</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">2011</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">19,171</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">64,985</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">84,156</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD>Amy He (2)</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">2010</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD>(Acting Chief Financial Officer)</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">2011</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">3,864</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">14,854</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">18,718</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD>David Lethem</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">2010</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">64,334</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">25,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">64,334</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD>(Former Chief Financial Officer)</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">2011</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD>Charlie Lin (2)</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">2010</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD>(Former Chief Financial Officer)</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">2011</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">125,333</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">23,333</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">148,667</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD>Jianbin Zhou</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">2010</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">43,807</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">40,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">15,106</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">58,913</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD>(Chief Operating Officer)</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">2011</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">56,305</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">77,363</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">133,669</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD>Michael Han</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">2010</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">13,595</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">13,595</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD>Corporate Secretary</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">2011</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">37,541</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">37,541</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD>Junde Zhang (1)</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">2010</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">5,287</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">40,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">37,009</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">42,296</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD>(Vice President of the Grain Division)</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">2011</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">108,309</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">54,154</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">162,463</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD>Yongqing Ren (1)</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">2010</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">5,287</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">40,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">37,009</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">42,296</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD>(Vice President of the Corn Division)</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">2011</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">123,782</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">54,154</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">177,936</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD>Yunling Ding (1)(3)</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">2010</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">26,304</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">15,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD>(Vice President)</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">2011</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">37,738</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">37,738</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD>Li Ren (1)(3)</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">2010</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">30,967</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">30,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">15,106</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">46,073</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD>(Vice President of Branding and Marketing)</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">2011</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">56,305</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">56,305</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD>Weizhong Cai(3)</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">2010</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">1,133</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">1,133</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD>(Chief Scientist)</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: center">2011</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(1) Based on the compensation received by Mr.&nbsp;Junde Zhang,
Mr.&nbsp;Yongqing Ren and Mr.&nbsp;Li Ren, they are qualified as executive officers for purposes of this table.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(2) Effective February 3, 2012, Ms. Amy He was promoted to
Acting Chief Financial Officer of the Company. Ms. He replaced Mr. Charlie Lin, whose employment and employment agreement with
the Company officially terminated on March 5, 2012 in accordance with the notification procedures set forth in his employment
agreement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(3) Effective February 3, 2012, Mr. Li Ren resigned as the
Company&rsquo;s Vice President - Brand and Marketing and Mr. Weizhong Cai resigned as the Company&rsquo;s Chief Scientist, and
Mr. Yunlin Ding was appointed the Vice President of Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(4) Effective April 30, 2012, Mr. Tian resigned as the Company&rsquo;s
President and as a member of the Board of Directors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(5) Effective April 30, 2012, Mr. Hao was appointed to serve
as President of the Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Outstanding Equity Awards at the End of the Fiscal Year</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The following table summarizes the number
of securities underlying outstanding plan awards for each named executive officer as of December&nbsp;31, 2011:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: bottom">
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD COLSPAN="18" STYLE="border-bottom: black 1pt solid; font-weight: bold; text-align: center"><FONT STYLE="font-size: 7pt">Option&nbsp;Awards</FONT></TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD COLSPAN="14" STYLE="border-bottom: black 1pt solid; font-weight: bold; text-align: center"><FONT STYLE="font-size: 7pt">Stock&nbsp;Awards</FONT></TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD NOWRAP COLSPAN="2" STYLE="border-bottom: black 1pt solid; font-weight: bold; text-align: center"><FONT STYLE="font-size: 7pt">Number&nbsp;of<BR>
    Securities<BR>
    Underlying<BR> Unexercised<BR> Options&nbsp;(#)</FONT></TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD NOWRAP COLSPAN="2" STYLE="border-bottom: black 1pt solid; font-weight: bold; text-align: center"><FONT STYLE="font-size: 7pt">Number&nbsp;of<BR>
    Securities<BR>
    Underlying<BR> Unexercised<BR> Options (#)</FONT></TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD NOWRAP COLSPAN="2" STYLE="border-bottom: black 1pt solid; font-weight: bold; text-align: center"><FONT STYLE="font-size: 7pt">Equity&nbsp;Incentive<BR>
    &nbsp;Plan<BR> Awards:Number&nbsp;of<BR> Securities<BR> Underlying<BR> Unearned&nbsp;Options<BR> (#)</FONT></TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD NOWRAP COLSPAN="2" STYLE="border-bottom: black 1pt solid; font-weight: bold; text-align: center"><FONT STYLE="font-size: 7pt">Option<BR>
    Exercise<BR>
    Price&nbsp;($)</FONT></TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD NOWRAP COLSPAN="2" STYLE="border-bottom: black 1pt solid; font-weight: bold; text-align: center"><FONT STYLE="font-size: 7pt">Option<BR>
    Expiration<BR>
    Date</FONT></TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD NOWRAP COLSPAN="2" STYLE="border-bottom: black 1pt solid; font-weight: bold; text-align: center"><FONT STYLE="font-size: 7pt">Number&nbsp;of&nbsp;<BR>
    Shares or<BR> Units&nbsp;of&nbsp;Stock<BR> That&nbsp;Have&nbsp;Not<BR> Vested&nbsp;(#)</FONT></TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD NOWRAP COLSPAN="2" STYLE="border-bottom: black 1pt solid; font-weight: bold; text-align: center"><FONT STYLE="font-size: 7pt">Market<BR>
    Value of<BR>
    Shares&nbsp;or<BR> Units&nbsp;of<BR> Stock That<BR> Have Not<BR> Vested&nbsp;($)</FONT></TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD NOWRAP COLSPAN="2" STYLE="border-bottom: black 1pt solid; font-weight: bold; text-align: center"><FONT STYLE="font-size: 7pt">Equity<BR>
    Incentive&nbsp;Plan<BR>
    Awards:<BR> Number&nbsp;of<BR> Unearned<BR> &nbsp;Shares, Units&nbsp;or<BR> Other Rights<BR> That&nbsp;Have Not<BR> Vested&nbsp;(#)</FONT></TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD NOWRAP COLSPAN="2" STYLE="border-bottom: black 1pt solid; font-weight: bold; text-align: center"><FONT STYLE="font-size: 7pt">Equity<BR>
    Incentive&nbsp;Plan<BR>
    Awards:&nbsp;Market<BR> or Payout&nbsp;Value<BR> of Unearned<BR> Shares, Units&nbsp;or<BR> Other<BR> Rights&nbsp;That<BR>
    Have Not<BR> Vested&nbsp;($)</FONT></TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="border-bottom: black 1pt solid; font-weight: bold"><FONT STYLE="font-size: 7pt">Name</FONT></TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; font-weight: bold; text-align: center"><FONT STYLE="font-size: 7pt">Exercisable</FONT></TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; font-weight: bold; text-align: center"><FONT STYLE="font-size: 7pt">Unexercisable</FONT></TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; font-weight: bold; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; font-weight: bold; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; font-weight: bold; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; font-weight: bold; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; font-weight: bold; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; font-weight: bold; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; font-weight: bold; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD STYLE="width: 10%"><FONT STYLE="font-size: 7pt">Jianming Hao</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 7%; text-align: right"><FONT STYLE="font-size: 7pt">100,000</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 7%; text-align: right"><FONT STYLE="font-size: 7pt">50,000</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 7%; text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 7%; text-align: right"><FONT STYLE="font-size: 7pt">4.4</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 7%; text-align: right"><FONT STYLE="font-size: 7pt">5-Nov-20</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 7%; text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 7%; text-align: right"><FONT STYLE="font-size: 7pt">&mdash;</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 7%; text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 7%; text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD>
    <TD STYLE="width: 1%"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD><FONT STYLE="font-size: 7pt">Wenjun Tian (1)</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">100,000</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">50,000</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">4.4</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">5-Nov-20</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD><FONT STYLE="font-size: 7pt">Amy He</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD><FONT STYLE="font-size: 7pt">Charlie Lin</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD><FONT STYLE="font-size: 7pt">Jianbin Zhou</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">26,666</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">13,334</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">4.4</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">5-Nov-20</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD><FONT STYLE="font-size: 7pt">Michael Han</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">5-Nov-20</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD><FONT STYLE="font-size: 7pt">Junde Zhang</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">26,666</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">13,334</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">4.4</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">5-Nov-20</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD><FONT STYLE="font-size: 7pt">Yongqing Ren</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">26,666</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">13,334</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">4.4</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">5-Nov-20</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD><FONT STYLE="font-size: 7pt">Yunling Ding</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">10,000</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">5,000</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">4.4</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">5-Nov-20</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD><FONT STYLE="font-size: 7pt">Li Ren (2)</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">20,000</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">10,000</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">4.4</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">5-Nov-20</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD><FONT STYLE="font-size: 7pt">Weizhong Cai</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD>
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(1) Effective April 30, 2012, Mr. Tian resigned as the Company&rsquo;s
President and as a member of the Board of Directors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(2) As a result of the termination of employment (the &quot;Termination&quot;)
of Mr. Li Ren as the Vice President effective February, 3, 2012, and pursuant to the terms of the Plan, the unexercised options
will expire and be forfeited three months after the Termination.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Option Exercises and Stock Vested</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">None.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Director Compensation</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our directors are reimbursed for expenses
incurred by them in connection with attending Board of Directors&rsquo; meetings.&nbsp;&nbsp;The following table presents compensation
distributed to our independent directors during the years ended December 31, 2011 and December 31, 2010 for serving on the Board
of Directors:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">Fees&nbsp;Earned<BR> or&nbsp;Paid&nbsp;in<BR> Cash</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">Option<BR> Awards&nbsp;(1)</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">All&nbsp;Other</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">Total</TD><TD STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">($)</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">($)</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Compensation&nbsp;($)</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">($)</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: center">2011</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 52%; text-align: left">Timothy Stevens</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">43,810</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">-</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">-</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">43,810</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Al Carmona</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">31,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">31,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Longjiang Yuan</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">7,736</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">7,736</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">82,546</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">82,546</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: center">2010</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Timothy Stevens</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">12,375</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">35,997</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">48,372</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Al Carmona</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">6,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">26,998</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">32,998</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Longjiang Yuan</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">8,999</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">8,999</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">18,375</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">71,994</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">90,369</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(1) The numbers for 2010 represents the aggregated fair value
to option awards granted to the directors as at the grant date of the options granted in November 18, 2010, which is determined
in accordance with ASC Topic 718.&nbsp; For information regarding the fair value of option awards as at the grant date of the
options, please refer to Note 15 of the Consolidated Financial Statements &ndash; Share-Based Compensation.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Bonuses and Deferred Compensation</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We do not have any bonus, deferred compensation
or retirement plan.<B>&nbsp;</B> All decisions regarding compensation are determined by our Board of Directors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Options and Stock Appreciation Rights</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On November 4, 2010, the Company&rsquo;s
Board of Directors approved the Company&rsquo;s 2010 Share Incentive Plan.&nbsp;&nbsp;Under the Plan, 1,000,000 shares of the
Company&rsquo;s common stock shall be allocated to and authorized for use pursuant to the terms of the Plan.&nbsp;&nbsp;On November
8, 2010, a total of 931,000 non-qualified incentive stock options were approved by our Board of Directors and granted under the
Plan to executives, key employees, independent directors, and consultants at an exercise price of $4.40 per share and on December
15, 2010, 40,000 non-qualified incentive stock shares were approved by our Board of Directors and granted under the Plan to a
consultant at an exercise price of $4.40 per share, of which shall vest as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">33 1/3% of the option grants vested one (1) month
after the date of grant;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">33 1/3% of the option grants vested twelve (12) months
after the date of grant; and</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">33 1/3% of the option grants will vest twenty-four
(24) months after the date of grant.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On March 8, 2012, the Company&rsquo;s Board
of Directors allocated to and authorized for use the maximum number of shares allowable pursuant to the terms of the Plan and
granted 420,000 options under the Plan, of which 264,000 were new options and 156,000 were re-granted after such options were
forfeited by employees as a result of their resignations from the Company in accordance with the terms of their option agreements.
All of the newly granted options vest as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">50% of the options granted will vest six
(6) months after the date of the grant; and</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">50% of the options granted will vest twelve
(12) months after the date of the grant.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On November 5, 2010, we filed a Registration
Statement with the SEC on Form S-8 covering up to 1,000,000 shares underlying options which may be granted under the Plan. As
of March 19, 2012, none of the options granted pursuant to the Plan have been exercised.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Employment Agreement</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On January 10, 2011, we entered into an
employment agreement with Charlie Lin pursuant to which Mr. Lin was hired as our Chief Financial Officer. Effective March 5, 2012,
Mr. Lin&rsquo;s employment and his employment agreement were terminated.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Payment of Post-Termination Compensation</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We do not have change-in-control agreements
with any of our directors or executive officers, and we are not obligated to pay severance or other enhanced benefits to executive
officers upon termination of their employment.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>CERTAIN RELATIONSHIPS AND RELATED PARTY
TRANSACTIONS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Sales Transactions</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The Company (a) sold grain products in
the aggregate amount of $3.3 million to Beijing Yilian Gifts Tech Development Co., Ltd. (&quot;BYGT&quot;), the Executive Director
of which is Jianming Hao, the Company's Chief Executive Officer and (b) sold corn in the aggregate amount of $1.1 million to Tieling
Zhongnong Agriculture Technology Development Co., Ltd. (&quot;TZAT&quot;), the legal representative of which is Yongqin Ren, the
Company's Vice President of the Corn Division, during the fiscal year ended December 31, 2011.&nbsp; The Company also purchased
a batch of sunflower seed for $2.6 million from TZAT in June 2011 and returned the goods at original cost for quality rejection.&nbsp;The
prices in the transactions with such related parties were determined according to market price at the time of purchase and sale.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Due from Related Parties</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The Company sold grain products to BYGT
for $3.3 million in the year 2011 and the amounts due from/ to BYGT as of December 31, 2011 and March 28, 2012 were $468,976 and
$285,210 under this transaction, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The Company paid social insurance and office
rental for Deyufarm Innovation Food (Beijing) Co., Ltd. (&quot;Deyufarm&quot;), a former variable interest entity of the Company,
for $89,929 in December 2011.&nbsp;The amounts due from Deyufarm as of December 31, 2011 and March 28, 2012 under this transaction
were $89,929 and $0, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The Company sold grain products to Beijing
Doukounianhua Biotechnology Co., Ltd., the legal representative of which is Jianbin Zhou, the Company's Chief Operating Officer,
for total $24,666 in December 2011.&nbsp; As of December 31, 2011 $24,666 was due under this transaction and remained outstanding
as of March 28, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The Company sold grain products to Jinshang
International Finance Leasing Co., Ltd., a shareholder and the Executive Director of which is Wenjun Tian, the Company&rsquo;s
former President and a Director, for $3,537 in September 2011.&nbsp; As of December 31, 2011, $3,537 was due under this transaction
and remained outstanding as of March 28, 2012. Effective April 30, 2012, Mr. Tian resigned as the Company&rsquo;s President and
as a member of the Board of Directors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Due to Related Parties</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Dongsheng International Investment Co.,
Ltd., the President and Executive Director of which is Wenjun Tian, the Company's President and a Director, loaned the Company
in the aggregate amount of $2.9 million in the year ended December 31, 2011.&nbsp; Such loan is unsecured, bears no interest and
no due date is specified.&nbsp; As of December 31, 2011 and March 28, 2012, $2.9 million and $2.5 million were due under this
loan, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Wenjun Tian, the Company's former President
and a Director, loaned the Company in the aggregate amount of $2.5 million in the year ended December 31, 2011.&nbsp; Such loan
is unsecured, bears no interest and no due date is specified.&nbsp; As of December 31, 2011, $2.5 million was due under this advance
and remained outstanding as of March 28, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Deyufarm paid the miscellaneous expenses
for the Company for $3,338 in the year of 2011.&nbsp; As of December 31, 2011 and March 28, 2012, $3,338 and $0 was due under
this transaction, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Guarantee Transactions</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On May 10, 2011, Wenjun Tian, Jianming
Hao and an unrelated third party provided a one year guarantee on a $7.9 million short-term bank loan payable to Bank of Communications
by Detian Yu, bearing interest at a floating rate of prime rate plus 30% of prime rate, of which prime rate was based on the one-year
loan interest rate released by The People's Bank of China.&nbsp; The actual interest rate as of December 31, 2011 was 8.5280%.&nbsp;
The maturity date is May 9, 2012.&nbsp;Detian Yu paid $0 towards principal and $408,296 towards interest on the loan during the
fiscal year ended December 31, 2011. $7.9 million was outstanding under the loan as of December 31, 2011 and March 28, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On August 9, 2011, Yuci Jinmao Food Processing
Factory, the legal representative of which is Junlian Zheng, the wife of Junde Zhang, the Vice President of the Company, provided
a two-year guarantee on a $1.4 million short-term bank loan payable to Jinzhong City Yuci District Rural Credit Union Co., Ltd.
by Jinzhong Yongcheng, bearing interest at a floating rate of prime rate plus 130% of prime rate, of which prime rate was based
on the six-month to one-year loan interest rate released by The People's Bank of China.&nbsp; The actual interest rate as of December
31, 2011 was 15.084%.&nbsp; The maturity date is August 7, 2012.&nbsp; Jinzhong Yongcheng paid $0 towards principal and $73,291
towards interest on the loan during the fiscal year ended December 31, 2011. $1.4 million was outstanding under the loan as of
December 31, 2011 and March 28, 2012,</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On August 9, 2011, Yuci Jinmao Food Processing
Factory, the legal representative of which is Junlian Zheng, the wife of Junde Zhang, the Vice President of the Company, provided
a two-year guarantee on a $1.4 million short-term bank loan payable to Jinzhong City Yuci District Rural Credit Union Co., Ltd.
by Jinzhong Yuliang, bearing interest at a floating rate of prime rate plus 130% of prime rate, of which prime rate was based
on the six-month to one-year loan interest rate released by The People's Bank of China.&nbsp; The actual interest rate as of December
31, 2011 was 15.084%.&nbsp; The maturity date is August 7, 2012.&nbsp; Jinzhong Yuliang paid $0 towards principal and $73,291
towards interest on the loan during the fiscal year ended December 31, 2011. $1.4 million was outstanding under the loan as of
December 31, 2011 and March 28, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On January 13, 2010, Jinzhong Deyu provided
a two year guarantee on a $1.3 million short-term bank loan payable to Jinzhong Economic Development District Rural Credit Union
by Jingzhong Yuliang, bearing interest at a floating rate of prime rate plus 129.83% of prime rate, of which prime rate was based
on the six-month to one-year loan interest rate released by The People's Bank of China.&nbsp; The loan was originally due March
8, 2011.&nbsp; In January 2011, the Company entered into an agreement with the bank for an extension and the new term was from
February 1, 2011 to October 1, 2011.&nbsp; The adjustable interest rate was a rate per annum equal to the prime rate plus 117.23%
of prime rate.&nbsp; The prime rate was based on the one to three year loan interest rate released by The People's Bank of China.&nbsp;
The loan was fully paid off on May 11, 2011, with Jingzhong Yuliang paying the principal amount of $1.3 million plus $8,865 in
accrued interest.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; background-color: white">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On January 13, 2010, Jinzhong Deyu and
Jinzhuong Yuliang provided a two-year guarantee on a $1.3 million short-term bank loan payable to Shanxi Province Rural Credit
Union by Jingzhong Yongcheng, bearing interest at a floating rate of prime rate plus 107% of prime rate, of which prime rate was
based on the six-month to one-year loan interest rate released by The People's Bank of China.&nbsp; The loan was originally due
January 13, 2011.&nbsp; In January 2011, the Company entered into an agreement with the bank for an extension and the new term
was from January 14, 2011 to June 11, 2011.&nbsp; The adjustable interest rate was a rate per annum equal to the prime rate plus
107% of prime rate.&nbsp; The prime rate was based on the one to three year loan interest rate released by The People's Bank of
China.&nbsp; The loan was fully paid off on May 11, 2011, with Jingzhong Yongcheng paying the principal amount of $1.3 million
plus $6,750 in accrued interest.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Promoters and Certain Control Persons</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">None.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Conflicts of Interest</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We have certain potential conflicts of
interest that are inherent in the relationships between our officers and directors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">From time to time, one or more of our affiliates
may form or hold an ownership interest in and/or manage other businesses both related and unrelated to the type of business that
we own and operate. These persons expect to continue to form, hold an ownership interest in and/or manage additional other businesses
which may compete with ours with respect to operations, including financing and marketing, management time and services and potential
customers. These activities may give rise to conflicts between or among the interests of us and other businesses with which our
affiliates are associated. Our affiliates are in no way prohibited from undertaking such activities, and neither we nor our shareholders
will have any right to require participation in such other activities.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Further, because we intend to transact
business with some of our officers, directors and affiliates, as well as with firms in which some of our officers, directors or
affiliates have a material interest, potential conflicts may arise between the respective interests of us and these related persons
or entities. We believe that such transactions will be effected on terms at least as favorable to us as those available from unrelated
third parties.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">With respect to transactions involving
real or apparent conflicts of interest, we have adopted policies and procedures which require that: (a) the fact of the relationship
or interest giving rise to the potential conflict be disclosed or known to the directors who authorize or approve the transaction
prior to such authorization or approval, (b) the transaction be approved by a majority of our disinterested outside directors
and (c) the transaction be fair and reasonable to us at the time it is authorized or approved by our directors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>PRINCIPAL SHAREHOLDERS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The following table sets forth certain
information regarding beneficial ownership of our common stock as of, April 27, 2012: (i) by each of our directors, (ii) by each
of the named executive officers, (iii) by all of our executive officers and directors as a group, and (iv) by each person or entity
known by us to beneficially own more than 5% of any class of our outstanding shares. As of April 27, 2012, there were 10,566,766
shares of our common stock outstanding:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="font-weight: bold; text-align: center">&nbsp;</TD>
    <TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD NOWRAP STYLE="font-weight: bold; text-align: center">&nbsp;</TD>
    <TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD NOWRAP COLSPAN="2"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Amount&nbsp;and</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P></TD>
    <TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD NOWRAP COLSPAN="2" STYLE="font-weight: bold; text-align: center">Fully&nbsp;Diluted</TD>
    <TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD NOWRAP STYLE="font-weight: bold; text-align: center"></TD>
    <TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD NOWRAP COLSPAN="2"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Nature&nbsp;of</B><BR>
<B>Beneficial</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"></P></TD>
    <TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD>
    <TD NOWRAP COLSPAN="2"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Percentage&nbsp;of</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Outstanding</B></P></TD>
    <TD NOWRAP STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="border-bottom: black 1pt solid; font-weight: bold; text-align: center">Title&nbsp;of&nbsp;Class</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD>
    <TD NOWRAP STYLE="border-bottom: black 1pt solid; font-weight: bold; text-align: center">Name&nbsp;and&nbsp;Address&nbsp;of<BR>
Beneficial&nbsp;Owner&nbsp;(1)(2)</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD>
    <TD NOWRAP COLSPAN="2" STYLE="border-bottom: black 1pt solid; font-weight: bold; text-align: center"><B>Ownership</B><BR>
(number&nbsp;of&nbsp;shares)</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD>
    <TD NOWRAP COLSPAN="2" STYLE="border-bottom: black 1pt solid"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Shares&nbsp;of&nbsp;Common</B></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Stock&nbsp;(3)</B></P></TD>
    <TD NOWRAP STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD COLSPAN="3" STYLE="padding-bottom: 1pt; font-style: italic; font-weight: bold">Certain Beneficial Owners - Over 5% Ownership</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="width: 20%; text-align: center">Common Stock</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 38%">Expert Venture Limited&nbsp;(4)(5)</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 16%; text-align: right">5,534,513</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 19%; text-align: right">38.81</TD>
    <TD STYLE="width: 1%">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD STYLE="text-align: center">Common Stock</TD>
    <TD>&nbsp;</TD>
    <TD>Sure Glory Holdings Limited (6)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">748,636</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">5.25</TD>
    <TD>%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="text-align: center">Common Stock</TD>
    <TD>&nbsp;</TD>
    <TD>Charming Action Management Limited (7)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">616,364</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">4.32</TD>
    <TD>%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD COLSPAN="3" STYLE="padding-bottom: 1pt; font-style: italic; font-weight: bold">&nbsp;Directors and Executive Officers
    and Significant Employees</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="text-align: center">Common Stock</TD>
    <TD>&nbsp;</TD>
    <TD>Jianming Hao (10)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">658,986</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">4.62</TD>
    <TD>%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD STYLE="text-align: center">Common Stock</TD>
    <TD>&nbsp;</TD>
    <TD>Wenjun Tian (11)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">1,760,354</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;12.34</TD>
    <TD>%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="text-align: center">Common Stock</TD>
    <TD>&nbsp;</TD>
    <TD>Charlie Lin (21)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">0</TD>
    <TD>%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD STYLE="text-align: center">Common Stock</TD>
    <TD>&nbsp;</TD>
    <TD>Amy He (20)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">0</TD>
    <TD>%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="text-align: center">Common Stock</TD>
    <TD>&nbsp;</TD>
    <TD>Jianbin Zhou (12)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">26,666</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>*</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD STYLE="text-align: center">Common Stock</TD>
    <TD>&nbsp;</TD>
    <TD>Michael Han</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">0</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">0</TD>
    <TD>%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="text-align: center">Common Stock</TD>
    <TD>&nbsp;</TD>
    <TD>Yongqing Ren (13)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">1,133,570</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;7.95</TD>
    <TD>%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD STYLE="text-align: center">Common Stock</TD>
    <TD>&nbsp;</TD>
    <TD>Junde Zhang (14)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">1,133,570</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">7.95</TD>
    <TD>%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="text-align: center">Common Stock</TD>
    <TD>&nbsp;</TD>
    <TD>Yunlin Ding (15)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">10,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>*</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD STYLE="text-align: center">Common Stock</TD>
    <TD>&nbsp;</TD>
    <TD>Li, Ren (16)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">20,000</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>*</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="text-align: center">Common Stock</TD>
    <TD>&nbsp;</TD>
    <TD>Al Carmona (17)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">83,733</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>*</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD STYLE="text-align: center">Common Stock</TD>
    <TD>&nbsp;</TD>
    <TD>Longjiang Yuan (18)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">3,333</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>*</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="text-align: center">Common Stock</TD>
    <TD>&nbsp;</TD>
    <TD>Timothy Stevens (19)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">13,333</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>*</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD STYLE="text-align: center">Common Stock</TD>
    <TD>&nbsp;</TD>
    <TD>Hong Wang (8)(9)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">664,142</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">4.66</TD>
    <TD>%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD COLSPAN="3" STYLE="font-weight: bold">Officers and Significant Employees and Directors as a Group</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">5,507,687</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">38.62</TD>
    <TD>%</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">* Less than 1%.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.4in">(1)</TD><TD>Pursuant to Rule 13d-3 under the Exchange Act, a person has beneficial ownership of any securities as to which such person,
directly or indirectly, through any contract, arrangement, undertaking, relationship or otherwise has or shares voting power and/or
investment power or as to which such person has the right to acquire such voting and/or investment power within 60 days.</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.4in">(2)</TD><TD>Unless otherwise stated, each beneficial owner has sole power to vote and dispose of the shares.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in; text-indent: -0.4in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.4in">(3)</TD><TD>Applicable percentage of ownership is based on <FONT STYLE="background-color: white">10,566,766</FONT> shares of common stock
outstanding as of April 27, 2012, together with 1,995,475 shares of common stock issuable upon the conversion of convertible preferred
stock, 1,154,272 shares of common stock issuance upon the exercise of warrants, and 543,333 shares of common stock issuance upon
the exercise of exercisable stock options within sixty (60) days as of the date hereof for beneficial owner.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in; text-indent: -0.4in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.4in">(4)</TD><TD>The registered address of Expert Venture Limited is P.O. Box 957, Offshore Incorporation Centre, Road Town, Tortola, British
Virgin Islands.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in; text-indent: -0.4in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.4in">(5)</TD><TD>Mr.&nbsp;Yam Sheung Kwok is the sole and controlling person of Expert Venture Limited, owning all 1,000 shares of Expert Venture
Limited (subject to the share transfer agreements discussed below).</TD></TR></TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in; text-indent: -0.4in"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.4in">(6)</TD><TD>The registered address of Sure Glory Holdings Limited is P.O. Box 957, Offshore incorporation Centre, Road Town, Tortola, British
Virgin Islands.&nbsp;&nbsp;Mr.&nbsp;Dai Ai Wei is the sole and controlling person of Sure Glory Holdings Limited, owning the sole
share of Sure Glory Holdings Limited.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in; text-indent: -0.4in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.4in">(7)</TD><TD>The registered address of Charming Action Management Limited is Portcullis TrustNet Chambers, P.O. Box 3444, Road Town, Tortola,
British Virgin Islands.&nbsp;&nbsp;Miss Jin Juan Dai is the sole and controlling person of Charming Action Management Limited,
owning the sole share of Charming Action Management Limited.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in; text-indent: -0.4in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.4in">(8)</TD><TD>Effective April 30, 2012, Mr. Wang was appointed to serve as a Director of the Company. The registered address of Hong Wang
is 7/F, B Tower, Jinshangguoji Building, Jinzhong, China.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in; text-indent: -0.4in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.4in">(9)</TD><TD>Pursuant to a share transfer agreement, Mr.&nbsp;Hong Wang has the option, subject to certain performance targets (discussed
in more detail below), to purchase from Mr.&nbsp;Yam Sheung Kwok, the current sole shareholder of Expert Venture Limited, up to
120 shares of Expert Venture Limited. Accordingly, upon exercise of such option, Mr.&nbsp;Wang will indirectly (through his ownership
of Expert Venture Limited) own and control 664,142 shares, which equal 4.66% of the fully-diluted percentage of outstanding shares.
Since the performance targets set forth in the share transfer agreement have been met, the option has vested and become exercisable
to Mr. Wang. As a result, the number of shares of beneficial ownership has included 664,142 shares of common stock that have become
transferrable to Mr. Wang after adjusting proportionally to the reduction of total number of shares held by Expert Venture Limited
since April 2010.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in; text-indent: -0.4in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.4in">(10)</TD><TD>Pursuant to a share transfer agreement, Mr.&nbsp;Jianming Hao, our Chairman and Chief Executive Officer, has the option, subject
to certain performance targets, to purchase from Mr.&nbsp;Yam Sheung Kwok, the current sole shareholder of Expert Venture Limited,
up to 101 shares of Expert Venture Limited. Accordingly, upon exercise of such option, Mr.&nbsp;Hao will indirectly (through his
ownership of Expert Venture Limited own and control&nbsp;558,986&nbsp;shares, which equal 3.92% of the fully-diluted percentage
of outstanding shares. Since the performance targets set forth in the share transfer agreement have been met, the option has vested
and become exercisable to Mr. Hao. As a result, the number of shares of beneficial ownership has included 558,986 shares of common
stock that have become transferrable to Mr. Hao after adjusting proportionally to the reduction of total number of shares held
by Expert Venture Limited since April 2010. In addition, the Company has granted to Mr. Hao options to purchase 250,000 shares
of our common stock under the Plan, 100,000 of which have vested.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in; text-indent: -0.4in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.4in">(11)</TD><TD>Pursuant to a share transfer agreement, Mr.&nbsp;Wenjun Tian, our Executive Director, will have an option, subject to certain
performance targets (discussed in more detail below), to purchase from Mr.&nbsp;Yam Sheung Kwok, the current sole shareholder of
Expert Venture Limited, up to 300 shares of Expert Venture Limited, which constitutes 30% of Expert Venture Limited. Accordingly,
upon exercise of such option, Mr.&nbsp;Tian will indirectly (through his ownership of Expert Venture Limited) own and control 1,660,354
shares, which equal 11.64% of the fully-diluted percentage of outstanding shares. Since the performance targets set forth in the
share transfer agreement have been met, the option has vested and become exercisable to Mr. Tian. As a result, the number of shares
of beneficial ownership has included 1,660,354 shares of common stock that have become transferrable to Mr. Tian after adjusting
proportionally to the reduction of total number of shares held by Expert Venture Limited since April 2010. In addition, the Company
has granted to Mr. Tian options to purchase 150,000 shares of our common stock under the Plan, 100,000 of which have vested.&nbsp;
Effective April 30, 2012, Mr. Tian resigned as the Company&rsquo;s President and as a member of the Board of Directors.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in; text-indent: -0.4in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.4in">(12)</TD><TD>The Company has granted to Mr. Zhou options to purchase 40,000 shares of common stock under the Company&rsquo;s share option
plan, 26,667 of which have vested.</TD></TR></TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in; text-indent: -0.4in"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in; text-indent: -0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in; text-indent: -0.4in"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in; text-indent: -0.4in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in; text-indent: -0.4in"></P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.4in">(13)</TD><TD>Pursuant to a share transfer agreement, Mr.&nbsp;Yongqing Ren will have an option, subject to certain performance targets (discussed
in more detail below), to purchase from Mr.&nbsp;Yam Sheung Kwok, the current sole shareholder of Expert Venture Limited, up to
200 shares of Expert Venture Limited. Accordingly, upon exercise of such option, Mr.&nbsp;Ren will indirectly (through his ownership
of Expert Venture Limited) own and control 1,106,903 shares, which equal 7.76% of the fully-diluted percentage of outstanding shares.
Since the performance targets set forth in the share transfer agreement have been met, the option has vested and become exercisable
to Mr. Ren. As a result, the number of shares of beneficial ownership has included 1,106,903 shares of common stock that have become
transferrable to Mr. Ren after adjusting proportionally to the reduction of total number of shares held by Expert Venture Limited
since April 2010. In addition, the Company has granted to Mr. Ren options to purchase 40,000 shares of our common stock under the
Plan, 26,667 of which have vested.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.4in">(14)</TD><TD>Pursuant to a share transfer agreement, Mr.&nbsp;Junde Zhang will have an option, subject to certain performance targets (discussed
in more detail below), to purchase from Mr.&nbsp;Yam Sheung Kwok, the current sole shareholder of Expert Venture Limited, up to
200 shares of Expert Venture Limited. Accordingly, upon exercise of such option, Mr.&nbsp;Zhang will indirectly (through his ownership
of Expert Venture Limited) own and control 1,106,903 shares, which equal 7.76% of the fully-diluted percentage of outstanding shares
of common stock. Since the performance targets set forth in the share transfer agreement have been met, the option has vested and
become exercisable to Mr. Zhang. As a result, the number of shares of beneficial ownership has included 1,106,903 shares of common
stock that have become transferrable to Mr. Zhang after adjusting proportionally to the reduction of total number of shares held
by Expert Venture Limited since April 2010. In addition, the Company has granted to Mr. Zhang options to purchase 40,000 shares
of our common stock under the Plan, 26,667 of which have vested.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in; text-indent: -0.4in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.4in">(15)</TD><TD>The Company has granted to Mr. Yunling Ding options to purchase 55,000 shares of our common stock under the Plan, 10,000 of
which have vested.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in; text-indent: -0.4in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.4in">(16)</TD><TD>The Company has granted to Mr. Li Ren options to purchase 30,000 shares of our common stock under the Plan, 20,000 of which
have vested. As a result of the termination of employment of Mr. Li Ren effective February, 3, 2012, such options shall expire
three months after termination such employee in accordance with the terms of the Plan unless exercised by Mr. Li Ren prior to such
time.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in; text-indent: -0.4in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.4in">(17)</TD><TD>Al Carmona was an investor in the financing that closed immediately following the Share Exchange.&nbsp;&nbsp;As of March 27,
2012, Mr. Al&nbsp;Carmona owned 46,547 shares of Series A Convertible Preferred Shares, 9,186 shares of common stock and a warrant
exercisable into 18,000 shares of common stock at an exercise price of $5.06. In addition, the Company has granted to Mr. Carmona
options to purchase 75,000 shares of our common stock under the Plan, 10,000 of which have vested.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in; text-indent: -0.4in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.4in">(18)</TD><TD>The Company has granted to Mr. Longjiang Yuan options to purchase 5,000 shares of our common stock under the Plan, 3,333 of
which have vested.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in; text-indent: -0.4in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.4in">(19)</TD><TD>The Company has granted to Mr. Stevens options to purchase 80,000 shares of our common stock under the Plan, 13,333 of which
have vested.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.4in">(20)</TD><TD>The Company has granted to Ms. Amy He options to purchase 60,000 shares of our common stock under the Plan, none of which have
vested.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in; text-indent: -0.4in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.4in">(21)</TD><TD>Mr. Lin&rsquo;s employment as Chief Financial Officer terminated on March 5, 2012.</TD></TR></TABLE>



<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in; text-indent: -0.4in"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.4in; text-indent: -0.4in"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Change in Control Arrangements</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We are not aware of any arrangements that
could result in a change of control.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B>&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>SELLING STOCKHOLDER</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We are registering the shares of common
stock in order to permit Expert Venture Limited to offer the shares for resale from time to time. Expert Venture Limited is not
a licensed broker-dealer or an affiliate of a licensed broker-dealer.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We do not know when or in what amounts
Expert Venture Limited may offer shares for sale. Expert Venture Limited may elect not to sell any or all of the shares offered
by this prospectus. Because Expert Venture Limited may offer all or some of the shares, and because there are currently no agreements,
arrangements or understandings with respect to the sale of any of the shares, we cannot estimate the number of the shares that
will be held by Expert Venture Limited after completion of the offering. However, for purposes of this table, we have assumed
that, after completion of the offering, all of the shares covered by this prospectus will be sold by Expert V Venture Limited.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The following table presents information
regarding Expert Venture Limited. The information concerning beneficial ownership has been taken from our stock transfer records
and information provided by Expert Venture Limited and is dated as of April 27, 2012. Beneficial ownership has been calculated
in accordance with the rules of the SEC, which generally attribute beneficial ownership of securities to persons who possess sole
or shared voting power or investment power with respect to those securities and include shares of common stock issuable pursuant
to the exercise of stock options or warrants that are either immediately exercisable or exercisable within 60&nbsp;days of April
27, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Selling&nbsp;Stockholder</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Shares<BR> Beneficially<BR> Owned&nbsp;Before&nbsp;<BR> Offering</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Fully&nbsp;Diluted<BR> Percentage&nbsp;of<BR> Outstanding&nbsp;Shares<BR> Beneficially&nbsp;Owned<BR> Before&nbsp;Offering&nbsp;(2)</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Shares&nbsp;to&nbsp;be<BR> Sold<BR> in&nbsp;the&nbsp;Offering<BR> Assuming&nbsp;the&nbsp;<BR> Selling<BR>
Stockholder<BR>
Sells&nbsp;Maximum<BR>
Number&nbsp;of<BR> Shares&nbsp;in&nbsp;the<BR> Offering</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Fully&nbsp;Diluted<BR> Percentage&nbsp;of<BR> Outstanding&nbsp;Shares<BR> Beneficially&nbsp;Owned<BR> After&nbsp;Offering&nbsp;(2)</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 28%">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 15%; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 15%; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 15%; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 15%; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Expert Venture Limited (1)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">5,534,513</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">38.81</TD><TD STYLE="text-align: left">%</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">250,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">37.06</TD><TD STYLE="text-align: left">%</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(1) &nbsp;The registered address of Expert Venture Limited
is P.O. Box 957, Offshore Incorporation Centre, Road Town, Tortola, British Virgin Islands. Mr.&nbsp;Yam Sheung Kwok is the sole
and controlling person of Expert Venture Limited, owning all 1,000 shares of Expert Venture Limited (subject to the share transfer
agreements discussed below in the subsection entitled &ldquo;Share Transfer Agreements&rdquo;). Mr. Kwok has sole voting and disposition
power over the shares being offered under this prospectus.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(2) Applicable percentage of ownership is based on 10,566,766
shares of common stock outstanding as of April 27, 2012, together with 1,995,475 shares of common stock issuable upon the conversion
of convertible preferred stock, 1,154,272 shares of common stock issuance upon the exercise of warrants, and 543,333 shares of
common stock issuance upon the exercise of exercisable stock options within sixty (60) days as of the date hereof for beneficial
owner.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>2010 Share Exchange</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On April 27, 2010, we entered into a Share
Exchange Agreement (&ldquo;Exchange Agreement&rdquo;) by and among (i) City Zone Holdings Limited, an emerging organic and non-organic
agricultural products distributor in Shanxi Province, China, engaged in procuring, processing, marketing and distributing various
grain and corn products (&ldquo;City Zone&rdquo;), (ii) City Zone&rsquo;s shareholders, including, without limitation, Expert
Venture Limited, a company organized under the laws of the British Virgin Islands and the selling stockholder hereunder and (iii)
certain of our principal shareholders, whereby Expert Venture Limited and the other City Zone shareholders transferred to us all
of the shares of City Zone in exchange for the issuance of an aggregate 8,736,932 shares of our common stock, of which 6,238,205
were issued to Expert Venture Limited. As a result of the Exchange Agreement, Expert Venture Limited and other minority shareholders
of City Zone owned a majority of our outstanding shares, City Zone became our wholly-owned subsidiary and we acquired 100% of
the processing and production operations of City Zone&nbsp;and its subsidiaries, the business and operations of which now constitutes
the primary business and operations of the Company.&nbsp;&nbsp;&nbsp;The 250,000 shares of our common stock being registered hereunder
were part of the issuance by us to Expert Venture Limited pursuant to the Exchange Agreement.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>2010 Private Placement</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Simultaneously with the acquisition of
City Zone, we completed a private placement offering in the gross amount of $8,211,166 of the sale of securities to accredited
investors at $4.40 per unit, with each &ldquo;Unit&rdquo; consisting of one share of our Series A convertible preferred stock
and one warrant to purchase 0.4 shares of our common stock with an exercise price of $5.06 per share. On May 10, 2010, we&nbsp;closed
on the second and final round of the private placement offering as disclosed in our Current Report on Form 8-K filed with the
SEC on May 3, 2010 through the sale of 589,689 Units comprised of 589,689 shares of our Series A convertible preferred stock and
235,882 five-year warrants with an exercise price of $5.06 per share, to certain accredited investors for total gross proceeds
of $2,594,607. We raised an aggregate amount of $10,805,750 in the two rounds of offerings.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In connection with the financing transaction,
we entered into (i) a Securities Purchase Agreement, (ii) a Registration Rights Agreement, (iii) a Lock-Up Agreement and (iv)
a Securities Escrow Agreement for a make good arrangement with our management (collectively, the &ldquo;Financing Documents&rdquo;).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The private placement closed simultaneously
with the signing of the Financing Documents and our issuing of 2,455,863 shares of Series A convertible preferred stock and warrants
exercisable into 982,362 shares of common stock to certain investors (collectively, the &ldquo;Investors&rdquo;).&nbsp;&nbsp;Pursuant
to its terms, the Series A convertible preferred stock receive cumulative dividends at a rate of 5% per annum and can be converted
into common stock on a 1:1 basis, subject to applicable adjustments.&nbsp;&nbsp;Pursuant to its terms, the warrants can be converted
into 982,362 shares of common stock at an exercise price of $5.06 per share (the &quot;Warrants&quot;).&nbsp;&nbsp;The Warrants
will expire on April 27, 2015.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Pursuant to the Registration Rights Agreement,
we agreed to file a registration statement on Form S-1 (or other applicable Form) within 60 days of the close of such financing.&nbsp;&nbsp;We
filed a Registration Statement on Form S-1 with the SEC on June 15, 2010 (, and on October 21, 2010, the&nbsp;SEC declared the
Form S-1 effective.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We also entered into a Lock-Up Agreement
with the Investors, pursuant to which the common stock owned by the management of City Zone was locked-up for the six (6) month
period following the effectiveness of the Registration Statement is declared effective. The Lock-Up Agreement expired on April
21, 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Lastly, pursuant to the Securities Escrow
Agreement, Expert Venture Limited pledged 2,455,863 shares of&nbsp;common stock of the Company (the &ldquo;Make Good Shares&rdquo;)
to secure the obligation that we reach certain earnings thresholds for the fiscal years ended 2010 and 2011. One half (or 1,227,932
shares) of the Make Good Shares were allocated to the 2010 earnings requirement and the other half (1,227,931 shares) of the Make
Good Shares were allocated to the 2011 earnings requirement. For the fiscal year 2010, we met our threshold requirement of reporting
net income of at least 95% of $11,000,000. If we meet the threshold in 2011 of reporting net income of at least 95% of $15,000,000
(i.e., at least $14,250,000), the remainder of the Make Good Shares will be returned to Expert Venture Limited, however if we
fail to meet our threshold, then the Make Good Shares will be released from escrow based on the following terms and conditions:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>If we achieve net
                                                                                                          income of less than
                                                                                                          50% of $15,000,000 (or
                                                                                                          $7,500,000), then 1,227,931
                                                                                                          shares shall be released
                                                                                                          to the investors on
                                                                                                          a pro rata basis (based
                                                                                                          on the amount of each
                                                                                                          investors investment).</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.25in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>If we achieve net
                                                                                                          income of between 50%
                                                                                                          and less than 95% of
                                                                                                          $15,000,000, then a
                                                                                                          portion of the 1,227,931
                                                                                                          shares held in escrow
                                                                                                          shall be disbursed to
                                                                                                          the Investors (the remaining
                                                                                                          shares will be returned
                                                                                                          to Expert Venture Limited).&nbsp;
                                                                                                          The number of shares
                                                                                                          released to the investors
                                                                                                          shall be determined
                                                                                                          by doubling the percentage
                                                                                                          missed between the actual
                                                                                                          net income as compared
                                                                                                          to the make good target
                                                                                                          and then multiplying
                                                                                                          that by the 1,227,931
                                                                                                          escrow shares.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The 250,000 shares being registered hereunder
are not part of the 2,455,863 shares pledged by Expert Venture Limited pursuant to the Securities Escrow Agreement.<B> </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Share Transfer Agreements</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Pursuant to a share transfer agreement
dated April 26, 2010, Mr.&nbsp;Hong Wang, a Director of the Company, has the option, subject to certain performance targets (discussed
in more detail below), to purchase from Mr.&nbsp;Yam Sheung Kwok, the current sole shareholder of Expert Venture Limited, up to
120 shares of Expert Venture Limited. Accordingly, upon exercise of such option, Mr.&nbsp;Wang will indirectly (through his ownership
of Expert Venture Limited) own and control 664,142 shares, which equal 4.66% of the fully-diluted percentage of outstanding shares
as of the date of this prospectus. Since the performance targets set forth in the share transfer agreement have been met, the
option has vested and become exercisable to Mr. Wang. As a result, the number of shares of beneficial ownership has included 664,142
shares of common stock that have become transferrable to Mr. Wang after adjusting proportionally to the reduction of total number
of shares held by Expert Venture Limited since April 2010.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Pursuant to a share transfer agreement
dated April 26, 2010, Mr.&nbsp;Jianming Hao, the Chairman of the Board and the President and Chief Executive Officer of the Company,
has the option, subject to certain performance targets, to purchase from Mr.&nbsp;Yam Sheung Kwok, the current sole shareholder
of Expert Venture Limited, up to 101 shares of Expert Venture Limited. Accordingly, upon exercise of such option, Mr.&nbsp;Hao
will indirectly (through his ownership of Expert Venture Limited) own and control&nbsp;558,986&nbsp;shares, which equal 3.92%
of the fully-diluted percentage of outstanding shares as of the date of this prospectus. Since the performance targets set forth
in the share transfer agreement have been met, the option has vested and become exercisable to Mr. Hao. As a result, the number
of shares of beneficial ownership has included 558,986 shares of common stock that have become transferrable to Mr. Hao after
adjusting proportionally to the reduction of total number of shares held by Expert Venture Limited since April 2010. In addition,
the Company has granted to Mr. Hao options to purchase 250,000 shares of our common stock under the Plan, 100,000 of which have
vested.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Pursuant to a share transfer agreement
dated April 26, 2010, Mr.&nbsp;Wenjun Tian, a former Director and former President of the Company, will have an option, subject
to certain performance targets (discussed in more detail below), to purchase from Mr.&nbsp;Yam Sheung Kwok, the current sole shareholder
of Expert Venture Limited, up to 300 shares of Expert Venture Limited, which constitutes 30% of Expert Venture Limited. Accordingly,
upon exercise of such option, Mr.&nbsp;Tian will indirectly (through his ownership of Expert Venture Limited) own and control
1,660,354 shares, which equal 11.64% of the fully-diluted percentage of outstanding shares as of the date of this prospectus.
Since the performance targets set forth in the share transfer agreement have been met, the option has vested and become exercisable
to Mr. Tian. As a result, the number of shares of beneficial ownership has included 1,660,354 shares of common stock that have
become transferrable to Mr. Tian after adjusting proportionally to the reduction of total number of shares held by Expert Venture
Limited since April 2010. In addition, the Company has granted to Mr. Tian options to purchase 150,000 shares of our common stock
under the Plan, 100,000 of which have vested. Effective April 30, 2012, Mr. Tian resigned as the Company&rsquo;s President and
as a member of the Board of Directors.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Pursuant to a share transfer agreement
dated April 26, 2010, Mr.&nbsp;Yongqing Ren, Vice President of the Corn Division of the Company, will have an option, subject
to certain performance targets (discussed in more detail below), to purchase from Mr.&nbsp;Yam Sheung Kwok, the current sole shareholder
of Expert Venture Limited, up to 200 shares of Expert Venture Limited. Accordingly, upon exercise of such option, Mr.&nbsp;Ren
will indirectly (through his ownership of Expert Venture Limited) own and control 1,106,903 shares, which equal 7.76% of the fully-diluted
percentage of outstanding shares as of the date of this prospectus. Since the performance targets set forth in the share transfer
agreement have been met, the option has vested and become exercisable to Mr. Ren. As a result, the number of shares of beneficial
ownership has included 1,106,903 shares of common stock that have become transferrable to Mr. Ren after adjusting proportionally
to the reduction of total number of shares held by Expert Venture Limited since April 2010. In addition, the Company has granted
to Mr. Ren options to purchase 40,000 shares of our common stock under the Plan, 26,667 of which have vested.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Pursuant to a share transfer agreement
dated April 26, 2010, Mr.&nbsp;Junde Zhang, Vice President of the Grain Division of the Company, will have an option, subject
to certain performance targets (discussed in more detail below), to purchase from Mr.&nbsp;Yam Sheung Kwok, the current sole shareholder
of Expert Venture Limited, up to 200 shares of Expert Venture Limited. Accordingly, upon exercise of such option, Mr.&nbsp;Zhang
will indirectly (through his ownership of Expert Venture Limited) own and control 1,106,903 shares, which equal 7.76% of the fully-diluted
percentage of outstanding shares of common stock. Since the performance targets set forth in the share transfer agreement have
been met, the option has vested and become exercisable to Mr. Zhang. As a result, the number of shares of beneficial ownership
has included 1,106,903 shares of common stock that have become transferrable to Mr. Zhang after adjusting proportionally to the
reduction of total number of shares held by Expert Venture Limited since April 2010. In addition, the Company has granted to Mr.
Zhang options to purchase 40,000 shares of our common stock under the Plan, 26,667 of which have vested.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: -1.5pt">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center; text-indent: -1.5pt"><B>DESCRIPTION OF
SECURITIES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Authorized Capital Stock</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our authorized stock consists of 85,000,000
shares, of which 75,000,000 are authorized shares of common stock, par value $0.001 per share and of which 10,000,000 are authorized
shares of preferred stock, par value $0.001 per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Common Stock</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Holders of common stock are entitled to
cast one vote for each share on all matters submitted to a vote of shareholders, including the election of directors. The holders
of common stock are entitled to receive ratably such dividends, if any, as may be declared by the Board of Directors of the Company
out of funds legally available therefore. Such holders do not have any preemptive or other rights to subscribe for additional
shares. All holders of our common stock are entitled to share ratably in any assets for distribution to shareholders upon the
liquidation, dissolution or winding up. There are no conversion, redemption or sinking fund provisions applicable to the common
stock. All outstanding shares of common stock are fully paid and non-assessable.&nbsp;Our Board of Directors is not classified.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Also, holders of common stock do not have
preemption rights, liability for further calls or to assessment by the Company, any restriction on alienability of the securities
to be registered, or any provision discriminating against any existing or prospective holder of such securities. The rights of
the shareholders may not be modified other than by a vote of a majority of the shares outstanding, voting as a class.<BR STYLE="mso-special-character:
line-break">
<BR STYLE="mso-special-character: line-break"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Series A Convertible Preferred Stock</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In connection with our private placement
in May 2010, we executed a Securities Purchase Agreement whereby we issued shares of Series A convertible preferred stock to investors.&nbsp;&nbsp;The
holders of Series A Preferred are entitled to receive cumulative dividends in preference to the holders of common stock at an
annual rate of 5% of the applicable per Series A Preferred original purchase price (the &ldquo;<U>Dividend Preference</U>&rdquo;
and the &ldquo;<U>Dividends</U>&rdquo;).&nbsp;&nbsp;If, after the Dividend Preference has been fully paid or declared and set
apart, the Company shall make any additional distributions, then the holders of Series A Preferred shall participate with the
holders of common stock on an as-converted basis with respect to such distributions.&nbsp;&nbsp;Dividends shall be payable in
cash or stock, at the Company&rsquo;s option.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Upon any liquidation, dissolution or winding
up of the Company, the holders of Series A Preferred will be entitled to receive, out of the assets of the Company available for
distribution to its stockholders, an amount equal to $4.40 per share (the amount, the &ldquo;<U>Liquidation Preference Amount</U>&rdquo;),
before any payment shall be made or any assets distributed to the holders of the common stock (the &ldquo;<U>Liquidation Preference</U>&rdquo;).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Each holder of Series A Preferred has the
right, at the option of the holder at any time on or after the issuance of the Series A Preferred, without the payment of additional
consideration, to convert Series A Preferred into a number of fully paid and nonassessable shares of common stock equal to: (i)
the Liquidation Preference Amount of such share divided by (ii) the Conversion Price in effect as of the date of the conversion.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">For a period of two (2) years following
the issuance of the Series A Preferred, the conversion price of Series A Preferred will be subject to adjustment for issuances
of common stock (or securities convertible or exchangeable into shares of common stock) at a purchase price less than the conversion
price of the Series A Preferred. &nbsp; The Series A Preferred Stock does not contain any repurchase or redemption rights.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>The Series A Warrants</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In connection with our private placement
in May 2010, we also issued Series A Warrants to investors and the placement agent which are exercisable into shares of common
stock. Each Series A Warrant:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">(a)</TD><TD>entitles the holder to purchase&nbsp;one (1) share of common
                                                                 stock;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">(b)</TD><TD>Is exercisable at any time after consummation of the transactions
                                                                 contemplated by the SPA and shall expire on the date that is
                                                                 five (5) years following the original issuance date of the Series
                                                                 A Warrants;</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">(c)</TD><TD>is exercisable, in whole or in part, at an exercise price
                                                                 of $5.06 per share of common stock for the investors and $4.84
                                                                 for the placement agent and</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in">(d)</TD><TD>is exercisable only for cash (except that there will be a
                                                                 cashless exercise option if, after twelve months from the Issue
                                                                 Date, (i) the Per Share Market Value of one share of common stock
                                                                 is greater than the Warrant Price (at the date of calculation)
                                                                 and (ii) a registration statement under the Securities Act of
                                                                 1933 providing for the resale of the common stock issuable upon
                                                                 exercise of Warrant Shares is not in effect, in lieu of exercising
                                                                 the Series A Warrant by payment of cash).</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Capitalized terms in the section herein
above not otherwise defined herein have the meanings set forth in the Series A Warrants.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Dividend Policy</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We have not paid cash dividends on any
class of common equity since formation and we do not anticipate paying any dividends on our outstanding common stock in the foreseeable
future. We plan to retain any earnings to finance the development of the business and for general corporate purposes.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Nevada Anti-Takeover Laws and our Corporate Policy</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Nevada Revised Statutes sections 78.378
to 78.379 provide state regulation over the acquisition of a controlling interest in certain Nevada corporations unless the articles
of incorporation or bylaws of the corporation provide that the provisions of these sections do not apply. Our articles of incorporation
and bylaws do not state that these provisions do not apply. The statute creates a number of restrictions on the ability of a person
or entity to acquire control of a Nevada corporation by setting down certain rules of conduct and voting restrictions in any acquisition
attempt, among other things. The statute is limited to corporations that are organized in the state of Nevada and that have 200
or more stockholders, at least 100 of whom are stockholders of record and residents of the State of Nevada; and does business
in the State of Nevada directly or through an affiliated corporation. Because of these conditions, the statute currently does
not apply to us.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The anti-takeover provisions of Sections
78.411 through 78.445 of the Nevada Corporation Law apply to our Company. Section 78.438 of the Nevada law prohibits companies
from merging with or selling more than 5% of its assets or stock to any shareholder who owns or owned more than 10% of any stock
or any entity related to a 10% shareholder for three years after the date on which the shareholder acquired the shares, unless
the transaction is approved by the our Board. The provisions also prohibit companies from completing any of the transactions described
in the preceding sentence with a 10% shareholder who has held the shares more than three years and its related entities unless
the transaction is approved by our Board or a majority of our shares, other than shares owned by that 10% shareholder or any related
entity. These provisions could delay, defer or prevent a change in control of our Company.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Indemnification and Limitation of Liability</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Under the terms of our articles of incorporation
and bylaws, we will indemnify our officers, directors, employees, and agents against all liabilities and expenses actually and
reasonably incurred in connection with service for or on behalf of the corporation to the fullest extent allowed by Chapter 78
of the Nevada Revised Statutes, unless it is ultimately determined by a court of competent jurisdiction that (i) they failed to
act in a manner they believed in good faith to be in, or not opposed to, the best interests of the corporation, and (ii) with
respect to any criminal proceeding, had reasonable cause to believe their conduct was lawful. In addition, the applicable provisions
mandate that we indemnify our officers and directors who have been successful on the merits or otherwise in the defense of any
such action, suit, or proceeding against expenses (including attorneys' fees) actually and reasonably incurred by them in connection
with such defense. The Articles also eliminate, to the fullest extent permitted by Nevada law, the liability of directors and
officers to the corporation or our stockholders for monetary or other damages for breach of fiduciary duties as a director or
officer.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>Transfer Agent and Registrar</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify; text-indent: 0.5in">West Coast Stock Transfer
is currently the transfer agent and registrar for our common stock. Its address is 2010 Hancock Street, Suite A, San Diego, CA
92110. Its phone number is (619) 664-4780.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>PLAN OF DISTRIBUTION</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We are registering the shares of common
stock previously issued to permit the resale of these shares of common stock by the selling stockholder of the common stock from
time to time after the date of this prospectus.&nbsp;&nbsp;We will not receive any of the proceeds from the sale by the selling
stockholder of the shares of common stock.&nbsp;&nbsp;We will bear all fees and expenses incident to the registration of the shares
of common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The selling stockholder may sell all or
a portion of the shares of common stock held by it and offered hereby from time to time directly or through one or more underwriters,
broker-dealers or agents. If the shares of common stock are sold through underwriters or broker-dealers, the selling stockholder
will be responsible for underwriting discounts or commissions or agent&rsquo;s commissions. The shares of common stock may be
sold in one or more transactions at fixed prices, at prevailing market prices at the time of the sale, at varying prices determined
at the time of sale or at negotiated prices. These sales may be effected in transactions, which may involve crosses or block transactions,
pursuant to one or more of the following methods:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>on any national
                                                                                                               securities exchange
                                                                                                               or quotation service
                                                                                                               on which the securities
                                                                                                               may be listed or
                                                                                                               quoted at the time
                                                                                                               of sale;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>in the over-the-counter
                                                                                                               market;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>in transactions
                                                                                                               otherwise than
                                                                                                               on these exchanges
                                                                                                               or systems or in
                                                                                                               the over-the-counter
                                                                                                               market;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>through the
                                                                                                               writing or settlement
                                                                                                               of options, whether
                                                                                                               such options are
                                                                                                               listed on an options
                                                                                                               exchange or otherwise;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>ordinary brokerage
                                                                                                               transactions and
                                                                                                               transactions in
                                                                                                               which the broker-dealer
                                                                                                               solicits purchasers;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>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;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>purchases by
                                                                                                               a broker-dealer
                                                                                                               as principal and
                                                                                                               resale by the broker-dealer
                                                                                                               for its account;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>an exchange
                                                                                                               distribution in
                                                                                                               accordance with
                                                                                                               the rules of the
                                                                                                               applicable exchange;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>privately negotiated
                                                                                                               transactions;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>settlement
                                                                                                               of short sales
                                                                                                               entered into after
                                                                                                               the effective date
                                                                                                               of the registration
                                                                                                               statement of which
                                                                                                               this prospectus
                                                                                                               is a part;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>in transactions
                                                                                                               through broker-dealers
                                                                                                               that agree with
                                                                                                               the Selling stockholders
                                                                                                               to sell a specified
                                                                                                               number of such
                                                                                                               shares at a stipulated
                                                                                                               price per share;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>through the
                                                                                                               writing or settlement
                                                                                                               of options or other
                                                                                                               hedging transactions,
                                                                                                               whether through
                                                                                                               an options exchange
                                                                                                               or otherwise;</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>a combination
                                                                                                               of any such methods
                                                                                                               of sale; or</TD></TR></TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.75in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>any other method
                                                                                                               permitted pursuant
                                                                                                               to applicable law.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The selling stockholder may also sell shares
under Rule 144 under the Securities Act of 1933, as amended (the &ldquo;<U>Securities Act</U>&rdquo;), if available, rather than
under this prospectus.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In addition, the selling stockholder may
transfer the shares of common stock by other means not described in this prospectus. If the selling stockholder effects such transactions
by selling shares of common stock to or through underwriters, broker-dealers or agents, such underwriters, broker-dealers or agents
may receive commissions in the form of discounts, concessions or commissions from the selling stockholder or commissions from purchasers
of the shares of common stock for whom they may act as agent or to whom they may sell as principal (which discounts, concessions
or commissions as to particular underwriters, broker-dealers or agents may be in excess of those customary in the types of transactions
involved). In connection with sales of the shares of common stock or otherwise, the selling stockholder may enter into hedging
transactions with broker-dealers, which may in turn engage in short sales of the shares of common stock in the course of hedging
in positions they assume. The selling stockholder may also sell shares of common stock short and deliver shares of common stock
covered by this prospectus to close out short positions and to return borrowed shares in connection with such short sales. The
selling stockholder may also loan or pledge shares of common stock to broker-dealers that in turn may sell such shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The selling stockholder may pledge or grant
a security interest in some or all of the shares of common stock owned by them and, if they default in the performance of their
secured obligations, the pledgees or secured parties may offer and sell the shares of common stock from time to time pursuant
to this prospectus or any amendment to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act
amending, if necessary, the list of selling stockholder(s) to include the pledgee, transferee or other successors in interest
as selling stockholder under this prospectus. The selling stockholder also may transfer and donate the shares of common stock
in other circumstances in which case the transferees, donees, pledgees or other successors in interest will be the selling beneficial
owners for purposes of this prospectus.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">To the extent required by the Securities
Act and the rules and regulations thereunder, the selling stockholder and any broker-dealer participating in the distribution
of the shares of common stock may be deemed to be &ldquo;underwriters&rdquo; within the meaning of the Securities Act, and any
commission paid, or any discounts or concessions allowed to, any such broker-dealer may be deemed to be underwriting commissions
or discounts under the Securities Act. At the time a particular offering of the shares of common stock is made, a prospectus supplement,
if required, will be distributed, which will set forth the aggregate amount of shares of common stock being offered and the terms
of the offering, including the name or names of any broker-dealers or agents, any discounts, commissions and other terms constituting
compensation from the selling stockholder and any discounts, commissions or concessions allowed or re-allowed or paid to broker-dealers.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">No underwriter or person has been engaged
to facilitate the sale of shares of common stock in this offering.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Under the securities laws of some states,
the shares of common stock may be sold in such states only through registered or licensed brokers or dealers. In addition, in
some states the shares of common stock may not be sold unless such shares have been registered or qualified for sale in such state
or an exemption from registration or qualification is available and is complied with.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">There can be no assurance that the selling
stockholder will sell any or all of the shares of common stock registered pursuant to the registration statement, of which this
prospectus forms a part.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The selling stockholder and any other person
participating in such distribution will be subject to applicable provisions of the Securities Exchange Act of 1934, as amended,
and the rules and regulations thereunder, including, without limitation, to the extent applicable, Regulation M of the Exchange
Act, which may limit the timing of purchases and sales of any of the shares of common stock by the selling stockholder and any
other participating person. To the extent applicable, Regulation M may also restrict the ability of any person engaged in the
distribution of the shares of common stock to engage in market-making activities with respect to the shares of common stock. All
of the foregoing may affect the marketability of the shares of common stock and the ability of any person or entity to engage
in market-making activities with respect to the shares of common stock.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We will pay all expenses of the registration
of the shares of common stock pursuant to the registration rights agreement, estimated to be approximately $25,000 in total, including,
without limitation, Securities and Exchange Commission filing fees and expenses of compliance with state securities or &ldquo;blue
sky&rdquo; laws; provided, however, the selling stockholder will pay all underwriting discounts and selling commissions, if any.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Once sold under the registration statement,
of which this prospectus forms a part, the shares of common stock will be freely tradable in the hands of persons other than our
affiliates.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>LEGAL MATTERS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The validity of the securities being offered
by this prospectus has been passed upon for us by Burton Bartlett &amp; Glogovac, Reno, Nevada.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>EXPERTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">KCCW Accountancy Corp., Certified Public
Accountants, an independent registered public accounting firm, has audited, as set forth in its report thereon appearing elsewhere
herein, our financial statements at December 31, 2011 and 2010 and for the years then ended that appear in the prospectus. The
financial statements referred to above are included in this prospectus in reliance upon the independent registered public accounting
firm&rsquo;s report on their given authority as experts in accounting and auditing.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>WHERE YOU CAN FIND ADDITIONAL INFORMATION</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;&nbsp;&nbsp;We filed with the Securities
and Exchange Commission a registration statement under the Securities Act of 1933 for the shares of common stock in this offering.
This prospectus does not contain all of the information in the registration statement and the exhibits and schedule that were
filed with the registration statement. For further information with respect to us and our common stock, we refer you to the registration
statement and the exhibits and schedule that were filed with the registration statement. Statements contained in this prospectus
about the contents of any contract or any other document that is filed as an exhibit to the registration statement are not necessarily
complete, and we refer you to the full text of the contract or other document filed as an exhibit to the registration statement.
A copy of the registration statement and the exhibits and schedules that were filed with the registration statement may be inspected
without charge at the Public Reference Room maintained by the Securities and Exchange Commission at 100 F Street, N.E. Washington,
DC 20549, and copies of all or any part of the registration statement may be obtained from the Securities and Exchange Commission
upon payment of the prescribed fee. Information regarding the operation of the Public Reference Room may be obtained by calling
the Securities and Exchange Commission at 1-800-SEC-0330. The Securities and Exchange Commission maintains a website that contains
reports, proxy and information statements, and other information regarding registrants that file electronically with the SEC.
The address of the website is <U>www.sec.gov</U>.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">We file periodic reports under the Securities
Exchange Act of 1934, including annual, quarterly and special reports, and other information with the Securities and Exchange
Commission. These periodic reports and other information are available for inspection and copying at the regional offices, public
reference facilities and website of the Securities and Exchange Commission referred to above.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>DISCLOSURE OF COMMISSION POSITION ON
INDEMNIFICATION FOR<BR>
SECURITIES ACT LIABILITY</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Insofar as indemnification for liabilities
arising under the Securities Act may be permitted to directors, officers or persons controlling the registrant pursuant to the
foregoing provisions, the registrant has been informed that in the opinion of the SEC such indemnification is against public policy
as expressed in the Securities Act and is, therefore, unenforceable.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>DEYU AGRICULTURE CORP AND SUBSIDIARIES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>INDEX TO CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>December 31, 2011</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD STYLE="width: 90%; padding-right: 0.8pt">Report of Independent Registered Public Accounting Firm</TD>
    <TD STYLE="width: 1%; padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="width: 9%; padding-right: 0.8pt; text-align: right">F-1</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt; text-align: right">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD STYLE="padding-right: 0.8pt">Consolidated Financial Statements:</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt; text-align: right">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt; text-align: right">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD STYLE="padding-right: 0.8pt">Consolidated Balance Sheets</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt; text-align: right">F-2</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt; text-align: right">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD STYLE="padding-right: 0.8pt">Consolidated Statements of Income and Comprehensive Income</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt; text-align: right">F-3</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt; text-align: right">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD STYLE="padding-right: 0.8pt">Consolidated Statements of Stockholders&rsquo; Equity</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt; text-align: right">F-4</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt; text-align: right">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD STYLE="padding-right: 0.8pt">Consolidated Statements of Cash Flows</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt; text-align: right">F-5</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt; text-align: right">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD STYLE="padding-right: 0.8pt">Notes to Consolidated Financial Statements</TD>
    <TD STYLE="padding-right: 0.8pt">&nbsp;</TD>
    <TD STYLE="padding-right: 0.8pt; text-align: right">F-6</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 59%"><img src="logo.jpg"></TD>
    <TD STYLE="width: 41%"><P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><U>A</U></B><U>udit <B>&bull; T</B>ax <B>&bull;
        C</B>onsulting <B>&bull;&nbsp;&nbsp;F</B>inancial <B>A</B>dvisory</U></P>
        <P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Registered with Public Company Accounting Oversight<BR>
        Board (PCAOB)</I></P></TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">To the Board of Directors and Stockholders of:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Deyu Agriculture Corp.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We have audited the accompanying consolidated balance sheets
of Deyu Agriculture Corp. (the &ldquo;Company&rdquo;) as of December 31, 2011 and 2010, and the related consolidated statements
of income and comprehensive income, stockholders&rsquo; equity, and cash flows for the years then ended.&nbsp;&nbsp;These consolidated
financial statements are the responsibility of the Company's management.&nbsp;&nbsp;Our responsibility is to express an opinion
on these consolidated financial statements based on our audits.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We conducted our audit in accordance with standards of the
Public Company Accounting Oversight Board (United States).&nbsp;&nbsp;Those standards require that we plan and perform the audits
to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement.&nbsp;&nbsp;The
Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.&nbsp;&nbsp;Our
audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company&rsquo;s
internal control over financial reporting.&nbsp;&nbsp;Accordingly, we express no such opinion.&nbsp;&nbsp;An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements.&nbsp;&nbsp;An audit
also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the
overall consolidated financial statement presentation.&nbsp;&nbsp;We believe that our audits provide a reasonable basis for our
opinion.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In our opinion, the consolidated financial statements referred
to above present fairly, in all material respects, the consolidated financial position of Deyu Agriculture Corp. as of December
31, 2011 and 2010 and the consolidated results of their operations and their cash flows for the years then ended in conformity
with accounting principles generally accepted in the United States of America.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">/s/ KCCW Accountancy Corp.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Diamond Bar, California</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">March 27, 2012</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right"><B>KCCW Accountancy Corp.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">22632 Golden Springs Dr. #230, Diamond Bar,
CA 91765, USA</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: right">Tel: +1 909 348 7228 &bull; Fax: +1 626
529 1580 &bull; info@kccwcpa.com</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>DEYU AGRICULTURE CORP AND SUBSIDIARIES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>CONSOLIDATED BALANCE SHEETS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">December<BR>
31,<BR> 2011</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">December<BR>
31,<BR> 2010</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold; text-align: center"><U>Assets</U></TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Current Assets</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 76%; text-align: left; padding-left: 9pt">Cash and cash equivalents</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">8,741,703</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">5,665,858</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt">Restricted cash</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,850,999</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">125,560</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Accounts receivable, net</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">36,167,136</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">11,160,959</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt">Due from related parties</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">587,108</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 9pt">Inventory</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">20,314,090</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">16,541,999</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt">Advance to supplier</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">7,233,371</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,178,532</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Prepaid expenses</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">391,537</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,324,251</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt">Assets held for sale</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,634,274</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Other current assets</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,204,934</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">669,134</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 9pt">Current assets of discontinued operations</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">5,806,884</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 0.25in">Total Current Assets</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">79,125,152</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">42,473,177</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Property, plant, and equipment, net</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">12,355,946</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4,287,372</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Construction-in-progress</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">6,732,189</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Other assets</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">727,535</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">10,394,246</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Intangible assets, net</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">10,651,844</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Non-current assets of discontinued operations</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">2,042,168</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; padding-left: 0.25in">Total Assets</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">102,860,477</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">65,929,152</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; text-decoration: underline; text-align: center">Liabilities and Equity</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Current Liabilities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-left: 9pt">Short-term loan</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">14,413,480</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">2,631,364</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Accounts payable</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,833,190</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">197,012</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt">Note payables</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,588,840</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Advance from customers</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">8,488,272</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">6,451,782</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt">Accrued expenses</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,149,205</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,291,227</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Preferred stock dividends payable</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">219,721</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">238,620</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt">Due to related parties</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">5,445,115</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Other current liabilities</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">583,196</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">23,779</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 9pt">Current liabilities of discontinued operations</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">11,654,915</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 0.25in">Total Current Liabilities</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right">33,721,019</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right">22,488,699</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Equity</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt">Series A convertible preferred stock, $.001 par value, 10,000,000 shares authorized,&nbsp; 1,997,467 and 2,106,088 shares outstanding, respectively</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,997</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,106</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Common stock, $.001 par value; 75,000,000 shares authorized, 10,564,774 and 10,349,774 shares issued and outstanding, respectively</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">10,565</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">10,350</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 9pt">Additional paid-in capital</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">20,367,138</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">18,770,230</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 9pt">Other comprehensive income</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4,831,353</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,272,633</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 9pt">Retained earnings</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">43,491,465</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">22,385,134</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 0.25in">Total Stockholders' Equity</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right">68,702,518</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right">43,440,453</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 0.25in">Noncontrolling Interests</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">436,940</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 0.25in">Total Equity</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right">69,139,458</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right">43,440,453</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; padding-left: 0.25in">Total Liabilities and Equity</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">102,860,477</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">65,929,152</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">The accompanying notes are an integral
part of these consolidated financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>DEYU AGRICULTURE CORP AND SUBSIDIARIES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>CONSOLIDATED STATEMENTS OF OPERATIONS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center">For&nbsp;The&nbsp;Years&nbsp;Ended</TD><TD STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">December&nbsp;31,</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2010</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 76%; text-align: left">Net revenue</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">261,576,666</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">85,174,884</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Cost of goods sold</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(218,480,009</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(63,250,363</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Gross Profit</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right">43,096,657</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right">21,924,521</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Selling expenses</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(13,231,094</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(6,281,768</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">General and administrative expenses</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(8,222,182</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(3,627,860</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 13.5pt">Total Operating Expense</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right">(21,453,276</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">)</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right">(9,909,628</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Operating income</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right">21,643,381</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right">12,014,893</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Interest income</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">42,159</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">17,505</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Interest expense</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(805,601</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(341,555</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt">Non-operating income</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(180,294</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(18,174</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 13.5pt">Total Other Expense</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right">(943,736</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">)</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right">(342,224</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Income from continuing operations before income taxes</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">20,699,645</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">11,672,669</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Income taxes</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(184,384</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">913,785</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Income from continuing operations</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">20,515,261</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">12,586,454</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Loss from discontinued operations, net of income taxes</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right">(3,891,830</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">)</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right">(756,480</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Net income</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right">16,623,431</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right">11,829,974</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Net loss attributable to noncontrolling interests:</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 13.5pt">Net loss from continuing operations</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">38,673</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 13.5pt">Net loss from discontinued operations</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,101,255</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 27pt">Total net loss attributable to noncontrolling interests</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,139,928</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Net income attributable to Deyu Agriculture Corp.</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">17,763,359</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">11,829,974</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Preferred stock dividends</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(427,917</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(327,721</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Net income available to common stockholders</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">17,335,442</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">11,502,253</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Foreign currency translation gain</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">2,751,687</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,363,322</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Comprehensive income</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">20,087,129</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">12,865,575</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Less: Other comprehensive income attributable to noncontrolling interests</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(130,653</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Comprehensive income attributable to Deyu Agriculture Corp.</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">19,956,475</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">12,865,575</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Amounts attributable to common stockholders:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 13.5pt">Net income from continuing operations, net of income taxes</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">20,126,017</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">12,258,733</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 13.5pt">Discontinued operations, net of income taxes</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(2,790,575</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(756,480</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; padding-left: 27pt">Net income attributable to common stockholders</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">17,335,442</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">11,502,253</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Net income attributable to common stockholders per share - basic:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 13.5pt">Income from continuing operations</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">1.91</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">1.45</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 13.5pt">Loss from discontinuing operations</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(0.27</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(0.09</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; padding-left: 13.5pt">Net income attributable to common stockholders</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1.64</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1.36</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Net income attributable to common stockholders per share - diluted:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 13.5pt">Income from continuing operations</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">1.64</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">1.23</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 13.5pt">Loss from discontinuing operations</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(0.22</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(0.07</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; padding-left: 13.5pt">Net income attributable to common stockholders</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1.42</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1.16</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 2.5pt">Weighted average number of common shares outstanding - basic</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">10,522,432</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">8,445,880</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 2.5pt">Weighted average number of common shares outstanding - diluted</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">12,497,164</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">10,249,041</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">The accompanying notes are an integral
part of these consolidated financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>DEYU AGRICULTURE CORP AND SUBSIDIARIES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>CONSOLIDATED STATEMENTS OF STOCKHOLDERS'
EQUITY</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 7pt">Series&nbsp;A&nbsp;<BR> Convertible&nbsp;<BR>
    Preferred&nbsp;Stock</FONT></TD><TD STYLE="font-weight: bold"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 7pt">Common&nbsp;Stock</FONT></TD><TD STYLE="font-weight: bold"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center"><FONT STYLE="font-size: 7pt">Additional<BR> Paid-in</FONT></TD><TD STYLE="font-weight: bold"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center"><FONT STYLE="font-size: 7pt">Other<BR> Comprehensive</FONT></TD><TD STYLE="font-weight: bold"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center"><FONT STYLE="font-size: 7pt"><B>Retained</B>&nbsp;</FONT></TD><TD STYLE="font-weight: bold"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center"><FONT STYLE="font-size: 7pt"><B>Noncontrolling</B></FONT></TD><TD STYLE="font-weight: bold"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 7pt">Shares</FONT></TD><TD STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 7pt">Amount</FONT></TD><TD STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 7pt">Shares</FONT></TD><TD STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 7pt">Amount</FONT></TD><TD STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 7pt">Capital</FONT></TD><TD STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 7pt">Income</FONT></TD><TD STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 7pt">Earnings</FONT></TD><TD STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 7pt">Interest</FONT></TD><TD STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold; padding-bottom: 1pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid"><FONT STYLE="font-size: 7pt">Total</FONT></TD><TD STYLE="padding-bottom: 1pt; font-weight: bold"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: bold"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 28%; font-weight: bold"><FONT STYLE="font-size: 7pt">Balance at December 31, 2009</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="width: 5%; text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 7pt">$</FONT></TD><TD STYLE="width: 5%; text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="width: 5%; text-align: right"><FONT STYLE="font-size: 7pt">4,930,000</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 7pt">$</FONT></TD><TD STYLE="width: 5%; text-align: right"><FONT STYLE="font-size: 7pt">4,930</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 7pt">$</FONT></TD><TD STYLE="width: 5%; text-align: right"><FONT STYLE="font-size: 7pt">8,978,527</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 7pt">$</FONT></TD><TD STYLE="width: 5%; text-align: right"><FONT STYLE="font-size: 7pt">909,311</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 7pt">$</FONT></TD><TD STYLE="width: 5%; text-align: right"><FONT STYLE="font-size: 7pt">11,805,468</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 7pt">$</FONT></TD><TD STYLE="width: 5%; text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="width: 1%"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 7pt">$</FONT></TD><TD STYLE="width: 5%; text-align: right"><FONT STYLE="font-size: 7pt">21,698,236</FONT></TD><TD STYLE="width: 1%; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">Common stocks cancelled prior to reverse acquisition</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">(3,666,933</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">)</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">(3,667</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">)</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">3,667</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">Common stocks issued for reverse acquisition</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">8,736,932</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">8,737</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">(8,737</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">)</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">Convertible preferred stocks issued for cash in private placement</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">2,455,863</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">2,456</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">8,226,221</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">8,228,677</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">Warrants issued to investors with issuance of convertible preferred
    stocks</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">851,342</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">851,342</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">Warrants issued to placement agent on issuance of convertible preferred
    stocks</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">170,104</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">170,104</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">Conversion of convertible preferred stocks to common stocks</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">(349,775</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">)</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">(350</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">)</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">349,775</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">350</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD><FONT STYLE="font-size: 7pt">Share-based compensation</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">549,106</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">549,106</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">Net carrying amounts of the VIE Group at initial recognition</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">(922,587</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">)</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">(922,587</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">)</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">Net changes in foreign currency translation adjustment</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">1,363,322</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">1,363,322</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt"><FONT STYLE="font-size: 7pt">Net earnings for the year ended December 31,
    2010</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 7pt">11,502,253</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 7pt">11,502,253</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold"><FONT STYLE="font-size: 7pt">Balance at December 31, 2010</FONT></TD><TD STYLE="font-weight: bold"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-weight: bold; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold; text-align: right"><FONT STYLE="font-size: 7pt">2,106,088</FONT></TD><TD STYLE="font-weight: bold; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-weight: bold; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold; text-align: right"><FONT STYLE="font-size: 7pt">2,106</FONT></TD><TD STYLE="font-weight: bold; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-weight: bold; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold; text-align: right"><FONT STYLE="font-size: 7pt">10,349,774</FONT></TD><TD STYLE="font-weight: bold; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-weight: bold; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold; text-align: right"><FONT STYLE="font-size: 7pt">10,350</FONT></TD><TD STYLE="font-weight: bold; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-weight: bold; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold; text-align: right"><FONT STYLE="font-size: 7pt">18,770,230</FONT></TD><TD STYLE="font-weight: bold; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-weight: bold; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold; text-align: right"><FONT STYLE="font-size: 7pt">2,272,633</FONT></TD><TD STYLE="font-weight: bold; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-weight: bold; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold; text-align: right"><FONT STYLE="font-size: 7pt">22,385,134</FONT></TD><TD STYLE="font-weight: bold; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-weight: bold; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold; text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="font-weight: bold; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="font-weight: bold; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold; text-align: right"><FONT STYLE="font-size: 7pt">43,440,453</FONT></TD><TD STYLE="font-weight: bold; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">Subsidiary equity interest acquired by noncontrolling interest</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">877,892</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">(62,314</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">)</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">2,989,303</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">3,804,882</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">Subsidiary capital injected by noncontrolling interest</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">469,147</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">469,147</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">Conversion of convertible preferred stocks to common stocks</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">(175,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">)</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">(175</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">)</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">175,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">175</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">Convertible preferred stocks issued for payment of preferred stock
    dividends</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">66,379</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">66</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">212,354</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">212,420</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD><FONT STYLE="font-size: 7pt">Share-based compensation</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">428,702</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">428,702</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">Common stocks issued for services</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">40,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">40</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">77,960</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">78,000</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">Net changes in foreign currency translation adjustment</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">2,621,034</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">130,653</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">2,751,687</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">Deconsolidation of the VIE Group</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">3,770,889</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">(2,012,236</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">)</FONT></TD><TD><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="text-align: right"><FONT STYLE="font-size: 7pt">1,758,653</FONT></TD><TD STYLE="text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt"><FONT STYLE="font-size: 7pt">Net earnings for the year ended December 31,
    2011</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 7pt">-</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 7pt">17,335,442</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 7pt">(1,139,928</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 7pt">)</FONT></TD><TD STYLE="padding-bottom: 1pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right"><FONT STYLE="font-size: 7pt">16,195,514</FONT></TD><TD STYLE="padding-bottom: 1pt; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold; padding-bottom: 2.5pt"><FONT STYLE="font-size: 7pt">Balance at December 31, 2011</FONT></TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right"><FONT STYLE="font-size: 7pt">1,997,467</FONT></TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left"><FONT STYLE="font-size: 7pt">$</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right"><FONT STYLE="font-size: 7pt">1,997</FONT></TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right"><FONT STYLE="font-size: 7pt">10,564,774</FONT></TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left"><FONT STYLE="font-size: 7pt">$</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right"><FONT STYLE="font-size: 7pt">10,565</FONT></TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left"><FONT STYLE="font-size: 7pt">$</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right"><FONT STYLE="font-size: 7pt">20,367,138</FONT></TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left"><FONT STYLE="font-size: 7pt">$</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right"><FONT STYLE="font-size: 7pt">4,831,353</FONT></TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left"><FONT STYLE="font-size: 7pt">$</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right"><FONT STYLE="font-size: 7pt">43,491,465</FONT></TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left"><FONT STYLE="font-size: 7pt">$</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right"><FONT STYLE="font-size: 7pt">436,940</FONT></TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left"><FONT STYLE="font-size: 7pt">$</FONT></TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right"><FONT STYLE="font-size: 7pt">69,139,458</FONT></TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left"><FONT STYLE="font-size: 7pt">&nbsp;</FONT></TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">The accompanying notes are an integral
part of these consolidated financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>DEYU AGRICULTURE CORP AND SUBSIDIARIES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>CONSOLIDATED STATEMENTS OF CASH FLOWS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center">For&nbsp;The&nbsp;Years&nbsp;Ended</TD><TD STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">December&nbsp;31,</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2010</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold; text-align: left">CASH FLOWS FROM OPERATING ACTIVITIES</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="width: 76%; text-align: left; padding-left: 6.75pt">Net income available to common stockholders</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">17,335,442</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">11,502,253</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 6.75pt">Loss from discontinued operations attributable to Deyu Agriculture Corp.</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,790,575</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">756,480</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 6.75pt">Adjustments to reconcile net income to net cash provided by operating activities:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 20.25pt">Depreciation &amp; amortization</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">979,297</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">489,379</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 20.25pt">Share-based compensation</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">428,702</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">549,106</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 20.25pt">Preferred stock dividends accrued</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">219,721</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">232,642</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 20.25pt">Dividends paid with Series A preferred stock</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">212,420</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 20.25pt">Common stocks issued for services</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">78,000</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 20.25pt">Deferred income tax expense (benefit)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">184,384</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(913,785</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 20.25pt">Noncontrolling interests</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(38,673</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 20.25pt">Loss on disposal of fixed assets</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">7,573</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 20.25pt">Decrease (increase) in current assets:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 27pt">Accounts receivable</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(23,824,017</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(6,645,744</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 27pt">Related-parties trade receivable</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(494,752</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-left: 27pt">Inventories</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(2,873,705</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(7,816,702</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 27pt">Advance to suppliers</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(5,840,601</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(947,913</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 27pt">Prepaid expense and other current assets</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(539,339</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(853,455</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 20.25pt">Increase (decrease) in liabilities:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 27pt">Accounts payable</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,584,038</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">192,077</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 27pt">Advance from customers</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,677,638</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">6,284,419</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 27pt">Accrued expense and other liabilities</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">346,492</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,097,413</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 13.5pt">Net cash (used in) provided by operating activities of continuing operations</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">(7,774,378</TD><TD STYLE="font-weight: bold; text-align: left">)</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">3,933,743</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 13.5pt">Net cash used in operating activities of discontinued operations</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(3,858,325</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(3,727,140</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 13.5pt">Net cash (used in) provided by operating activities</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right">(11,632,703</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">)</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right">206,603</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold; text-align: left">CASH FLOWS FROM INVESTING ACTIVITIES</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 6.75pt">Purchase of machinery and equipment</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(3,759,859</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1,987,716</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 6.75pt">Construction and remodeling of factory and warehouses</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(109,856</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(3,281,762</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 6.75pt">Purchase of software and other assets</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(8,902</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(960,175</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 6.75pt">Advances to related parties</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(76,995</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 6.75pt">Prepayments for acquisition of land use rights</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(76,715</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(6,889,032</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 6.75pt">Proceeds from disposal of fixed assets</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">274,727</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 13.5pt">Net cash used in investing activities of continuing operations</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">(4,032,327</TD><TD STYLE="font-weight: bold; text-align: left">)</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">(12,843,958</TD><TD STYLE="font-weight: bold; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 13.5pt">Net cash used in investing activities of discontinued operations</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(2,476,523</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(117,583</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 13.5pt">Net cash used in investing activities</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right">(6,508,850</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">)</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right">(12,961,541</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; text-align: left">CASH FLOWS FROM FINANCING ACTIVITIES</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 6.75pt">Proceeds from capital contributions</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">464,180</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,831,718</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 6.75pt">Net proceeds from short-term loans from related parties</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,101,839</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,101,989</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 6.75pt">Cash restricted for credit line of bank acceptance notes</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1,802,568</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 6.75pt">Release of cash restricted held at a trust account</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">125,560</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 6.75pt">Payment of preferred dividends</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(243,678</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 6.75pt">Net proceeds from short-term loans from bank</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">11,349,219</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 6.75pt">Net proceeds from short-term bank acceptance notes</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,547,269</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 6.75pt">Net proceeds from short-term loan from others</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">952</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1,079,701</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 6.75pt">Net repayments of short-term loans from related parties</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1,113,632</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 6.75pt">Proceeds from private placement, net of restricted cash held in escrow</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">8,827,123</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 6.75pt">Release of restricted cash related to private placement</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">298,848</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 13.5pt">Net cash provided by financing activities of continuing operations</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">14,542,773</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">11,866,345</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 13.5pt">Net cash used in financing activities of discontinued operations</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">5,918,988</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">4,277,243</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 13.5pt">Net cash used in financing activities</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right">20,461,761</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right">16,143,588</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; text-align: left; padding-bottom: 1pt">EFFECT OF EXCHANGE RATE CHANGE ON CASH AND CASH EQUIVALENTS</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">352,429</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">204,593</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; text-align: left">NET INCREASE IN CASH &amp; CASH EQUIVALENTS</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">2,672,637</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">3,593,243</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold; text-align: left; padding-bottom: 1pt">NET INCREASE IN CASH &amp; CASH EQUIVALENTS FROM DISCONTINUED OPERATIONS</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(403,208</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">489,886</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; text-align: left">NET INCREASE IN CASH &amp; CASH EQUIVALENTS FROM CONTINUING OPERATIONS</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">3,075,845</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">3,103,357</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; text-align: left; padding-bottom: 1pt">CASH &amp; CASH EQUIVALENTS, BEGINNING BALANCE</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">5,665,858</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">2,562,501</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold; text-align: left; padding-bottom: 2.5pt">CASH &amp; CASH EQUIVALENTS, ENDING BALANCE</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">8,741,703</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">5,665,858</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="font-weight: bold; text-align: left">SUPPLEMENTAL DISCLOSURES:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; padding-left: 6.75pt">Income tax paid</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">62</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; padding-left: 6.75pt">Interest paid</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">809,448</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">323,829</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="font-weight: bold; text-align: left">NONCASH INVESTING AND FINANCING ACTIVITIES:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; padding-left: 6.75pt">Construction completed and transferred to property, plant, and equipment</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">5,914,602</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; padding-left: 6.75pt">Construction completed and transferred to land use rights</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">2,320,904</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; padding-left: 6.75pt">Obtained certificates of farmland use rights</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">8,221,569</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">The accompanying notes are an integral
part of these consolidated financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>DEYU AGRICULTURE CORP AND SUBSIDIARIES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>NOTES TO CONSOLIDATED FINANCIAL STATEMENTS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 1%; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 15%; font-weight: bold">NOTE&nbsp;1.</TD>
    <TD STYLE="width: 84%; font-weight: bold; text-align: justify">NATURE OF BUSINESS AND BASIS OF FINANCIAL STATEMENT PREPARATION</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Deyu Agriculture Corp. (the &ldquo;Company&rdquo;), formerly
known as Eco Building International, Inc., was incorporated under the laws of the State of Nevada on December 23, 2008.&nbsp;&nbsp;We
completed the acquisition of City Zone Holdings Limited (&ldquo;City Zone&rdquo;), an agricultural products distributor in the
Shanxi Province of the People&rsquo;s Republic of China (the &ldquo;PRC&rdquo;) engaged in procuring, processing, marketing, and
distributing various grain and corn products, by means of a share exchange, effective April 27, 2010.&nbsp;&nbsp;As a result of
the share exchange, City Zone became our wholly-owned subsidiary.&nbsp;&nbsp;We currently conduct our business primarily through
the operating PRC subsidiaries, including Jinzhong Deyu Agriculture Trading Co., Ltd. (&ldquo;Jinzhong Deyu&rdquo;), Jinzhong
Yuliang Agriculture Trading Co., Ltd. (&ldquo;Jinzhong Yuliang&rdquo;), Jinzhong Yongcheng Agriculture Trading Co., Ltd. (&ldquo;Jinzhong
Yongcheng&rdquo;), Shanxi Taizihu Food Co., Ltd. (&ldquo;Taizihu&rdquo;) and Shanxi HuiChun Bean Products Co., Ltd. (&ldquo;Huichun&rdquo;
and together with Taizihu, the &ldquo;Taizihu Group&rdquo;, see Note 20) and Betian Yu Biotechnology (Beijing) Co., Ltd. (&ldquo;Detian
Yu&rdquo;) and its subsidiaries.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On May 11, 2010, our Board of Directors adopted a resolution
to change our name to &quot;Deyu Agriculture Corp.&quot;&nbsp; FINRA declared the name change effective on June 2, 2010.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Reverse Acquisition</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On April 27, 2010, we entered into a Share Exchange Agreement
(&ldquo;Share Exchange&rdquo;) under which we issued 8,736,932 shares of common stock, par value $0.001 per share, to Expert Venture
Limited (&ldquo;Expert Venture&rdquo;), a company organized under the laws of the British Virgin Islands, and the other shareholders
of City Zone (&ldquo;the &ldquo;City Zone Shareholders&rdquo;).&nbsp;&nbsp;As a result of the Share Exchange, City Zone became
our wholly-owned subsidiary and City Zone Shareholders acquired a majority of our issued and outstanding common stocks.&nbsp;&nbsp;Concurrent
with the Share Exchange, Mr. Jianming Hao (&ldquo;Mr. Hao&rdquo;), the managing director of City Zone and all of its operating
subsidiaries, was appointed our Chief Executive Officer.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As a result, the Share Exchange has been accounted for as a
reverse acquisition using the purchase method of accounting, whereby City Zone is deemed to be the accounting acquirer (legal
acquiree) and we are to be the accounting acquiree (legal acquirer).&nbsp;&nbsp;The financial statements before the date of the
Share Exchange are those of City Zone with our results being consolidated from the date of the Share exchange.&nbsp;&nbsp;The
equity section and earnings per share have been retroactively restated to reflect the reverse acquisition and no goodwill has
been recorded.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">City Zone was incorporated in the British Virgin Islands on
July 27, 2009 under the BVI Business Companies Act, 2004.&nbsp;&nbsp;In November 2009, pursuant to a restructuring plan set out
below, City Zone has become the holding company of a group of companies comprising Most Smart, Shenzhen Redsun, Shenzhen JiRuHai,
Beijing Detian Yu, Jinzhong Deyu, Jinzhong Yongcheng, and Jinzhong Yuliang.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Restructuring</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In November 2009, pursuant to a restructuring plan (&ldquo;Restructuring&rdquo;)
intended to ensure compliance with the PRC rules and regulations, City Zone, through a series of acquisitions and wholly-owned
subsidiaries, acquired 100% equity interests in Jinzhong Deyu, Jinzheng Yuliang, and Jinzhong Yongcheng.&nbsp;&nbsp;The former
shareholders and key management of Jinzhong Deyu, Jinzhong Yongcheng, and Jinzhong Yuliang became the ultimate controlling parties
and key management of City Zone.&nbsp;&nbsp;This restructuring exercise has been accounted for as a recapitalization of Jinzhong
Deyu, Jinzhong Yongcheng, and Jinzhong Yuliang with no adjustment to the historical basis of the assets and liabilities of these
companies, while the historical financial positions and results of operations are consolidated as if the restructuring occurred
as of the beginning of the earliest period presented in the accompanying consolidated financial statements.&nbsp;&nbsp;For the
purpose of consistent and comparable presentation, the consolidated financial statements have been prepared as if City Zone had
been in existence since the beginning of the earliest and throughout the whole periods covered by these consolidated financial
statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Variable Interest Entities</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On November 16, 2010, Detian Yu entered into a series of contractual
arrangements (the &ldquo;Contractual Arrangements&rdquo;) with each of Beijing Jundaqianyuan Investment Management Co., Ltd. (&ldquo;Junda&rdquo;),
Jinzhong Longyue Investment Consultancy Services Co., Ltd. (&ldquo;Longyue&rdquo;), and their shareholders, pursuant to which
Detian Yu effectively took over management of the business activities of Junda and Longyue.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Junda is a limited liability company incorporated in the PRC
on June 13, 2010 with registered capital of $14,637 (or RMB 100,000) by Jianming Hao, Chairman and Chief Executive Officer of
the Company, and Wenjun Tian, President and Executive Director of the Company.&nbsp;&nbsp;As of December 31, 2010, Junda&rsquo;s
equity interest was 100% held by several executives and managers of the Company, including (a) Jianming Hao, owning 33% of Junda,
(b) Wenjun Tian, owning 34% of Junda, (c) Jianbin Zhou, the Chief Operating Officer of the Company, owning 10% of Junda, (d) Li
Ren, Vice President of Branding and Marketing of the Company, owning 5% of Junda, (e) Yongqing Ren, Vice President of the Corn
Division of the Company, owning 3% of Junda and (f) Junde Zhang, Vice President of the Grain Division of the Company, owning 3%
of Junda.&nbsp;&nbsp;As a result, the execution of the Contractual Arrangements with Junda is considered a related party transaction.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Contractual Arrangements are comprised of a series of agreements
with a term of ten (10) years, including:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Exclusive Management
                                                                                                               and Consulting
                                                                                                               Service Agreements,
                                                                                                               through which Detian
                                                                                                               Yu shall provide
                                                                                                               to each of Junda
                                                                                                               and Longyue management
                                                                                                               consulting services
                                                                                                               in relation to
                                                                                                               the business of
                                                                                                               Junda and Longyue
                                                                                                               in exchange for
                                                                                                               35% of the net
                                                                                                               income after taxes
                                                                                                               of Junda and Longyue
                                                                                                               every fiscal year.</TD></TR>                                                                                                                                           <TR STYLE="vertical-align: top">
<TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR>
</TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Business Cooperation
                                                                                                               Agreements, through
                                                                                                               which Detian Yu
                                                                                                               shall provide business
                                                                                                               cooperation opportunities
                                                                                                               and services including
                                                                                                               clients, cooperation
                                                                                                               partners and market
                                                                                                               information in
                                                                                                               the fields of grain
                                                                                                               processing, sales
                                                                                                               and financing to
                                                                                                               each of Junda and
                                                                                                               Longyue in exchange
                                                                                                               for cooperation
                                                                                                               fees and commissions
                                                                                                               from each of Junda
                                                                                                               and Longyue equal
                                                                                                               to 65% of the net
                                                                                                               income after tax
                                                                                                               of each of Junda
                                                                                                               and Longyue in
                                                                                                               every fiscal year.</TD></TR>                                                                                                                                           <TR STYLE="vertical-align: top">
<TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR>
</TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Business Operations
                                                                                                               Agreements, through
                                                                                                               which Detian Yu
                                                                                                               has exclusive authority
                                                                                                               of all decision-making
                                                                                                               of ongoing operations,
                                                                                                               including establishing
                                                                                                               compensation levels
                                                                                                               and hiring and
                                                                                                               firing of key personnel.&nbsp;&nbsp;In
                                                                                                               order to ensure
                                                                                                               normal operation
                                                                                                               of Junda and Longyue,
                                                                                                               Detian Yu agrees
                                                                                                               to act as the guarantor
                                                                                                               and provide guarantee
                                                                                                               on the performance
                                                                                                               of the obligations
                                                                                                               of Junda and Longyue
                                                                                                               under all contracts
                                                                                                               executed by Junda
                                                                                                               and Longyue.</TD></TR>                                                                                                                                     <TR STYLE="vertical-align: top">
<TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR>
</TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Share Pledge
                                                                                                               Agreements, through
                                                                                                               which the shareholders
                                                                                                               of Junda and Longyue
                                                                                                               have agreed to
                                                                                                               pledge all of their
                                                                                                               respective equity
                                                                                                               interests in Junda
                                                                                                               or Longyue (as
                                                                                                               the case may be)
                                                                                                               as security for
                                                                                                               the performance
                                                                                                               of all of the obligations
                                                                                                               or debts under
                                                                                                               the Exclusive Management
                                                                                                               and Consulting
                                                                                                               Service Agreements
                                                                                                               and Business Cooperation
                                                                                                               Agreements assumed
                                                                                                               by Junda and Longyue,
                                                                                                               and under a counter-guarantee
                                                                                                               to all the payments
                                                                                                               made by Detian
                                                                                                               Yu for the performance
                                                                                                               of the guarantees
                                                                                                               assumed by Detian
                                                                                                               Yu under the Business
                                                                                                               Operation Agreements.</TD></TR>                                                                                                                                              <TR STYLE="vertical-align: top">
<TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR>
</TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Power of Attorney,
                                                                                                               signed by each
                                                                                                               of the shareholders
                                                                                                               of Junda and Longyue,
                                                                                                               authorizes a designee
                                                                                                               appointed by Detian
                                                                                                               Yu to exercise
                                                                                                               all of their respective
                                                                                                               voting rights as
                                                                                                               a shareholder.</TD></TR>                                                                                                                                       <TR STYLE="vertical-align: top">
<TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR>
</TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Equity Acquisition
                                                                                                               Option Agreements,
                                                                                                               through which the
                                                                                                               shareholders of
                                                                                                               Junda and Longyue
                                                                                                               granted Detian
                                                                                                               Yu an irrevocable
                                                                                                               and unconditional
                                                                                                               right to purchase,
                                                                                                               or cause a designated
                                                                                                               party of Detian
                                                                                                               Yu to purchase,
                                                                                                               part or all of
                                                                                                               the equity interests
                                                                                                               in Junda and Longyue
                                                                                                               from such shareholders,
                                                                                                               when and to the
                                                                                                               extent that, applicable
                                                                                                               PRC laws permit.&nbsp;&nbsp;The
                                                                                                               consideration for
                                                                                                               the equity acquisition
                                                                                                               option for Junda
                                                                                                               is RMB 80,000,000
                                                                                                               and the consideration
                                                                                                               for the equity
                                                                                                               option for Longyue
                                                                                                               is RMB 120,000,000.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On February 21, 2011, Deyufarm received capital injection of
$3,800,505 (RMB 24,971,218) from SBCVC Fund III Company Limited (&quot;SBCVC&quot;), a company organized under the laws of Hong
Kong, in exchange for 35.69% of Deyufarm's equity interest pursuant to the two Investment and Relevant Issues Agreements entered
into by each of Junda and Longyue with Deyufarm and SBCVC on September 15, 2010. According to the Investment and Relevant Issues
Agreements, SBCVC shall invest an equivalent of RMB 25,000,000 of US dollars to Deyufarm. Before or in the meantime that SBCVC
completes such investment to Deyufarm, Longyue shall have invested RMB 35,000,000 to Deyufarm through a capital increase and obtained
the relevant capital verification report. Any time within 2 years after completing an investment to Deyufarm, SBCVC has the right
to require Deyufarm to repurchase in advance, or Junda or Longyue to purchase part of or all the equity interests of Deyufarm
owned by SBCVC. The board of directors of Deyufarm shall be comprised of 3 directors, and Junda, Longyue and SBCVC shall each
nominate one director. The board of directors shall nominate a financial administrator agreed to by SBCVC. Forty-eight (48) months
after SBCVC completes its investment in Deyufarm, the parties shall consummate a qualified IPO of Deyufarm.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On February 25, 2011, Deyufarm received an additional capital
injection of $4,495 (RMB 28,782) from SBCVC for 0.02% of Deyufarm's equity interest.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">After the above two capital injections, SBCVC, Junda and Longyue
currently own 35.71%, 14.29% and 50% of the equity interests in Deyufarm, respectively. The total registered capital of Deyufarm
increased from $6,688,635 (RMB45,000,000) to $10,493,516 (RMB 70,000,000). SBCVC&rsquo;s 35.71% equity interest in Deyufarm.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On December 20, 2011, Detian Yu entered into a series of termination
agreements (collectively, the &ldquo;Termination Agreements&rdquo;) with each of Junda, Longyue and their shareholders, pursuant
to which Detian Yu gave up the control management of the business activities of Junda and Longyue. According to the Termination
Agreements, each side agreed to terminate the Contractual Arrangements entered into on November 16, 2010.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Consolidation Scope:</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Details of our subsidiaries subject to consolidation are as
follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: center">Domicile&nbsp;and</TD>
    <TD STYLE="font-weight: bold; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: center">Percentage</TD>
    <TD STYLE="font-weight: bold; text-align: center">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: center">Date&nbsp;of</TD>
    <TD STYLE="font-weight: bold; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">Registered</TD>
    <TD STYLE="font-weight: bold; text-align: center">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: center">of</TD>
    <TD STYLE="font-weight: bold; text-align: center">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: center">Name&nbsp;of&nbsp;Subsidiary</TD>
    <TD STYLE="font-weight: bold; text-align: center; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: center">Incorporation</TD>
    <TD STYLE="font-weight: bold; text-align: center; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: center">Capital</TD>
    <TD STYLE="font-weight: bold; text-align: center; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: center">Ownership</TD>
    <TD STYLE="font-weight: bold; text-align: center; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: center">Principal&nbsp;Activities</TD></TR>
<TR STYLE="vertical-align: top; background-color: #CCFFCC">
    <TD STYLE="width: 25%">City Zone Holdings Limited (&quot;City Zone&quot;)</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 25%">British Virgin Islands, July 27, 2009</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">$</TD>
    <TD STYLE="text-align: right; width: 9%">20,283,581</TD>
    <TD STYLE="width: 1%; text-align: center">&nbsp;</TD>
    <TD STYLE="width: 9%; text-align: right">100</TD>
    <TD STYLE="width: 2%">%&nbsp;</TD>
    <TD STYLE="width: 26%">Holding company of Most Smart</TD></TR>
<TR STYLE="vertical-align: top; background-color: white">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: #CCFFCC">
    <TD>Most Smart International Limited (&quot;Most Smart&quot;)</TD>
    <TD>&nbsp;</TD>
    <TD>Hong Kong,March 11, 2009</TD>
    <TD>&nbsp;</TD>
    <TD>$</TD>
    <TD STYLE="text-align: right">1</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: right">100</TD>
    <TD>%</TD>
    <TD>Holding company of Shenzhen Redsun</TD></TR>
<TR STYLE="vertical-align: top; background-color: white">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: #CCFFCC">
    <TD>Redsun Technology (Shenzhen) Co., Ltd. (&quot;Shenzhen Redsun&quot;)</TD>
    <TD>&nbsp;</TD>
    <TD>The PRC, August 20, 2009</TD>
    <TD>&nbsp;</TD>
    <TD>$</TD>
    <TD STYLE="text-align: right">30,000</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: right">100</TD>
    <TD>%&nbsp;</TD>
    <TD>Holding company of Shenzhen JiRuHai, Taizhihu and Huichun</TD></TR>
<TR STYLE="vertical-align: top; background-color: white">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: #CCFFCC">
    <TD>Shenzhen JiRuHai Technology Co., Ltd.(&quot;Shenzhen JiRuHai&quot;)</TD>
    <TD>&nbsp;</TD>
    <TD>The PRC, August 20, 2009</TD>
    <TD>&nbsp;</TD>
    <TD>$</TD>
    <TD STYLE="text-align: right">14,638</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: right">100</TD>
    <TD>%&nbsp;</TD>
    <TD>Holding company of Beijing Detian Yu</TD></TR>
<TR STYLE="vertical-align: top; background-color: white">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: #CCFFCC">
    <TD>Detian Yu Biotechnology (Beijing) Co., Ltd. (&quot;Detian Yu&quot;)</TD>
    <TD>&nbsp;</TD>
    <TD>The PRC, November 30, 2006</TD>
    <TD>&nbsp;</TD>
    <TD>$</TD>
    <TD STYLE="text-align: right">7,637,723</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: right">100</TD>
    <TD>%&nbsp;</TD>
    <TD>Wholesale distribution of simple-processed and deep-processed packaged food products and staple food.&nbsp;&nbsp;Holding company of the following first five entities</TD></TR>
<TR STYLE="vertical-align: top; background-color: white">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: #CCFFCC">
    <TD>Jinzhong Deyu Agriculture Trading Co., Ltd. (&quot;Jinzhong Deyu&quot;)</TD>
    <TD>&nbsp;</TD>
    <TD>The PRC, April 22, 2004</TD>
    <TD>&nbsp;</TD>
    <TD>$</TD>
    <TD STYLE="text-align: right">1,492,622</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: right">100</TD>
    <TD>%&nbsp;</TD>
    <TD>Organic grains preliminary processing and wholesale distribution</TD></TR>
<TR STYLE="vertical-align: top; background-color: white">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: #CCFFCC">
    <TD>Jinzhong Yongcheng Agriculture Trading Co., Ltd. (&quot;Jinzhong Yongcheng&quot;)</TD>
    <TD>&nbsp;</TD>
    <TD>The PRC, May 30, 2006</TD>
    <TD>&nbsp;</TD>
    <TD>$</TD>
    <TD STYLE="text-align: right">1,025,787</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: right">100</TD>
    <TD>%&nbsp;</TD>
    <TD>Corns preliminary processing and wholesale</TD></TR>
</TABLE>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top; background-color: #CCFFCC">
    <TD STYLE="width: 25%">Jinzhong Yuliang Agriculture Trading Co., Ltd. (&quot;Jinzhong Yuliang&quot;)</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 25%">The PRC, March 17, 2008</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="text-align: center; width: 1%">$</TD>
    <TD STYLE="text-align: center; width: 9%">1,019,516</TD>
    <TD STYLE="text-align: center; width: 1%">&nbsp;</TD>
    <TD STYLE="text-align: right; width: 9%">100</TD>
    <TD STYLE="width: 2%">%</TD>
    <TD STYLE="width: 26%">Corns preliminary processing and wholesale distribution</TD></TR>
<TR STYLE="vertical-align: top; background-color: white">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: #CCFFCC">
    <TD>Tianjin Guandu Food Co., Ltd. (&quot;Tianjin Guandu&quot;) (1)</TD>
    <TD>&nbsp;</TD>
    <TD>The PRC, June 21, 2011</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;$</TD>
    <TD STYLE="text-align: center">1,544,497</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: right">100</TD>
    <TD>%</TD>
    <TD>Wholesale distribution of simple-processed and deep-processed packaged food products and staple food</TD></TR>
<TR STYLE="vertical-align: top; background-color: white">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: #CCFFCC">
    <TD>Hebei Yugu Grain Co., Ltd. (&quot;Hebei Yugu&quot;)</TD>
    <TD>&nbsp;</TD>
    <TD>The PRC, July 25, 2011</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;$</TD>
    <TD STYLE="text-align: center">1,563,824</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: right">70</TD>
    <TD>%</TD>
    <TD>Wholesale distribution of&nbsp;grain products and operating or acting as an agent of import &amp; export business for grain products</TD></TR>
<TR STYLE="vertical-align: top; background-color: white">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: #CCFFCC">
    <TD>Beijing Jundaqianyuan Investment Management Co., Ltd. (&quot;Junda&quot;)(2)</TD>
    <TD>&nbsp;</TD>
    <TD>The PRC, June 13, 2010</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;$</TD>
    <TD STYLE="text-align: center">14,637</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: right">Variable interest</TD>
    <TD>&nbsp;</TD>
    <TD>Shareholding of Deyufarm (14.29%)</TD></TR>
<TR STYLE="vertical-align: top; background-color: white">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: #CCFFCC">
    <TD>Jinzhong Longyue Investment Consultancy Services Co., Ltd. (&quot;Longyue&quot;)(2)</TD>
    <TD>&nbsp;</TD>
    <TD>The PRC, June 2, 2010</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;$</TD>
    <TD STYLE="text-align: center">4,393</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: right">Variable interest</TD>
    <TD>&nbsp;</TD>
    <TD>Shareholding of Deyufarm (50%)</TD></TR>
<TR STYLE="vertical-align: top; background-color: white">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: #CCFFCC">
    <TD>Deyufarm Innovation Food (Beijing) Co., Ltd. (&quot;Deyufarm&quot;)(2)</TD>
    <TD>&nbsp;</TD>
    <TD>The PRC, June 13, 2010</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;$</TD>
    <TD STYLE="text-align: center">10,493,516</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: right">Variable interest</TD>
    <TD>&nbsp;</TD>
    <TD>Wholesale distribution of packaged food products and instant millet beverage. Holding company of the following two companies</TD></TR>
<TR STYLE="vertical-align: top; background-color: white">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: #CCFFCC">
    <TD>Sichuan HaoLiangXin Instant Food Co., Ltd. (&quot;HaoLiangXin&quot;)(2)</TD>
    <TD>&nbsp;</TD>
    <TD>The PRC, April 25, 2008</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;$</TD>
    <TD STYLE="text-align: center">1,202,460</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: right">Variable interest</TD>
    <TD>&nbsp;</TD>
    <TD>Manufacturing and wholesale distribution of instant grain vermicelli and buckwheat tea products</TD></TR>
<TR STYLE="vertical-align: top; background-color: white">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: #CCFFCC">
    <TD>Beijing Xinggu Deyufarm Food Co., Ltd. (&quot;Xinggu Deyufarm&quot;)(2)</TD>
    <TD>&nbsp;</TD>
    <TD>The PRC, November 25, 2010</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: center">&nbsp;$</TD>
    <TD STYLE="text-align: center">1,515,152</TD>
    <TD STYLE="text-align: center">&nbsp;</TD>
    <TD STYLE="text-align: right">Variable interest</TD>
    <TD>&nbsp;</TD>
    <TD>Manufacturing of instant grain vermicelli products</TD></TR>
<TR STYLE="background-color: white">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="background-color: #CCFFCC">
    <TD STYLE="vertical-align: top">Shanxi Taizihu Food Co., Ltd. (&ldquo;Taizihu&rdquo;) (3)</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">The PRC, July 27, 2003</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: center">$</TD>
    <TD STYLE="vertical-align: top; text-align: center">1,208,233</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: right">100</TD>
    <TD>%</TD>
    <TD STYLE="vertical-align: top">producing and selling fruit beverages and soybean products</TD></TR>
<TR STYLE="background-color: white">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="background-color: #CCFFCC">
    <TD STYLE="vertical-align: top">Shanxi HuiChun Bean Products Co., Ltd. (&ldquo;Huichun&rdquo;)(3)</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top">The PRC, September 2, 2007</TD>
    <TD STYLE="vertical-align: top">&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: center">$</TD>
    <TD STYLE="vertical-align: top; text-align: center">2,636,192</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="vertical-align: top; text-align: right">100</TD>
    <TD>%</TD>
    <TD STYLE="vertical-align: top">producing and selling fruit beverages and soybean products</TD></TR>
</TABLE>


<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(1) Tianjing Guandu Food Co., Ltd, (&quot;Tianjing Guandu&quot;),
previously was Tianjing Detianyu Food Co., Ltd. changed its company name and completed the name change registration on October
24, 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(2) Detian Yu terminated its control over the Junda, Longyue,
Deyufarm, Haoliangxin, Xinggu Deyufarm, (collectively, the &ldquo;VIE Group&rdquo;) on December 20, 2011. The operation results
of the VIE Group are included in the consolidated financial statements from January 1 to December 20, 2011</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">(3) Taizihu and Huichun became the wholly-owned subsidiaries
of the Company on February 2, 2012 through a business acquisition (see Note 20), but they are not within the consolidation scope
as of December 31, 2011</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 10px; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 96px; font-weight: bold">NOTE&nbsp;2.</TD>
    <TD STYLE="font-weight: bold; text-align: justify">SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Basis of presentation</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The accompanying consolidated financial statements include
the financial statements of Deyu Agriculture Corp., its subsidiaries, and those variable interest entities where the Company is
the primary beneficiary.&nbsp;&nbsp;All significant intercompany account balances and transactions have been eliminated in consolidation.&nbsp;&nbsp;Results
of operations of companies purchased are included from the dates of acquisition.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">These consolidated financial statements have been prepared
in accordance with accounting principles generally accepted in the United States of America.&nbsp;&nbsp;The Company&rsquo;s function
currency is the Chinese Yuan, or Renminbi (&ldquo;RMB&rdquo;); however, the accompanying consolidated financial statements have
been translated and presented in United States Dollars (&ldquo;USD&rdquo;).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On April 27, 2010, as a result of the consummation of the Share
Exchange, we changed our fiscal year end from May 31 to December 31 to conform to the fiscal year end of City Zone.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Use of estimates</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The preparation of the consolidated financial statements in
conformity with generally accepted&nbsp;&nbsp;accounting&nbsp;&nbsp;principles requires management to make estimates and&nbsp;&nbsp;assumptions&nbsp;&nbsp;that&nbsp;&nbsp;affect&nbsp;&nbsp;the&nbsp;&nbsp;reported&nbsp;&nbsp;amounts&nbsp;&nbsp;of&nbsp;&nbsp;assets
and liabilities and disclosure of contingent assets and liabilities at the date&nbsp;&nbsp;of the financial statements and the
reported amounts of revenues and expenses during the reporting period.&nbsp;&nbsp;Management makes its estimates based on historical
experience and various other assumptions and information that are available and believed to be reasonable at the time the estimates
are made.&nbsp;&nbsp;Therefore, actual results could differ from those estimates under different assumptions and conditions.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Cash and cash equivalents</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Cash and cash equivalents consist of cash on hand, cash in
bank and all highly liquid investments with original maturities of three months or less.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As a result of the financings associated with the reverse merger,
we had, as of December 31, 2010, $125,560 in a trust account. The use of these funds requires the written approval of our placement
agent and us. The funds in the escrow account were designated for certain expenses, such as investor relations, accounting/consulting
fees, SEC fees, and stock transfer agent fees. This amount was classified as restricted cash under current assets on our balance
sheet as of December 31, 2010, while the restriction has been released in 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As of December 31, 2011, $1,588,840 of cash was restricted
as a pledge for $1,588,840 (RMB 10,000,000) of notes payable obtained from Jinzhong City Yuci District Rural Credit Union Co.,
Ltd. in August 2011 and $262,159 of cash was restricted as a pledge for $ 2,121,101 (RMB 13,350,000) of bank loan obtained from
China Merchants Bank at Dongzhimen branch in November 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Accounts receivable</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Accounts receivable are recorded at net realizable value consisting
of the carrying amount less allowance for doubtful accounts, as needed.&nbsp;&nbsp;We assess the collectability of accounts receivable
based primarily upon the creditworthiness of the customer as determined by credit checks and analysis, as well as the customer&rsquo;s
payment history.&nbsp;&nbsp;Management reviews the composition of accounts receivable and analyzes historical bad debts, customer
concentrations, customer credit worthiness, current economic trends, and changes in customer payment patterns to evaluate the
adequacy of these reserves.&nbsp;&nbsp;As of December 31, 2011 and 2010, there were no customers with accounts receivable greater
than six months past due.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Inventories</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company's inventories are stated at lower of cost or market.&nbsp;&nbsp;Cost
is determined on moving-average basis.&nbsp;&nbsp;Costs of inventories include purchase and related costs incurred in delivering
the products to their present location and condition.&nbsp;&nbsp;Market value is determined by reference to selling prices after
the balance sheet date or to management&rsquo;s estimates based on prevailing market conditions.&nbsp;&nbsp;Management periodically
evaluates the composition of its inventories at least quarterly to identify slow-moving and obsolete inventories to determine
if valuation allowance is required.&nbsp;&nbsp;As of December 31, 2011 and 2010, management had identified no slow moving or obsolete
inventory. For the years ended December 31, 2011 and 2010, loss on reduction of inventory to the lower of cost or market was $56,140
and $0, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Assets held for sales</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">A long-lived asset to be sold shall be classified as held for
sale in the period in which all of the following criteria are met: (a) Management, having the authority to approve the action,
commits to a plan to sell the asset. (b) The asset is available for immediate sale in its present condition subject only to terms
that are usual and customary for sales of such assets. (c) An active program to locate a buyer and other actions required to complete
the plan to sell the asset have been initiated. (d) The sale of the asset is probable, and transfer of the asset is expected to
qualify for recognition as a completed sale, within one year, except as permitted by paragraph ASC 360-10-45-11. The term probable
refers to a future sale that is likely to occur. (e) The asset is being actively marketed for sale at a price that is reasonable
in relation to its current fair value. The price at which a long-lived asset is being marketed is indicative of whether the entity
currently has the intent and ability to sell the asset. A market price that is reasonable in relation to fair value indicates
that the asset is available for immediate sale, whereas a market price in excess of fair value indicates that the asset is not
available for immediate sale. (f) Actions required to complete the plan indicate that it is unlikely that significant changes
to the plan will be made or that the plan will be withdrawn.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">A loss shall be recognized for any initial or subsequent write-down
to fair value less cost to sell. A gain shall be recognized for any subsequent increase in fair value less cost to sell, but not
in excess of the cumulative loss previously recognized (for a write-down to fair value less cost to sell). The loss or gain shall
adjust only the carrying amount of a long-lived asset, whether classified as held for sale individually or as part of a disposal
group.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Property, plant, and equipment</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Property, plant, and equipment are stated at cost less accumulated
depreciation.&nbsp;&nbsp;Expenditures for maintenance and repairs are charged to earnings as incurred; additions, renewals and
betterments are capitalized.&nbsp;&nbsp;When property, plant, and equipment are retired or otherwise disposed of, the related
cost and accumulated depreciation are removed from the respective accounts, and any gain or loss is included in operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;Depreciation is computed using the straight-line method
over the estimated useful lives of the assets as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="width: 82%; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 1%; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 16%; border-bottom: black 1pt solid; padding-left: 10pt; font-weight: bold; text-align: center">Useful Life<BR>
    (in years)</TD>
    <TD STYLE="width: 1%; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR>
    <TD>Automobiles</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-left: 10pt; text-align: center">5</TD>
    <TD>&nbsp;</TD></TR>
<TR>
    <TD>Buildings</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-left: 10pt; text-align: center">10-30</TD>
    <TD>&nbsp;</TD></TR>
<TR>
    <TD>Office equipment</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-left: 10pt; text-align: center">5</TD>
    <TD>&nbsp;</TD></TR>
<TR>
    <TD>Machinery and equipment</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-left: 10pt; text-align: center">5-10</TD>
    <TD>&nbsp;</TD></TR>
<TR>
    <TD>Furniture &amp; fixtures</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="padding-left: 10pt; text-align: center">5</TD>
    <TD>&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Construction-in-progress</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Construction-in-progress consists of amounts expended for warehouse
construction.&nbsp;&nbsp;Construction-in-progress is not depreciated until such time as the assets are completed and put into
service.&nbsp;&nbsp;Once warehouse construction is completed, the cost accumulated in construction-in-progress is transferred
to property, plant, and equipment.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Long-lived assets</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company applies the provisions of FASB ASC Topic 360 (ASC
360), &quot;Property, Plant, and Equipment&quot; which addresses financial accounting and reporting for the impairment or disposal
of long-lived assets.&nbsp;&nbsp;The Company periodically evaluates the carrying value of long-lived assets to be held and used
in accordance with ASC 360, at least on an annual basis.&nbsp;&nbsp;ASC 360 requires the impairment losses to be recorded on long-lived
assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated
by those assets are less than the assets' carrying amounts. In that event, a loss is recognized based on the amount by which the
carrying amount exceeds the fair market value of the long-lived assets.&nbsp;&nbsp;Loss on long-lived assets to be disposed of
is determined in a similar manner, except that fair market values are reduced for the cost of disposal.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Goodwill and intangible assets</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Good is calculated as the purchase premium after adjusting
for the fair value of net assets acquired.&nbsp;&nbsp;Goodwill is not amortized but is reviewed for potential impairment on an
annual basis, or when events or circumstances indicate a potential impairment, at the reporting unit level.&nbsp;&nbsp;A reporting
unit, as defined under applicable accounting guidance, is a business segment or one level below a business segment.&nbsp;&nbsp;Under
applicable accounting guidance, the goodwill impairment analysis is a two-step test.&nbsp;&nbsp;The first step of the goodwill
impairment test involves comparing the fair value of each reporting unit with its carrying amount including goodwill.&nbsp;&nbsp;If
the fair value of the reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired; however,
if the carrying amount of the reporting unit exceeds its fair value, the second step must be performed to measure potential impairment.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The second step involves calculating an implied fair value
of goodwill for each reporting unit for which the first step indicated possible impairment.&nbsp;&nbsp;The implied fair value
of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination, which is the excess
of the fair value of the reporting unit, as determined in the first step, over the aggregate fair values of the assets, liabilities
and identifiable intangibles as if the reporting unit was being acquired in a business combination.&nbsp;&nbsp;Measurement of
the fair values of the assets and liabilities of a reporting unit is consistent with the requirements of the fair value measurements
accounting guidance, which defines fair value as the price that would be received to sell an asset or paid to transfer a liability
in an orderly transaction between market participants at the measurement date.&nbsp;&nbsp;The adjustments to measure the assets,
liabilities, and intangibles at fair value are for the purpose of measuring the implied fair value of goodwill and such adjustments
are not reflected in the consolidation balance sheet.&nbsp;&nbsp;If the implied fair value of goodwill exceeds the goodwill assigned
to the reporting unit, there is no impairment.&nbsp;&nbsp;If the goodwill assigned to a reporting unit exceeds the implied fair
value of goodwill, an impairment charge is recorded for the excess.&nbsp;&nbsp;An impairment loss recognized cannot exceed the
amount of goodwill assigned to a reporting unit.&nbsp;&nbsp;An impairment loss establishes a new basis in the goodwill and subsequent
reversals of goodwill impairment losses are not permitted under applicable accounting guidance.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The goodwill in the amount of $1,103,309 recorded in the consolidated
balance sheet of the VIE Group as of December 31, 2010 (see Note 3) was generated from the acquisition of Haoliangxin by Deyufarm
on July 24, 2010. In 2010, goodwill was tested for impairment and it was determined that goodwill was not impaired as of December
31, 2010. Pursuant to the Termination Agreements for the VIE Group, the Company deconsolidated the VIE Group and no goodwill was
presented on the consolidated balance sheets as of December 31, 2011 and 2010 of the Company after reclassification of the assets
and liabilities of discontinued operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">For intangible assets subject to amortization, an impairment
loss is recognized if the carrying amount of the intangible asset is not recoverable and exceeds fair value.&nbsp;&nbsp;The carrying
amount of the intangible asset is considered not recoverable if it exceeds the sum of the undiscounted cash flows expected to
result from the use of the asset.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Fair value measurements</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">FASB ASC 820, &ldquo;Fair Value Measurements&rdquo; (formerly
SFAS No. 157) defines fair value for certain financial and nonfinancial assets and liabilities that are recorded at fair value,
establishes a framework for measuring fair value, and expands disclosures about fair value measurements.&nbsp;&nbsp;It requires
that an entity measure its financial instruments to base fair value on exit price and maximize the use of observable units and
minimize the use of unobservable inputs to determine the exit price.&nbsp;&nbsp;It establishes a hierarchy which prioritizes the
inputs to valuation techniques used to measure fair value.&nbsp;&nbsp;This hierarchy increases the consistency and comparability
of fair value measurements and related disclosures by maximizing the use of observable inputs and minimizing the use of unobservable
inputs by requiring that observable inputs be used when available.&nbsp;&nbsp;Observable inputs are inputs that reflect the assumptions
market participants would use in pricing the assets or liabilities based on market data obtained from sources independent of the
Company.&nbsp;&nbsp;Unobservable inputs are inputs that reflect the Company&rsquo;s own assumptions about the assumptions market
participants would use in pricing the asset or liability developed based on the best information available in the circumstances.&nbsp;&nbsp;The
hierarchy prioritizes the inputs into three broad levels based on the reliability of the inputs as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Level 1 &ndash;
                                                                                                               Inputs are quoted
                                                                                                               prices in active
                                                                                                               markets for identical
                                                                                                               assets or liabilities
                                                                                                               that the Company
                                                                                                               has the ability
                                                                                                               to access at the
                                                                                                               measurement date.&nbsp;&nbsp;Valuation
                                                                                                               of these instruments
                                                                                                               does not require
                                                                                                               a high degree of
                                                                                                               judgment as the
                                                                                                               valuations are
                                                                                                               based on quoted
                                                                                                               prices in active
                                                                                                               markets that are
                                                                                                               readily and regularly
                                                                                                               available.</TD></TR>                                                                                                                                   <TR STYLE="vertical-align: top">
<TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR>
</TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Level 2 &ndash;
                                                                                                               Inputs other than
                                                                                                               quoted prices in
                                                                                                               active markets
                                                                                                               that are either
                                                                                                               directly or indirectly
                                                                                                               observable as of
                                                                                                               the measurement
                                                                                                               date, such as quoted
                                                                                                               prices for similar
                                                                                                               assets or liabilities;
                                                                                                               quoted prices in
                                                                                                               markets that are
                                                                                                               not active; or
                                                                                                               other inputs that
                                                                                                               are observable
                                                                                                               or can be corroborated
                                                                                                               by observable market
                                                                                                               data for substantially
                                                                                                               the full term of
                                                                                                               the assets or liabilities.</TD></TR>                                                                                                                                                   <TR STYLE="vertical-align: top">
<TD>&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD></TR>
</TABLE>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0.25in"></TD><TD STYLE="width: 0.25in"><FONT STYLE="font-family: Symbol">&middot;</FONT></TD><TD>Level 3 &ndash;
                                                                                                               Valuations based
                                                                                                               on inputs that
                                                                                                               are unobservable
                                                                                                               and not corroborated
                                                                                                               by market data.&nbsp;&nbsp;The
                                                                                                               fair value for
                                                                                                               such assets and
                                                                                                               liabilities is
                                                                                                               generally determined
                                                                                                               using pricing models,
                                                                                                               discounted cash
                                                                                                               flow methodologies,
                                                                                                               or similar techniques
                                                                                                               that incorporate
                                                                                                               the assumptions
                                                                                                               a market participant
                                                                                                               would use in pricing
                                                                                                               the asset or liability.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">This guidance applies to other accounting pronouncements that
require or permit fair value measurements.&nbsp;&nbsp;On February 12, 2008, the FASB finalized FASB Staff Position (FSP) No. 157-2,
Effective Date of FASB Statement No. 157 (ASC 820).&nbsp;&nbsp;This Staff Position delays the effective date of SFAS No. 157 (ASC
820) for nonfinancial assets and liabilities to fiscal years beginning after November 15, 2008 and interim periods within those
fiscal years, except for those items that are recognized or disclosed at fair value in the financial statements on a recurring
basis (at least annually).&nbsp;&nbsp;The adoption of SFAS No. 157 (ASC 820) had no effect on the Company's financial position
or results of operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;We also analyze all financial instruments with features
of both liabilities and equity under ASC 480-10 (formerly SFAS 150, &ldquo;Accounting for Certain Financial Instruments with Characteristics
of Both Liabilities and Equity&rdquo;) and ASC 815-40 (formerly EITF 00-19, &ldquo;Accounting for Derivative Financial Instruments
Indexed to, and Potentially Settled in, a Company&rsquo;s Own Stock&rdquo;).&nbsp;&nbsp;We have determined ASC 480-10 (formerly
SFAS 150) and ASC 815-40 (formerly EITF 00-19) has no material effect on our financial position or results of operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Revenue recognition</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company&rsquo;s revenue recognition policies are in compliance
with the SEC Staff Accounting Bulletin No. 104 (&ldquo;SAB 104&rdquo;).&nbsp;&nbsp;The Company recognizes product revenue when
the following fundamental criteria are met: (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred, (iii)
our price to the customer is fixed or determinable and (iv) collection of the resulting accounts receivable is reasonably assured.&nbsp;&nbsp;The
Company recognizes revenue for product sales upon transfer of title to the customer.&nbsp;&nbsp;Customer purchase orders and/or
contracts are generally used to determine the existence of an arrangement.&nbsp;&nbsp;Shipping documents and the completion of
any customer acceptance requirements, when applicable, are used to verify product delivery or that services have been rendered.&nbsp;&nbsp;The
Company assesses whether a price is fixed or determinable based upon the payment terms associated with the transaction and whether
the sales price is subject to refund or adjustment.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company&rsquo;s revenue is recognized net of value-added
tax (VAT), reductions to revenue for estimated product returns, and sales discounts based on volume achieved in the same period
that the related revenue is recorded.&nbsp;&nbsp;The estimates are based on historical sales returns, analysis of credit memo
data, and other factors known at the time.&nbsp;&nbsp;For the years ended December 31, 2011 and 2010, sales discounts from continuing
operations were $70,987 and $0, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We offer a right of exchange on our grain products sold through
our relationship with grocery store networks.&nbsp;&nbsp;The consumer who purchases the product may exchange it for the same kind
and quantity of product originally purchased.&nbsp;&nbsp;In accordance with FASB ASC 605-15-25-1 and 605-15-15-2, these are not
considered returns for revenue recognition purposes.&nbsp;&nbsp;For the years ended December 31, 2011 and 2010, the returns of
our product were not material.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Advertising costs</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company expenses the cost of advertising as incurred or,
as appropriate, the first time the advertising takes place.&nbsp;&nbsp;Advertising costs from continuing operations for the year
ended December 31, 2011 and 2010 were $952,472 and $83,576 respectively.&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Research and development</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company expenses its research and development costs as
incurred.&nbsp;&nbsp;Research and development costs from continuing operations for the years ended December 31, 2011 and 2010
were $98,393 and $73,860, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Stock-based compensation</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In December 2004, the Financial Accounting Standard Board,
or the FASB, issued the Statement of Financial Accounting Standards, or SFAS, No. 123(R), &ldquo;Share-Based Payment&rdquo;, which
replaces SFAS No. 123 and supersedes APB Opinion No. 25.&nbsp;&nbsp;SFAS No. 123(R) is now included in the FASB&rsquo;s ASC Topic
718, &ldquo;Compensation &ndash; Stock Compensation.&rdquo;&nbsp;&nbsp;Under SFAS No. 123(R), companies are required to measure
the compensation costs of share-based compensation arrangements based on the grant-date fair value and recognize the costs in
the financial statements over the period during which employees or independent contractors are required to provide services.&nbsp;&nbsp;Share-based
compensation arrangements include stock options and warrants, restricted share plans, performance-based awards, share appreciation
rights and employee share purchase plans.&nbsp;&nbsp;In March 2005, the SEC issued Staff Accounting Bulletin No. 107, or SAB 107,
which expresses views of the staff regarding the interaction between SFAS No. 123(R) and certain SEC rules and regulations and
provides the staff&rsquo;s views regarding the valuation of share-based payment arrangements for public companies.&nbsp;&nbsp;SFAS
No. 123(R) permits public companies to adopt its requirements using one of two methods.&nbsp;&nbsp;On April 14, 2005, the SEC
adopted a new rule amending the compliance dates for SFAS No. 123(R).&nbsp;&nbsp;Companies may elect to apply this statement either
prospectively, or on a modified version of retrospective application under which financial statements for prior periods are adjusted
on a basis consistent with the pro forma disclosures required for those periods under SFAS No. 123.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;The Company has fully adopted the provisions of FASB
ASC 718 and related interpretations as provided by SAB 107.&nbsp;&nbsp;As such, compensation cost is measured on the date of grant
as the fair value of the share-based payments.&nbsp;&nbsp;Such compensation amounts, if any, are amortized over the respective
vesting periods of the option grant.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Income taxes</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company accounts for income taxes in accordance with FASB
ASC Topic 740, &ldquo;Income Taxes.&rdquo;&nbsp;&nbsp;ASC 740 requires a company to use the asset and liability method of accounting
for income taxes, whereby deferred tax assets are recognized for deductible temporary differences, and deferred tax liabilities
are recognized for taxable temporary differences.&nbsp;&nbsp;Temporary differences are the differences between the reported amounts
of assets and liabilities and their tax bases.&nbsp;&nbsp;Deferred tax assets are reduced by a valuation allowance when, in the
opinion of management, it is more likely than not that some portion, or all of, the deferred tax assets will not be realized.&nbsp;&nbsp;Deferred
tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Under ASC 740, a tax position is recognized as a benefit only
if it is &ldquo;more likely than not&rdquo; that the tax position would be sustained in a tax examination, with a tax examination
being presumed to occur.&nbsp;&nbsp;The amount recognized is the largest amount of tax benefit that is greater than 50% likely
of being realized on examination.&nbsp;&nbsp;For tax positions not meeting the &ldquo;more likely than not&rdquo; test, no tax
benefit is recorded.&nbsp;&nbsp;The adoption had no effect on the Company&rsquo;s consolidated financial statements.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Foreign currency translation and comprehensive income</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">U.S. GAAP requires that recognized revenue, expenses, gains
and losses be included in net income.&nbsp;&nbsp;Certain statements, however, require entities to report specific changes in assets
and liabilities, such as gain or loss on foreign currency translation, as a separate component of the equity section of the balance
sheet.&nbsp;&nbsp;Such items, along with net income, are components of comprehensive income.&nbsp;&nbsp;The functional currency
of the Company is Renminbi (&ldquo;RMB&rdquo;).&nbsp;&nbsp;The unit of RMB is in Yuan.&nbsp;&nbsp;Translation gains are classified
as an item of other comprehensive income in the stockholders&rsquo; equity section of the consolidated balance sheet.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Statement of cash flows</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In accordance with FASB ASC Topic 230, &ldquo;Statement of
Cash Flows,&rdquo; cash flows from the Company&rsquo;s operations are calculated based upon the local currencies.&nbsp;&nbsp;As
a result, amounts related to assets and liabilities reported on the consolidated statement of cash flows will not necessarily
agree with changes in the corresponding balances on the consolidated balance sheets.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Discontinued operations</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>&nbsp;</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Certain prior period amounts have been reclassified in these
consolidated financial statements to conform to the 2011 presentation of discontinued operations of the VIE Group for the deep
processed grain business. See Note 1 and 3 for additional information.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Reclassifications</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Except for the classification for discontinued operations,
certain classifications have been made to the prior year financial statements to conform to the current year presentation.&nbsp;&nbsp;The
reclassifications have no impact on the Company&rsquo;s 2010 consolidated statement of operations and retained earnings.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Recent pronouncements</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In January 2010, FASB issued an amendment regarding improving
disclosures about fair value measurements. This new guidance requires some new disclosures and clarifies some existing disclosure
requirements about fair value measurement. The new disclosures and clarifications of existing disclosures are effective for interim
and annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances and
settlements in the roll forward of activity in Level 3 fair value measurements. Those disclosures are effective for fiscal years
beginning after December 15, 2010 and for interim periods within those fiscal years. There was no impact from the adoption of
this guidance to our consolidated financial position or results of operations as the amendment only addresses disclosures.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In April 2010, FASB issued an amendment to Stock Compensation.
The amendment clarifies that an employee stock-based payment award with an exercise price denominated in the currency of a market
in which a substantial portion of the entity&rsquo;s equity shares trades should not be considered to contain a condition that
is not a market, performance, or service condition. Therefore, an entity would not classify such an award as a liability if it
otherwise qualifies as equity. The amendments are effective for fiscal years, and interim periods within those fiscal years, beginning
on or after December 15, 2010. The adoption of this guidance had no impact on our consolidated financial position or results of
operations since our stock-based payment awards have an exercise price denominated in the same currency of the market in which
our Company shares are traded.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In May 2011, FASB issued an amendment (ASU No. 2011-04) to
Fair Value Measurement (ASC Topic 820). In 2006, the FASB and the International Accounting Standards Board (IASB) published a
Memorandum of Understanding, which has served as the foundation of the Board&rsquo;s efforts to a common set of high quality global
accounting standards. Consistent with the Memorandum of Understanding and the Board&rsquo;s commitment to achieving the goal,
the amendments in this Update are the result of the work by the FASB and the IASB to develop common requirements for measuring
fair value and for disclosing information about fair value measurements in accordance with U.S. GAAP and IFRS. The adoption of
this guidance had no impact on our consolidated financial position or results of operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In May 2011, FASB issued an amendment (ASU No. 2011-05) to
Comprehensive Income (ASC Topic 220). The amendment require that all nonowner changes in stockholders&rsquo; equity be presented
either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In the two-statement
approach, the first statement should present total net income and its components followed consecutively by a second statement
that should present total other comprehensive income, the components of other comprehensive income, and the total of comprehensive
income. The Company had adopted this guidance to our consolidated financial statements as of and for the year ended December 31,
2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In September 2011, FASB issued an amendment (ASU No. 2011-08)
to Intangibles&ndash;Goodwill and Other (ASC Topic 350). The amendments in the Update permit an entity to first assess qualitative
factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount
as a basis for determining whether it is necessary to perform the two-step goodwill impairment test described in Topic 350. If,
after assessing the totality of events or circumstances, an entity determines it is not more likely than not that the fair value
of a reporting unit is less than its carrying amount, then performing the two-step impairment test is unnecessary. However, if
an entity concludes otherwise, then it is required to perform the first step of the two-step impairment test by calculating the
fair value of the reporting unit and comparing the fair value with the carrying amount of the reporting unit, as described in
paragraph 350-20-35-4. If the carrying amount of a reporting unit exceeds its fair value, then the entity is required to perform
the second step of the goodwill impairment test to measure the amount of the impairment loss, if any, as described in paragraph
350-20-35-9. The Company had adopted this guidance to our consolidated financial statements as of and for the year ended December
31, 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In December 2011, FASB issued an Update (ASU No. 2011-10) to
Property, Plant, and Equipment (ASC Topic 360). Under the amendments in this Update, when a parent (reporting entity) ceases to
have a controlling financial interest (as described in Subtopic 810-10) in a subsidiary that is in substance real estate as a
result of default on the subsidiary&rsquo;s nonrecourse debt, the reporting entity should apply the guidance in Subtopic 360-20
to determine whether it should derecognize the in substance real estate. Generally, a reporting entity would not satisfy the requirements
to derecognize the in substance real estate before the legal transfer of the real estate to the lender and the extinguishment
of the related nonrecourse indebtedness. That is, even if the reporting entity ceases to have a controlling financial interest
under Subtopic 810-10, the reporting entity would continue to include the real estate, debt, and the results of the subsidiary&rsquo;s
operations in its consolidated financial statements until legal title to the real estate is transferred to legally satisfy the
debt. The adoption of this guidance had no impact on our consolidated financial position or results of operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">In December 2011, FASB issued an Update (ASU No. 2011-11) to
Balance Sheet (ASC Topic 210) regarding disclosures about offsetting assets and liabilities. Pursuant to this Update, entities
are required to disclose both gross information and net information about both instruments and transactions eligible for offset
in the statement of financial position and instruments and transactions subject to an agreement similar to a master netting arrangement.
This scope would include derivatives, sale and repurchase agreements and reverse sale and repurchase agreements, and securities
borrowing and securities lending arrangements. The adoption of this guidance had no impact on our consolidated financial position
or results of operations.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 10px; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 96px; font-weight: bold">NOTE&nbsp;3.</TD>
    <TD STYLE="font-weight: bold; text-align: justify">DISCONTINUED OPERATIONS</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On December 20, 2011, Detian Yu terminated its control over
the VIE Group (see Note 2). The results of the VIE Group have been presented as a discontinued operation in the consolidated statements
of operations. Selected operating results for the discontinued business are presented in the following tables:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-left: 0">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center">For&nbsp;The&nbsp;Years&nbsp;Ended</TD><TD STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-left: 0">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">December&nbsp;31,</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: bold; padding-left: 0">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2010</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 76%; text-align: left; padding-left: 0">Net revenue</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">15,276,475</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">4,000,749</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 0">Cost of goods sold</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(12,256,832</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(3,671,177</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-left: 0">Selling, general, and administrative expenses</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(8,251,364</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1,341,563</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 0">Interest (expense) income, net</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">5,478</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">65</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 0">Other income, net</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">37,371</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">5,770</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-left: 0">Loss before income taxes</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(5,188,872</TD><TD STYLE="text-align: left">)</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">(1,006,156</TD><TD STYLE="text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 0">Income taxes benefits</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,297,042</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">249,676</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; padding-left: 0">Net loss</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(3,891,830</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">(756,480</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">)</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The net assets distributed as of December 20, 2011 were as
follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">December<BR> 20, 2011</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 88%; text-align: left">Cash &amp; cash equivalents</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">86,678</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Inventory, net</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">606,300</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Accounts receivable, net</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4,001,821</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Advance to suppliers</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">157,650</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Prepaid expenses</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">664,081</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">All other current assets</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">4,858,057</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 0.12in">Current assets</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right">10,374,587</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Property, plant, and equipment, net</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3,094,778</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Goodwill</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,103,309</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">All other assets</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">766,947</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 1pt; padding-left: 0.12in">Non-current assets</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right">4,965,034</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Accounts payable</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">773,141</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Advance from customer</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,499,636</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Accrued expenses</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">724,918</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Other payables</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4,510,067</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Due to Related Party</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">8,319,191</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">All other current liabilities</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">271,321</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt; padding-left: 0.12in">Current liabilities</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right">17,098,274</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 10px; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 96px; font-weight: bold">NOTE&nbsp;4.</TD>
    <TD STYLE="font-weight: bold; text-align: justify">ACCOUNTS RECEIVABLE</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Accounts receivable consisted of the following:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">December<BR> 31,</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">December<BR> 31,</TD><TD STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2010</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 76%; text-align: left">Accounts receivable</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">36,167,136</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">11,160,959</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Less: Allowance for doubtful accounts</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">-</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Accounts receivable, net</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">36,167,136</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">11,160,959</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 10px; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 96px; font-weight: bold">NOTE&nbsp;5.</TD>
    <TD STYLE="font-weight: bold; text-align: justify">INVENTORY</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Inventory consisted of the following:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">December<BR> 31,</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">December<BR> 31,</TD><TD STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2010</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 76%; text-align: left">Raw materials</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">8,108,503</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">784,825</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Work in process</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,971</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">383,960</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Finished goods</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">12,109,353</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">15,316,045</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt">Supplies</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">94,263</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">57,169</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt; padding-left: 0.12in">Total Inventory</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">20,314,090</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">16,541,999</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 10px; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 96px; font-weight: bold">NOTE&nbsp;6.</TD>
    <TD STYLE="font-weight: bold; text-align: justify">PREPAID EXPENSES</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Prepaid expenses consisted of the following:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">December<BR> 31,</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">December<BR> 31,</TD><TD STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2010</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 76%; text-align: left">Deductible value-added taxes (VAT)</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">92,531</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">1,250,205</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Prepaid rent</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">88,889</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">52,904</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Prepaid bank loan guarantee fee</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">83,899</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">-</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Prepaid other expenses</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">79,842</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">18,112</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Prepaid advertisement</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">46,376</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">3,030</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 2.5pt">Total</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">391,537</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1,324,251</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 10px; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 96px; font-weight: bold">NOTE&nbsp;7.</TD>
    <TD STYLE="font-weight: bold; text-align: justify">ASSETS HELD FOR SALE</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Assets held for sale represent the cost of timber, timberland
and farmland (collectively the &ldquo;timberland) amounted to RMB 10.3 million ($1.6 million), which management assessed approximating
its fair value. The company exchanged the timberland for an office building with paying cash consideration of RMB 7.2 million
($1.1 million) for the variance between the fair values of the office building and the timberland on March 19, 2012. The cost
of the timberland was reclassified from other assets to assets held for sale in the consolidated balance sheets as of December
31, 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">According to government regulations of the PRC, the PRC Government
owned the timber land as of December 31, 2011. The Company leased and obtained a certificate of right to use farmland of approximately
1,605 acres (or 10,032 mu) for the period from August 2005 to December 2031. For the same farmland, the Company obtained a certificate
of the right to timber and 896 acres (or 5,600 mu) of timberland for the period from August 2006 to August 2028. Timber mainly
includes pine trees and poplar trees. These timber, timberland and farmland were not for operating use or intended for sale as
merchandise. Based on management&rsquo;s assessment, there was no impairment as of and for the years ended December 31, 2011 and
2010, or as of the date of exchange.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 10px; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 96px; font-weight: bold">NOTE&nbsp;8.</TD>
    <TD STYLE="font-weight: bold; text-align: justify">PROPERTY, PLANT, AND EQUIPMENT</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Property, plant, and equipment consisted of the following:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">December<BR> 31,</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">December<BR> 31,</TD><TD STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2010</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 76%">Automobiles</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">896,648</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">840,873</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Buildings</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">9,593,679</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">1,659,116</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Office equipment</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">408,203</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">360,841</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Machinery and equipment</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,954,783</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2,620,243</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Furniture and fixtures</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">605,705</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">33,479</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Total cost</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">14,459,018</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; text-align: right">5,514,552</TD><TD STYLE="font-weight: bold; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Less: Accumulated depreciation</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(2,103,072</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">(1,227,180</TD><TD STYLE="padding-bottom: 1pt; text-align: left">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Property, plant, and equipment, net</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">12,355,946</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; font-weight: bold; text-align: right">4,287,372</TD><TD STYLE="padding-bottom: 2.5pt; font-weight: bold; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The buildings owned by the Company located in Jinzhong, Shanxi
Province, China are used for production, warehousing and offices for our grains business. The building structure of warehouses
and office located in Shanzhuangtou under the title of Jinzhong Deyu is mainly constructed of light steel and bricks. At the same
area, the Company acquired buildings of RMB 11.8 million ($1.9 million) on December 27, 2011, of which depreciation commenced
in January 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The construction of a warehousing, processing, and logistics
center of Jinzhong Yongcheng (the &ldquo;Yongcheng Plant&rdquo;) was completed in June 2011. Cost of the six (6) warehouses (total
9,525 square meters), one office building (3,860 square meters), and a processing center with five (5) cylinder storages in the
amount of RMB 30.1 million ($4.8 million) of the Yongcheng Plant was reclassified from Construction-in-Progress to Property, Plant
and Equipment as reported on the consolidated balance sheet as of December 31, 2011. Also due to the construction completion,
cost of the land use rights in the amount of RMB 15 million ($2.4 million) of the Yongcheng Plant was reclassified from Construction-in-Progress
to Intangible Assets as reported on the consolidated balance sheet as of December 31, 2011 (see Note 9). Depreciation of the warehouses,
office building, and processing center commenced in July 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

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    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>



<P STYLE="margin: 0">&nbsp;</P>
<P STYLE="margin: 0"></P>

<P STYLE="margin: 0"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Depreciation expense from continuing operations for the year
ended December 31, 2011 and 2010 was $794,853 and $489,379, respectively.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; border-collapse: collapse; font-family: Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 3%; font-size: 10pt; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 14%; font-size: 10pt; font-weight: bold">NOTE&nbsp;9.</TD>
    <TD STYLE="width: 83%; font-size: 10pt; font-weight: bold; text-align: justify">CONSTRUCTION-IN-PROGRESS</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Construction-in-progress consisted of the following:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">December<BR> 31,</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">December<BR> 31,</TD><TD STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2011</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">2010</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 76%; text-align: left">Construction of Jinzhong corn processing and storage center</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">-</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">6,732,189</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 2.5pt">Total cost</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">-</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">$</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">6,732,189</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Jinzhong processing and storage center and Jinzhong factory
heating system located in Jinzhong City, Shanxi Province, PRC are completed and transferred to fixed assets in June 2011 (see Note
8).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 3%; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 14%; font-weight: bold">NOTE&nbsp;10.</TD>
    <TD STYLE="font-weight: bold; text-align: justify; width: 83%">INTANGIBLE ASSETS</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Intangible assets consisted of the following:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">December 31,</TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">December 31,</TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top; background-color: white">
    <TD STYLE="width: 72%; padding-bottom: 1pt; text-align: center">&nbsp;</TD>
    <TD STYLE="width: 2%; padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: black 1pt solid; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD STYLE="width: 10%; border-bottom: black 1pt solid; font-weight: bold; text-align: center">2011</TD>
    <TD STYLE="width: 1%; padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD STYLE="width: 2%; padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: black 1pt solid; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD STYLE="width: 10%; border-bottom: black 1pt solid; font-weight: bold; text-align: center">2010</TD>
    <TD STYLE="width: 1%; padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD>Software-ERP System and B2C platform</TD>
    <TD>&nbsp;</TD>
    <TD>$</TD>
    <TD STYLE="text-align: right">1,032,746</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>$</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD>Land use rights</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">9,808,497</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD STYLE="padding-bottom: 1pt">Less: Accumulated amortization</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right">(189,399</TD>
    <TD STYLE="padding-bottom: 1pt">)</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right">-</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="padding-bottom: 2.5pt">Total</TD>
    <TD STYLE="padding-bottom: 2.5pt; font-weight: bold">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double; font-weight: bold">$</TD>
    <TD STYLE="border-bottom: black 2.25pt double; font-weight: bold; text-align: right">10,651,844</TD>
    <TD STYLE="padding-bottom: 2.5pt; font-weight: bold">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double">$</TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right">-</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">According to government regulations of the PRC, the PRC Government
owns all land. The Company leases and obtains a certificate of right to use the industrial land of 11,667 square meters with the
PRC Government in Jingzhong, Shanxi Province where Jinzhong Deyu&rsquo;s buildings and production facility are located at. The
term of the right is four to five years and renewed upon expiration. The right was fully amortized as of December 31, 2010 using
the straight-line method. The term of the right was for the period from March 14, 2007 to March 14, 2011. The Company has been
in the process of renewing the land use right certificate since the expiration date. According to a Certification issued by the
Jinzhong Municipal Bureau of Land and Resources on March 30, 2011, Jinzhong Deyu holds the legal title of the land use rights during
the period of the renewal process.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The construction of a warehousing, processing, and logistics
center of Jinzhong Yongcheng (the &ldquo;Yongcheng Plant&rdquo;) was completed in June 2011. Cost of the six (6) warehouses (total
9,525 square meters), one office building (3,860 square meters), and a processing center with five (5) cylinder storages in the
amount of RMB 30.1 million ($4.8 million) of the Yongcheng Plant was reclassified from Construction-in-Progress to Property, Plant
and Equipment upon the construction completion as of June 30, 2011 (see Note 8). Cost of the land use rights in the amount of RMB
15 million ($2.4 million) of the Yongcheng Plant was reclassified from Construction-in-Progress to Intangible Assets upon the construction
completion and as reported on the consolidated balance sheet as of December 31, 2011. The industrial land underlying the certificate
of the land use rights is 46,860 square meters under the title of Jinzhong Deyu. The term of the rights is fifty (50) years starting
from November 26, 2010 to November 25, 2060. The amortization of the land use right was commenced in July, 2011using the straight-line
method over 49.40 years.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On September 30, 2010 and December 20, 2010, we entered into
Farmland Transfer Agreements with Shanxi Jinbei Plant Technology Co., Ltd. for the transfer of land use rights (the &ldquo;Rights&rdquo;)
consisting of 53,000 mu (equivalent to 8,731 acres) and 52,337 mu (equivalent to 8,615 acres), respectively. We paid RMB 19,415,000
(approximately $2,900,000) and RMB 27,221,000 (approximately $4,066,000) in September 30, 2010 and December 20, 2010, respectively.
The variance in the balance denominated in US Dollars as of September 30, 2011 was the effect of foreign currency translation.
Pursuant to the agreement and the terms of the original land use right certificates, the Rights will continue for 43 years (on
average). The land will be used for agricultural planting of corn and grains. We obtained land use rights certificates dated September
6, 2011 evidencing our ownership of those land use rights. The terms of the rights stated on the certificates averaged 38.39 years,
based on which we commenced the amortization of these land use rights from September, 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<!-- Field: Page; Sequence: 106; Value: 1 -->
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    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Amortization expense of the continuing operations for the year
ended December 31, 2011 was $184,444.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 3%; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 14%; font-weight: bold">NOTE&nbsp;11.</TD>
    <TD STYLE="width: 83%; font-weight: bold; text-align: justify">OTHER ASSETS</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Other assets consisted of the following:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">December 31,</TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">December 31,</TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="background-color: white">
    <TD STYLE="width: 72%; vertical-align: bottom; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 2%; vertical-align: top; padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD STYLE="width: 1%; vertical-align: top; border-bottom: black 1pt solid; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD STYLE="width: 10%; vertical-align: top; border-bottom: black 1pt solid; font-weight: bold; text-align: center">2011</TD>
    <TD STYLE="width: 1%; vertical-align: top; padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD STYLE="width: 2%; vertical-align: top; padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD STYLE="width: 1%; vertical-align: top; border-bottom: black 1pt solid; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD STYLE="width: 10%; vertical-align: top; border-bottom: black 1pt solid; font-weight: bold; text-align: center">2010</TD>
    <TD STYLE="width: 1%; vertical-align: top; padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD>Net deferred tax assets - noncurrent</TD>
    <TD>&nbsp;</TD>
    <TD>$</TD>
    <TD STYLE="text-align: right">648,759</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>$</TD>
    <TD STYLE="text-align: right">749,250</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD>Timber, timberland, and farmland use rights</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">78,776</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">1,558,479</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD>Prepaid for acquisition of land use rights</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">7,066,061</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD>Installment payment for ERP system</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">984,848</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD STYLE="padding-bottom: 1pt">Others</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right">-</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right">35,608</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="padding-bottom: 2.5pt">Total</TD>
    <TD STYLE="padding-bottom: 2.5pt; font-weight: bold">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double; font-weight: bold">$</TD>
    <TD STYLE="border-bottom: black 2.25pt double; font-weight: bold; text-align: right">727,535</TD>
    <TD STYLE="padding-bottom: 2.5pt; font-weight: bold">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt; font-weight: bold">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double; font-weight: bold">$</TD>
    <TD STYLE="border-bottom: black 2.25pt double; font-weight: bold; text-align: right">10,394,246</TD>
    <TD STYLE="padding-bottom: 2.5pt; font-weight: bold">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The cost of timber, timberland and farmland amounted to RMB
10.3 million ($1.6 million) as of December 31, 2010 was reclassified to assets held for sale as of December 31, 2011 (see Note
7).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 3%; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 14%; font-weight: bold">NOTE&nbsp;12.</TD>
    <TD STYLE="width: 83%; font-weight: bold; text-align: justify">SHORT-TERM LOAN</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Short-term loan consisted of the following:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD>
    <TD NOWRAP COLSPAN="2" STYLE="border-bottom: black 1pt solid; font-weight: bold; text-align: center">December 31,<BR> 2011</TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD>
    <TD NOWRAP COLSPAN="2" STYLE="border-bottom: black 1pt solid; font-weight: bold; text-align: center">December 31,<BR> 2010</TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD STYLE="width: 70%">Bank loan payable to Bank of Communications, bearing interest at a floating rate of prime rate plus 30% of prime rate, of which prime rate was based on one-year loan interest rate released by The People's Bank of China. The actual interest rate as of December 31, 2011 was 8.5280%. The term of the loan started from May 10, 2011 with maturity date on May 9, 2012. The loan was obtained by Detain Yu and guaranteed by Zhongyuan Guoxin Credit Guarantee Co., Ltd., Wenjun Tian and Jianming Hao for a period of one year starting from May 10, 2011. Wenjun Tian and Jianming Hao for a period of one year starting from May 10, 2011.</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">$</TD>
    <TD STYLE="width: 12%; text-align: right">7,944,200</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">$</TD>
    <TD STYLE="width: 12%; text-align: right">-</TD>
    <TD STYLE="width: 1%">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD>Bank loan payable to China Merchants Bank Beijing Dongzhimen subbranch, bearing interest at a floating rate of prime rate plus 20% of prime rate, of which prime rate was based on one-year loan interest rate released by The People's Bank of China. The actual interest rate as of December 31, 2011 was 7.8720%. The term of the loan started from November 30, 2011 with maturity date on November 29, 2012. The loan was obtained by Detain Yu and guaranteed by China Agriculture Credit Guarantee Co., Ltd. for a period of one year starting from November 30, 2011.</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">2,121,101</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD></TR>
</TABLE>

<P STYLE="margin: 0">&nbsp;</P>

<P STYLE="margin: 0"></P>

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    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->
<P STYLE="margin: 0">&nbsp;&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD>Bank loan payable to Jinzhong City Yuci District Rural Credit Union Co., Ltd, bearing interest at a floating rate of prime rate plus 130% of prime rate, of which prime rate was based on six-month to one-year loan interest rate released by The People's Bank of China. The actual interest rate as of December 31, 2011 was 15.084%. The term of the loan started from August 8, 2011 with maturity date on August 7, 2012. The loan was obtained by Jinzhong Deyu and guaranteed by Jinzhong Juntai Automotive Parts Manufacturing Co., Ltd., for a period of two years starting from August 7, 2012.</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">1,588,840</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD>Bank loan payable to Jinzhong City Yuci District Rural Credit Union Co., Ltd., bearing interest at a floating rate of prime rate plus 130% of prime rate, of which prime rate was based on six-month to one-year loan interest rate released by The People's Bank of China. The actual interest rate as of December 31, 2011 was 15.084%. The term of the loan started from August 9, 2011 with maturity date on August 7, 2012. The loan was obtained by Jinzhong Yongcheng and guaranteed by Yuci Jinmao Food Processing Factory, for a period of two years starting from August 7, 2012.</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">1,350,514</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD>Bank loan payable to Jinzhong City Yuci District Rural Credit Union Co., Ltd., bearing interest at a floating rate of prime rate plus 130% of prime rate, of which prime rate was based on six-month to one-year loan interest rate released by The People's Bank of China. The actual interest rate as of December 31, 2011 was 15.084%. The term of the loan started from August 9, 2011 with maturity date on August 7, 2012. The loan was obtained by Jinzhong Yuliang and guaranteed by Yuci Jinmao Food Processing Factory, for a period of two years starting from August 7, 2012.</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">1,350,514</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD>Loan payable to Hangzhou TianCi Investment Management Co., Ltd., an unrelated party. The loan was unsecured, bearing no interest and no due date was specified.</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">58,311</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">55,606</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD>Bank loan payable to Jinzhong Economic Development District Rural Credit Union, bearing interest at a floating rate of prime rate plus 129.83% of prime rate, of which prime rate was based on six-month to one-year loan interest rate released by The People's Bank of China. The loan was due March 8, 2011. The use of proceeds from the loan is for purchase of raw materials. The loan was obtained by Jinzhong Yuliang and guaranteed by Jinzhong Deyu for a period of two years starting from January 13, 2010. In January 2011, the Company entered into an agreement with the bank for an extension of the loan. The new term is from February 1, 2011 to October 1, 2011. The adjustable interest rate is a rate per annum equal to the Prime Rate plus 117.23 percentage points of prime rate. The prime rate is based on one- to three-year loan interest rate released by The People's Bank of China. Jinzhong Deyu continues to provide guarantees on the loan for a period of two years starting from October 1, 2011. This loan was paid off on May 11, 2011.</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">1,287,879</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD STYLE="padding-bottom: 1pt">Bank loan payable to Shanxi Province Rural Credit Union, bearing interest at a floating rate of prime rate plus 107.00% of prime rate, of which prime rate was based on six-month-to-one-year loan interest rate released by The People's Bank of China and due January 13, 2011. The use of proceeds from the loan is restricted for purchase of corns. The loan was obtained by Jinzhong Yongcheng and guaranteed by Jinzhong Deyu and Jinzhong Yuliang for a period of two years starting from January 13, 2011. In January 2011, the Company entered into an agreement with bank with an extension for the bank loan. The new term of bank loan is from January 14, 2011 to June 11, 2011. The adjustable interest rate is a rate per annum equal to the Prime Rate plus 107 percentage points of prime rate. The prime rate is based one-to-three-year loan interest rate released by The People's Bank of China. Jinzhong Deyu and Jinzhong Yuliang remain providing guarantees on the loan for a period of two years starting from June 11, 2011. This loan was paid off on May 11, 2011.</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right">-</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right">1,287,879</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD STYLE="padding-bottom: 2.5pt">Total</TD>
    <TD STYLE="padding-bottom: 2.5pt; font-weight: bold">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double; font-weight: bold">$</TD>
    <TD STYLE="border-bottom: black 2.25pt double; font-weight: bold; text-align: right">14,413,480</TD>
    <TD STYLE="padding-bottom: 2.5pt; font-weight: bold">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt; font-weight: bold">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double; font-weight: bold">$</TD>
    <TD STYLE="border-bottom: black 2.25pt double; font-weight: bold; text-align: right">2,631,364</TD>
    <TD STYLE="padding-bottom: 2.5pt; font-weight: bold">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

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    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.5in"><B>NOTE 13. NOTES PAYABLE</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Notes payable consisted of the following:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">December<BR> 31,</TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">December<BR> 31,</TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="width: 72%; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 2%; padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: black 1pt solid; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD STYLE="width: 10%; border-bottom: black 1pt solid; font-weight: bold; text-align: center">2011</TD>
    <TD STYLE="width: 1%; padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD STYLE="width: 2%; padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: black 1pt solid; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD STYLE="width: 10%; border-bottom: black 1pt solid; font-weight: bold; text-align: center">2010</TD>
    <TD STYLE="width: 1%; padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD STYLE="padding-bottom: 1pt">Bank notes payable to Jinzhong Haida Nongyi Trading Co., Ltd. issued by Bank of<BR> Communication at Beijing Gongzhifen branch, bearing no interest and no finance<BR> charge.This note is for August 17, 2011 through February 17, 2012.The note was<BR> obtained and issued by Detian Yu Biotechnology (Beijing) Co., Ltd. The note was<BR> paid off on March 7, 2012.</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">$</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right">1,588,840</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">$</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right">-</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD STYLE="padding-bottom: 2.5pt">Total</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double">$</TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right">1,588,840</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double">$</TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right">-</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 3%; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 14%; font-weight: bold">NOTE&nbsp;14.</TD>
    <TD STYLE="font-weight: bold; text-align: justify; width: 83%">ACCRUED EXPENSES</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Accrued expenses consisted of the following:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">December<BR> 31,</TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">December<BR> 31,</TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="width: 72%; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 2%; padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: black 1pt solid; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD STYLE="width: 10%; border-bottom: black 1pt solid; font-weight: bold; text-align: center">2011</TD>
    <TD STYLE="width: 1%; padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD STYLE="width: 2%; padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD STYLE="width: 1%; border-bottom: black 1pt solid; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD STYLE="width: 10%; border-bottom: black 1pt solid; font-weight: bold; text-align: center">2010</TD>
    <TD STYLE="width: 1%; padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD>Accrued VAT and other taxes</TD>
    <TD>&nbsp;</TD>
    <TD>$</TD>
    <TD STYLE="text-align: right">412,437</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>$</TD>
    <TD STYLE="text-align: right">877,112</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD>Accrued payroll</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">266,983</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">272,587</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD STYLE="padding-bottom: 1pt">Others</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right">469,785</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right">141,528</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="padding-bottom: 2.5pt">Total</TD>
    <TD STYLE="padding-bottom: 2.5pt; font-weight: bold">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double; font-weight: bold">$</TD>
    <TD STYLE="border-bottom: black 2.25pt double; font-weight: bold; text-align: right">1,149,205</TD>
    <TD STYLE="padding-bottom: 2.5pt; font-weight: bold">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt; font-weight: bold">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double; font-weight: bold">$</TD>
    <TD STYLE="border-bottom: black 2.25pt double; font-weight: bold; text-align: right">1,291,227</TD>
    <TD STYLE="padding-bottom: 2.5pt; font-weight: bold">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 3%; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 14%; font-weight: bold">NOTE&nbsp;15.</TD>
    <TD STYLE="width: 83%; font-weight: bold; text-align: justify">INCOME TAXES</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>United States</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company is incorporated in the United States of America
and is subject to the U.S. federal and state taxation.&nbsp;&nbsp;No provision for income taxes have been made as the Company has
no taxable income in the U.S..&nbsp;&nbsp;The applicable income tax rate for the Company for the years ended December 31, 2011
and 2010 was 34%.&nbsp;&nbsp;No tax benefit has been realized since a 100% valuation allowance has offset deferred tax asset resulting
from the net operating losses.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>British Virgin Islands</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">City Zone, a wholly-owned subsidiary of the Company, is incorporated
in the British Virgin Islands (&ldquo;BVI&rdquo;) and, under the current laws of the BVI, is not subject to income taxes.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Hong Kong</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Most Smart, a wholly-owned subsidiary of the Company, is incorporated
in Hong Kong.&nbsp;&nbsp;Most Smart is subject to Hong Kong taxation on its activities conducted in Hong Kong and income arising
in or derived from Hong Kong.&nbsp;&nbsp;No provision for income taxes have been made as Most Smart has no taxable income in Hong
Kong.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>People&rsquo;s Republic of China (PRC)</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Under the Enterprise Income Tax (&ldquo;EIT&rdquo;) Law of the
PRC, the standard EIT rate is 25%. The PRC subsidiaries of the Company are subject to PRC income taxes on an entity basis on income
arising in or derived from the tax jurisdiction in which they operate. According to the Tax Pronouncement [2008] No. 149 issued
by the State Administration of Tax of the PRC, the preliminary processing industry of agricultural products is entitled to EIT
exemption starting January 1, 2008. Three of the Company&rsquo;s wholly-owned subsidiaries located in the Shanxi Province, China,
including Jinzhong Deyu, Jinzhong Yongcheng, and Jinzhong Yuliang are subject to the EIT exemption. All other subsidiaries and
consolidated VIEs are subject to the 25% EIT rate.&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The provision for income taxes from continuing operations on
income consists of the following for the years ended December 31, 2011 and 2010:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center">For the Years Ended</TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center">Ended</TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="border-bottom: black 1pt solid; font-weight: bold; text-align: center">December 31,</TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="background-color: white">
    <TD STYLE="width: 72%; vertical-align: bottom; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 2%; vertical-align: top; padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD STYLE="width: 1%; vertical-align: top; border-bottom: black 1pt solid; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD STYLE="width: 10%; vertical-align: top; border-bottom: black 1pt solid; font-weight: bold; text-align: center">2011</TD>
    <TD STYLE="width: 1%; vertical-align: top; padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD STYLE="width: 2%; vertical-align: top; padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD STYLE="width: 1%; vertical-align: top; border-bottom: black 1pt solid; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD STYLE="width: 10%; vertical-align: top; border-bottom: black 1pt solid; font-weight: bold; text-align: center">2010</TD>
    <TD STYLE="width: 1%; vertical-align: bottom; padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD>Current income tax expense (benefit)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD>U.S</TD>
    <TD>&nbsp;</TD>
    <TD>$</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>$</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD STYLE="padding-bottom: 1pt">PRC</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right">-</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right">-</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="padding-bottom: 2.5pt">Total current expense (benefit)</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double">$</TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right">-</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double">$</TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right">-</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD>Deferred income tax expense (benefit)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD>U.S</TD>
    <TD>&nbsp;</TD>
    <TD>$</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>$</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD>PRC</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">(1,112,658</TD>
    <TD>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">(1,163,461</TD>
    <TD>)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD STYLE="padding-bottom: 1pt">Less: Income tax benefit attributable to discontinued operations</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right">1,297,042</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right">249,676</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="padding-bottom: 2.5pt">Income tax expense (benefit) attributable to continuing operations</TD>
    <TD STYLE="padding-bottom: 2.5pt; font-weight: bold">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double; font-weight: bold">$</TD>
    <TD STYLE="border-bottom: black 2.25pt double; font-weight: bold; text-align: right">184,384</TD>
    <TD STYLE="padding-bottom: 2.5pt; font-weight: bold">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt; font-weight: bold">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double; font-weight: bold">$</TD>
    <TD STYLE="border-bottom: black 2.25pt double; font-weight: bold; text-align: right">(913,785</TD>
    <TD STYLE="padding-bottom: 2.5pt; font-weight: bold">)</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The following is a reconciliation of the statutory tax rate
to the effective tax rate of the continuing operations for the years ended December 31, 2011 and 2010:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center">For The Years Ended</TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="border-bottom: black 1pt solid; font-weight: bold; text-align: center">December 31,</TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="background-color: white">
    <TD STYLE="width: 72%; vertical-align: bottom; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 2%; vertical-align: top; padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD STYLE="width: 1%; vertical-align: top; border-bottom: black 1pt solid; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD STYLE="width: 10%; vertical-align: top; border-bottom: black 1pt solid; font-weight: bold; text-align: center">2011</TD>
    <TD STYLE="width: 1%; vertical-align: top; padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD STYLE="width: 2%; vertical-align: top; padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD STYLE="width: 1%; vertical-align: top; border-bottom: black 1pt solid; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD STYLE="width: 10%; vertical-align: top; border-bottom: black 1pt solid; font-weight: bold; text-align: center">2010</TD>
    <TD STYLE="width: 1%; vertical-align: top; padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD>Expected U.S. income tax expense</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">34.0</TD>
    <TD>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">34.0</TD>
    <TD>%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD>Increase (decrease) in taxes resulting from:</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD>Tax-exempt income</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-39.0</TD>
    <TD>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-48.6</TD>
    <TD>%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD>Foreign tax differential</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">0.9</TD>
    <TD>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">2.8</TD>
    <TD>%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD>Change in valuation allowance</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">5.6</TD>
    <TD>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">2.9</TD>
    <TD>%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD>Intercompany elimination</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-0.6</TD>
    <TD>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">0.9</TD>
    <TD>%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD STYLE="padding-bottom: 1pt">Other</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right">-</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right">0.2</TD>
    <TD STYLE="padding-bottom: 1pt">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="padding-bottom: 2.5pt">Income tax benefit attributable to continuing operations</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right">0.9</TD>
    <TD STYLE="padding-bottom: 2.5pt">%</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right">-7.8</TD>
    <TD STYLE="padding-bottom: 2.5pt">%</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Significant components of the Company&rsquo;s net deferred tax
assets as of December 31, 2011 and 2010 are presented in the following table:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">December 31,</TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">December 31,</TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="background-color: white">
    <TD STYLE="width: 72%; vertical-align: bottom; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 2%; vertical-align: top; padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD STYLE="width: 1%; vertical-align: top; border-bottom: black 1pt solid; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD STYLE="width: 10%; vertical-align: top; border-bottom: black 1pt solid; font-weight: bold; text-align: center">2011</TD>
    <TD STYLE="width: 1%; vertical-align: top; padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD STYLE="width: 2%; vertical-align: top; padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD STYLE="width: 1%; vertical-align: top; border-bottom: black 1pt solid; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD STYLE="width: 10%; vertical-align: top; border-bottom: black 1pt solid; font-weight: bold; text-align: center">2010</TD>
    <TD STYLE="width: 1%; vertical-align: top; padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD>Deferred tax assets</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD>Net operating loss carryforwards (NOL)</TD>
    <TD>&nbsp;</TD>
    <TD>$</TD>
    <TD STYLE="text-align: right">2,255,365</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>$</TD>
    <TD STYLE="text-align: right">1,458,421</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD STYLE="padding-bottom: 1pt">Share-based compensation</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right">351,203</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right">197,126</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD>Gross deferred tax assets</TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: right">2,606,568</TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: right">1,655,547</TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD STYLE="padding-bottom: 1pt">Less: Valuation allowance</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right">(1,813,056</TD>
    <TD STYLE="padding-bottom: 1pt">)</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right">(466,649</TD>
    <TD STYLE="padding-bottom: 1pt">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="padding-bottom: 2.5pt">Total deferred tax assets, net</TD>
    <TD STYLE="padding-bottom: 2.5pt; font-weight: bold">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double; font-weight: bold">$</TD>
    <TD STYLE="border-bottom: black 2.25pt double; font-weight: bold; text-align: right">793,512</TD>
    <TD STYLE="padding-bottom: 2.5pt; font-weight: bold">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt; font-weight: bold">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double; font-weight: bold">$</TD>
    <TD STYLE="border-bottom: black 2.25pt double; font-weight: bold; text-align: right">1,188,898</TD>
    <TD STYLE="padding-bottom: 2.5pt; font-weight: bold">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<!-- Field: Page; Sequence: 110; Value: 1 -->
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    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 3%; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 14%; font-weight: bold">NOTE&nbsp;16.</TD>
    <TD STYLE="width: 83%; font-weight: bold; text-align: justify">NET INCOME PER SHARE</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Reconciliation of the basic and diluted net income per share
was as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">Amounts</TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">Shares</TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">Per Share</TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; font-weight: bold; text-align: center">(Numerator)</TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; font-weight: bold; text-align: center">(Denominator)</TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; font-weight: bold; text-align: center">Amount</TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD STYLE="font-weight: bold">For the year ended December 31, 2011:</TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD STYLE="width: 58%; padding-left: 13.5pt">Net income from continuing operations attributable to common stockholders - basic</TD>
    <TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%">$</TD>
    <TD STYLE="width: 10%; text-align: right">20,126,017</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 10%; text-align: right">10,522,432</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%">$</TD>
    <TD STYLE="width: 10%; text-align: right">1.91</TD>
    <TD STYLE="width: 1%">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD STYLE="padding-bottom: 1pt; padding-left: 13.5pt">Preferred dividends applicable to convertible preferred stocks</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right">427,917</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right">1,974,732</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD STYLE="padding-bottom: 2.5pt; padding-left: 13.5pt">Net income from continuing operations attributable to common stockholders - diluted</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double">$</TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right">20,553,934</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right">12,497,164</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD>$</TD>
    <TD STYLE="text-align: right">1.64</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD STYLE="padding-left: 13.5pt">Net income attributable to common stockholders - basic</TD>
    <TD>&nbsp;</TD>
    <TD>$</TD>
    <TD STYLE="text-align: right">17,335,442</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">10,522,432</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>$</TD>
    <TD STYLE="text-align: right">1.64</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD STYLE="padding-bottom: 1pt; padding-left: 13.5pt">Preferred dividends applicable to convertible preferred stocks</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right">427,917</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right">1,974,732</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD STYLE="padding-bottom: 2.5pt; padding-left: 13.5pt">Net income attributable to common stockholders - diluted</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double">$</TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right">17,763,359</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right">12,497,164</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD>$</TD>
    <TD STYLE="text-align: right">1.42</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD STYLE="font-weight: bold">For the year ended December 31, 2010:</TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD STYLE="padding-left: 13.5pt">Net income from continuing operations attributable to common stockholders - basic</TD>
    <TD>&nbsp;</TD>
    <TD>$</TD>
    <TD STYLE="text-align: right">12,258,733</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">8,445,880</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>$</TD>
    <TD STYLE="text-align: right">1.45</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD STYLE="padding-bottom: 1pt; padding-left: 13.5pt">Preferred dividends applicable to convertible preferred stocks</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right">327,721</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right">1,803,161</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD STYLE="padding-bottom: 2.5pt; padding-left: 13.5pt">Net income from continuing operations attributable to common stockholders - diluted</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double">$</TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right">12,586,454</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right">10,249,041</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD>$</TD>
    <TD STYLE="text-align: right">1.23</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD STYLE="padding-left: 13.5pt">Net income attributable to common stockholders - basic</TD>
    <TD>&nbsp;</TD>
    <TD>$</TD>
    <TD STYLE="text-align: right">11,502,253</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">8,445,880</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>$</TD>
    <TD STYLE="text-align: right">1.36</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD STYLE="padding-bottom: 1pt; padding-left: 13.5pt">Preferred dividends applicable to convertible preferred stocks</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right">327,721</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right">1,803,161</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD STYLE="padding-bottom: 2.5pt; padding-left: 13.5pt">Net income attributable to common stockholders - diluted</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double">$</TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right">11,829,974</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right">10,249,041</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD>$</TD>
    <TD STYLE="text-align: right">1.16</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 3%; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 14%; font-weight: bold">NOTE&nbsp;17.</TD>
    <TD STYLE="width: 83%; font-weight: bold; text-align: justify">SHAREHOLDERS&rsquo; EQUITY</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Reverse Acquisition and Private Placement</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On April 27, 2010, we completed the acquisition of City Zone
by means of a share exchange.&nbsp;&nbsp;Simultaneously with the acquisition, we completed a private placement for gross proceeds
of $8,211,166 from the sale of our securities to accredited investors at $4.40 per unit, with each &ldquo;Unit&rdquo; consisting
of one share of Series A Convertible Preferred Stock, and a warrant to purchase 0.4 shares of common stock with an exercise price
of $5.06 per share.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On April 27, 2010, the (the &ldquo;Closing Date&rdquo;), we
entered into a Share Exchange Agreement (&ldquo;Exchange Agreement&rdquo;) by and among (i) City Zone, (ii) City Zone&rsquo;s shareholders,
(iii) us, and (iv) our principal stockholders.&nbsp;&nbsp;Pursuant to the terms of the Exchange Agreement, Expert Venture Limited,
a company organized under the laws of the British Virgin Islands (&ldquo;Expert Venture&rdquo;) and the other City Zone shareholders
will transfer to us all of the shares of City Zone in exchange for the issuance of 8,736,932 shares of our common stock as set
forth in the Exchange Agreement, so that Expert Venture and other minority shareholders of City Zone shall own at least a majority
of our outstanding shares (the &ldquo;Share Exchange&rdquo;).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our directors approved the Exchange Agreement and the transactions
contemplated thereby.&nbsp;&nbsp;The directors of City Zone also approved the Exchange Agreement and the transactions contemplated
thereby.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As a result of the Exchange Agreement effective April 27, 2010,
we acquired 100% of the equity interest of City Zone, the business and operations of which now constitutes our primary business
and operations through its wholly-owned PRC subsidiaries.&nbsp;&nbsp;Specifically, as a result of the Exchange Agreement:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px; font-family: Symbol">&middot;</TD>
    <TD>We issued 8,736,932 shares of our common stock to the City Zone Shareholders;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD STYLE="font-family: Symbol">&middot;</TD>
    <TD>The ownership position of our shareholders who were holders of common stock immediately prior to the Exchange Agreement changed from 100% to 9.5% (fully diluted) of our outstanding shares; and</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px; font-family: Symbol">&middot;</TD>
    <TD>City Zone Shareholders were issued our common stock constituting approximately 65.71% of our fully diluted outstanding shares.</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Immediately after the Share Exchange, we entered into a securities
purchase agreement (the &ldquo;Purchase Agreement&rdquo;) with certain accredited investors (the &ldquo;Investors&rdquo;) for the
issuance and sale in a private placement of 1,866,174 Units, consisting of 1,866,174 shares of our Series A Convertible Preferred
Stock, par value $0.001 per share (the &ldquo;Investor Shares&rdquo;) and Series A Warrants to purchase up to 746,479 shares of
our Common Stock (the &ldquo;Warrants&rdquo;), for aggregate gross proceeds of $8,211,166 (the &ldquo;Private Placement&rdquo;).&nbsp;&nbsp;In
connection with the Private Placement, we also entered into a registration rights agreement (the &ldquo;Registration Rights Agreement&rdquo;)
with the Investors, in which we agreed to file a registration statement (the &ldquo;Registration Statement&rdquo;) with the Securities
and Exchange Commission (the &ldquo;SEC&rdquo;) to register for resale the Investor Shares, within 60 calendar days of the Closing
Date of the Private Placement, and use our best efforts to have the Registration Statement declared effective within 180 calendar
days of the Closing Date of the Private Placement.&nbsp;&nbsp;We will pay monthly liquidated damages in cash to each Investor of
0.5% of the dollar amount of the purchase price of the Investor Shares, on a pro rata basis, for each 30 day period the Registration
Statement is not declared effective, up to a maximum of 8% of the purchase price.&nbsp;&nbsp;However, no liquidated damages shall
be paid with respect to any shares that we are not permitted to include in the Registration Statement due to the SEC&rsquo;s application
of Rule 415.&nbsp; On October 21, 2010, the SEC declared our Form&nbsp;S-1 effective.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;In connection with the Private Placement, Maxim Group,
LLC acted as our financial advisor and placement agent (the &ldquo;Placement Agent&rdquo;).&nbsp;&nbsp;Maxim received a cash fee
equal to 7% of the gross proceeds of the Private Placement.&nbsp;&nbsp;Maxim also received warrants to purchase 171,911 shares
of our Common Stock at a price per share of $5.06 (the &ldquo;Placement Agent Warrants&rdquo;).&nbsp;&nbsp;Pursuant to the Original
Placement Agreement entered into by Detian Yu on January 27, 2010 with the Placement Agent (the &ldquo; Original Placement Agreement&rdquo;),
we engaged the Placement Agent to act as the exclusive agent to sell the Units in this Offering on a &ldquo;commercially reasonable
efforts basis.&rdquo;&nbsp;&nbsp;The Placement Agent received cash fees equal to 7% of our gross proceeds received in connection
with an equity financing and a cash corporate finance fee equally to 1% of our gross proceeds raised in the Offering, payable at
the time of each Closing; five (5) year warrants to purchase that number of Series A Preferred Shares and Shares equal to 5% of
the aggregate number of Series A Preferred Shares and Shares underlying the Units issued pursuant to this Offering; and a non-refundable
cash retainer (or restricted shares) of $25,000 payable upon the execution of the retainer agreement.&nbsp;&nbsp;We also agreed
to pay for all of the reasonable expenses the Placement Agent incurred in connection with the Offering.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On May 10, 2010, we closed on the second and final round (the
&ldquo;Final Closing&rdquo;) of the private placement offering for the issuance and sale of 589,689 Units, consisting of 589,689
shares of Series A Convertible Preferred Stock and 235,883 five-year Series A Warrants with an exercise price of $5.06 per share,
to certain accredited investors (the &ldquo;Investors&rdquo;) for total gross proceeds of $2,594,607.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We raised an aggregate amount of $10,805,750 in the Offering.&nbsp;&nbsp;As
of the Final Closing, we had 9,999,999 shares of common stock issued and outstanding.&nbsp;&nbsp;In connection with the offering,
we issued a total of 2,455,863 shares of Series A Convertible Preferred Shares and 982,362 Series A Warrants to the investors.&nbsp;&nbsp;Additionally,
the Placement Agent received 171,911 warrants.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Make Good Escrow Agreement</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">We also entered into a make good escrow agreement with the Investors
(the &ldquo;Securities Escrow Agreement&rdquo;), pursuant to which the City Zone Shareholders placed a number of shares of Common
Stock equal to 100% of the number of shares of Common Stock underlying the Investor Shares, which were initially convertible into
1,866,174 shares of Common Stock (the &ldquo;Escrow Shares&rdquo;) in an escrow account.&nbsp;&nbsp;The Escrow Shares were being
held as security in the event we did not achieve $11 million in audited net income for the fiscal year 2010 (the &ldquo;2010 Performance
Threshold&rdquo;) and $15 million in audited net income for the fiscal year 2011 (the &ldquo;2011 Performance Threshold&rdquo;).&nbsp;&nbsp;If
we achieved the 2010 Performance Threshold and the 2011 Performance Threshold, the Escrow Shares would be released back to the
City Zone Shareholders.&nbsp;&nbsp;If either the 2010 Performance Threshold or 2011 Performance Threshold was not achieved, an
aggregate number of Escrow Shares (such number to be determined by the formula set forth in the Securities Escrow Agreement) would
be distributed to the Investors, based upon the number of Investor Shares (on an as-converted basis) purchased in the Private Placement
and still beneficially owned by such Investor, or such successor, assign or transferee, at such time.&nbsp;&nbsp;If any Investor
transfers Investor Shares purchased pursuant to the Purchase Agreement, the rights to the Escrow Shares shall similarly transfer
to such transferee, with no further action required by the Investor, the transferee or us.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Common Stock&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As of the Final Closing, we had 9,999,999 shares of common stock
issued and outstanding. Between the Final Closing date to December 31, 2011, an aggregate of 524,775 shares of Series A Preferred
were converted to 524,775 common stocks. For the year ended December 31, 2011, an aggregate of 40,000 common stocks were issued
for investor relations services, valued at the market price of the Company&rsquo;s common stock at the time of issuance, or $78,000
in total, and charged to operating expenses. As of December 31, 2011, total number of common stock issued and outstanding was 10,564,774
shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Series A Convertible Preferred Stock</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The holders of Series A Convertible Preferred Shares (&ldquo;Series
A Preferred&rdquo;) will be entitled to receive, cumulative dividends in preference to the holders of Common Stock at an annual
rate of 5% of the applicable per Series A Preferred original purchase price (the &ldquo;Dividend Preference&rdquo; and the &ldquo;Dividends&rdquo;).&nbsp;&nbsp;If,
after the Dividend Preference has been fully paid or declared and set apart, the Company shall make any additional distributions,
then the holders of Series A Preferred shall participate with the holders of common stock on an as-converted basis with respect
to such distributions.&nbsp;&nbsp;Dividends will be payable in cash or stock, at the Company&rsquo;s option.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Upon any liquidation, dissolution or winding up of the Company,
the holders of Series A Preferred will be entitled to receive, out of the assets of the Company available for distribution to its
stockholders, an amount equal to $4.40 per share (the amount, the &ldquo;Liquidation Preference Amount&rdquo;), before any payment
shall be made or any assets distributed to the holders of the common stock (the &ldquo;Liquidation Preference&rdquo;).</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Each holder of Series A Preferred will have the right, at the
option of the holder at any time on or after the issuance of the Series A Preferred, without the payment of additional consideration,
to convert Series A Preferred into a number of fully paid and nonassessable shares of common stock equal to: (i) the Liquidation
Preference Amount of such share divided by (ii) the Conversion Price in effect as of the date of the conversion.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">For a period of two (2) years following the issuance of the
Series A Preferred, the conversion price of Series A Preferred will be subject to adjustment for issuances of common stock (or
securities convertible or exchangeable into shares of Common Stock) at a purchase price less than the conversion price of the Series
A Preferred. &nbsp; The Series A Preferred Stock does not contain any repurchase or redemption rights.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Current accounting standards require that we evaluate the terms
and conditions of convertible preferred stock to determine (i) if the nature of the hybrid financial instrument, based upon its
economic risks, is more akin to an equity contract or a debt contract for purposes of establishing classification of the embedded
conversion feature and (ii) the classification of the host or hybrid financial instrument.&nbsp;&nbsp;Based upon a review of the
terms and conditions of the Series A Preferred, the Company has concluded that the financial instrument is more akin to an equity
financial instrument.&nbsp;&nbsp;The major consideration underlying this conclusion is that the Series A Preferred is a perpetual
financial instrument with no stated maturity or redemption date, or other redemption that is not within the Company&rsquo;s control.&nbsp;&nbsp;Other
considerations in support of the equity conclusion included the voting rights and conversion feature into common shares.&nbsp;&nbsp;While
the cumulative dividend feature may, in some instances, be likened to a debt-type coupon, the absence of a stated maturity date
was determined to establish the cumulative dividend as a residual return, which does not obviate the equity nature of the financial
instrument.&nbsp;&nbsp;Further, there are no cash redemption features that are not within the control of our management.&nbsp;&nbsp;As
a result, classification in stockholders&rsquo; equity is appropriate for the Series A Preferred.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As of December 31, 2011, an aggregate of 524,775 shares of Series
A Preferred were converted to common stocks. On July 29, 2011, 66,739 shares of Series A Preferred were issued as dividends to
the shareholders of Series A Preferred. As of December 31, 2011, total number of Series A Preferred Shares issued and outstanding
was 1,997,467 shares.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">For the year ended December 31, 2011, the Company recorded $427,917
preferred dividend expense, of which $212,420 was distributed in 66,739 shares of Series A Preferred on July 29, 2011, valued approximating
to their fair value at the time of issuance. The remaining $219,712 was accrued as preferred dividend payable on the consolidated
balance sheet as of December 31, 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">For the year ended December 31, 2010, the Company recorded $327,721
preferred dividend expense, of which $96,051 was distributed in cash on July 22, 2010 and the remaining $231,670 was accrued as
preferred dividend payable on the consolidated balance sheet as of December 31, 2010.&nbsp;&nbsp;The distribution of $231,670 preferred
dividend was made on January 28, 2011.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Series A Warrants</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The warrants issued to the investors and placement agent have
strike prices of $5.06 and $4.84, respectively, and expire in five years.&nbsp;&nbsp;The strike prices are subject to adjustment
only for changes in our capital structure, but allow for cashless exercise under a formula that limits the aggregate issuable common
shares.&nbsp;&nbsp;There are no redemption features embodied in the warrants and they have met the conditions provided in current
accounting standards for equity classification.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">There were 982,362 Series A Warrants sold together with the
Series A Preferred to the investors, which:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 19px">(a)</TD>
    <TD>entitle the holder to purchase 1 shares of Common Stock;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>(b)</TD>
    <TD>are exercisable at any time after consummation of the transactions contemplated by the Securities Purchase Agreement and shall expire on the date that is five years following the original issuance date of the Series A Warrants;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>(c)</TD>
    <TD>are exercisable, in whole or in part, at an exercise price of $5.06 per share of Common Stock; and</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>(d)</TD>
    <TD>are exercisable only for cash (except that there will be a cashless exercise option if, after twelve months from the Issue Date, (i) the Per Share Market Value of one share of Common Stock is greater than the Warrant Price (at the date of calculation) and (ii) a registration statement under the Securities Act providing for the resale of the Common Stock issuable upon exercise of Warrant Shares is not in effect, in lieu of exercising this Warrant by payment of cash).</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Aggregate gross proceeds from the two closing events amounted
to $10,805,750.&nbsp;&nbsp;Direct financing costs totaled $1,742,993 of which $1,555,627 was paid in cash and the balance of $187,366
represents the fair value of warrants linked to 171,911 shares of our common stock that were issued to a placement agent.&nbsp;&nbsp;The
proceeds and the related direct financing costs were allocated to the Series A Preferred and the warrants (classified in paid-in
capital) based upon their relative fair values.&nbsp;&nbsp;The following table summarizes the components of the allocation:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD>
    <TD NOWRAP COLSPAN="2" STYLE="border-bottom: black 1pt solid; font-weight: bold; text-align: center">Series A<BR> Preferred</TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; font-weight: bold; text-align: center">Paid-in<BR> Capital<BR> Warrants</TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; font-weight: bold; text-align: center">Total</TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD STYLE="width: 55%">Fair values of financial instruments</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">$</TD>
    <TD STYLE="width: 12%; text-align: right">10,248,092</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">$</TD>
    <TD STYLE="width: 12%; text-align: right">1,039,978</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">$</TD>
    <TD STYLE="width: 12%; text-align: right">11,288,070</TD>
    <TD STYLE="width: 1%">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD>Gross proceeds</TD>
    <TD>&nbsp;</TD>
    <TD>$</TD>
    <TD STYLE="text-align: right">9,810,227</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>$</TD>
    <TD STYLE="text-align: right">995,523</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>$</TD>
    <TD STYLE="text-align: right">10,805,750</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD>Direct financing costs</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">(1,581,550</TD>
    <TD>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">(161,443</TD>
    <TD>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">(1,742,993</TD>
    <TD>)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD STYLE="padding-bottom: 1pt">Fair value of placement agent warrants</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right">-</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right">187,366</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right">187,366</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double">$</TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right">8,228,677</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double">$</TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right">1,021,446</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double">$</TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right">9,250,123</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Fair value considerations:</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Our accounting for the sale of Series A Preferred and warrants,
and the issuance of warrants to the Placement Agent required the estimation of fair values of the financial instruments on the
financing inception date.&nbsp;&nbsp;The development of fair values of financial instruments requires the selection of appropriate
methodologies and the estimation of often subjective assumptions.&nbsp;&nbsp;We selected the valuation techniques based upon consideration
of the types of assumptions that market participants would likely consider in exchanging the financial instruments in market transactions.&nbsp;&nbsp;The
Series A Preferred was valued based upon a common stock equivalent method, enhanced by the cumulative dividend feature.&nbsp;&nbsp;The
dividend feature was valued as the estimated cash flows of the dividends discounted to present value using an estimated weighted
average cost of capital.&nbsp;&nbsp;The warrants were valued using a Black-Scholes-Merton Valuation Technique because it embodies
all of the requisite assumptions (including trading volatility, estimated terms and risk free rates) necessary to fair value these
instruments.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">These fair values were necessary to develop relative fair value
calculation for allocations of certain elements of the financing arrangement, principally proceeds and the related direct financing
costs.&nbsp;&nbsp;The following tables reflect assumptions used to determine the fair value of the Series A Preferred stock:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Fair Value<BR> Hierarchy<BR> Level</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Series A<BR> Preferred<BR> April 27,<BR> 2010</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Series A<BR> Preferred<BR> May 10,<BR> 2010</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 64%">Indexed common shares</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 9%; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 9%; text-align: right">1,866,174</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 9%; text-align: right">589,689</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Components of fair value:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Common stock equivalent value</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">6,631,403</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">2,083,094</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Dividend feature</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">659,821</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">209,439</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">7,791,224</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">2,292,533</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Significant assumptions:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Common stock price</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3.55</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3.53</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Horizon for dividend cash flow projection</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2.00</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2.00</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Weighted average cost of capital ("WACC")</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">15.91</TD><TD STYLE="text-align: left">%</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">15.55</TD><TD STYLE="text-align: left">%</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Fair value hierarchy of the above assumptions can be categorized
as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 14px">&nbsp;</TD>
    <TD STYLE="width: 24px">(1)</TD>
    <TD>Level 1 inputs are quoted prices in active markets for identical assets and liabilities, or derived there from.&nbsp;&nbsp;There were no level 1 inputs.</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.3in; text-indent: -0.15in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 14px">&nbsp;</TD>
    <TD STYLE="width: 24px">(2)</TD>
    <TD>Level 2 inputs are significant other observable inputs. There were no level 2 inputs.</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.3in; text-indent: -0.15in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 14px">&nbsp;</TD>
    <TD STYLE="width: 24px">(3)</TD>
    <TD>Level 3 inputs are unobservable inputs. Inputs for which any parts are level 3 inputs are classified as level 3 in their entirety.</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 48px">&nbsp;</TD>
    <TD STYLE="width: 24px">&#9679;</TD>
    <TD>Stock price- Given that management did not believe our trading market price was indicative of the fair value of our common stock at the measurement date, the common stock price value was derived implicitly from an iterative process based upon the assumption that the consideration of the Private Placement was the result of an arm&rsquo;s length transaction. The Private Placement was composed of Series A Preferred Stock and Series A Warrants which were both indexed to our common stock; accordingly, we used an iterative process to determine the value of our common stock in order for the fair value of the Series A Preferred and Series A Warrants to equal the amount of consideration received in the Private Placement.</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 48px">&nbsp;</TD>
    <TD STYLE="width: 24px">&#9679;</TD>
    <TD>Dividend horizon- We estimated the horizon for dividend payment at 2 years.</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 48px">&nbsp;</TD>
    <TD STYLE="width: 24px">&#9679;</TD>
    <TD>WACC- The rates utilized to discount the cumulative dividend cash flows to their present values were based on a weighted average cost of capital of 18.94% and 18.60%, as of April 27, 2010 and May 10, 2010, respectively. This discount rate was determined after consideration of the rate of return on debt capital and equity that typical investors would require in an investment in companies similar in size and operating in similar markets as Deyu Agriculture Corporation. The cost of equity was determined using a build-up method which begins with a risk free rate and adds expected risk premiums designed to reflect the additional risk of the investment. Additional premiums or discounts related specifically to us and the industry are also added or subtracted to arrive at the final cost of equity rate. The cost of debt was determined based upon available financing terms.</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 48px">&nbsp;</TD>
    <TD STYLE="width: 24px">&#9679;</TD>
    <TD>Significant inputs and assumptions underlying the model calculations related to the warrant valuations are as follows:</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The following tables reflect assumptions used to determine the
fair value of the Warrants:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center">April 27, 2010</TD><TD STYLE="font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center">May 10, 2010</TD><TD STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="text-align: center">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Fair Value<BR> Hierarchy<BR> Level</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Investor<BR> warrants</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Agent<BR> warrants</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Investor<BR> warrants</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Agent<BR> Warrants</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">&nbsp;</TD><TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="text-align: right">&nbsp;</TD><TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 40%">Indexed shares</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 9%; text-align: right">&nbsp;</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 9%; text-align: right">746,479</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 9%; text-align: right">130,632</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 9%; text-align: right">235,883</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 9%; text-align: right">41,279</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Exercise price</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">5.06</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4.84</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">5.06</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">4.84</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Significant assumptions:</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Stock price</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3.55</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3.55</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3.53</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3.53</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Remaining term</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">3</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">5 years</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">5 years</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">5 years</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">5 years</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Risk free rate</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2.39</TD><TD STYLE="text-align: left">%</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2.39</TD><TD STYLE="text-align: left">%</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2.24</TD><TD STYLE="text-align: left">%</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2.24</TD><TD STYLE="text-align: left">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Expected volatility</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">2</TD><TD STYLE="text-align: left">&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">45.25</TD><TD STYLE="text-align: left">%</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">45.25</TD><TD STYLE="text-align: left">%</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">45.47</TD><TD STYLE="text-align: left">%</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">45.47</TD><TD STYLE="text-align: left">%</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Fair value hierarchy of the above assumptions can be categorized
as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px">(1)</TD>
    <TD>There were no Level 1 inputs.</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.2in; text-indent: -0.2in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 24px">(2)</TD>
    <TD>Level 2 inputs include:</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 48px">&nbsp;</TD>
    <TD STYLE="width: 24px">&#9679;</TD>
    <TD>Risk-free rate- This rate is based on publicly-available yields on zero-coupon Treasury securities with remaining terms to maturity consistent with the remaining contractual term of the warrants</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 48px">&nbsp;</TD>
    <TD STYLE="width: 24px">&#9679;</TD>
    <TD>Expected volatility- We did not have a historical trading history sufficient to develop an internal volatility rate for use in the model. As a result, we have used a peer approach wherein the historical trading volatilities of certain companies with similar characteristics as ours and who had a sufficient trading history were used as an estimate of our volatility. In developing this model, no one company was weighted more heavily.</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 19px">&nbsp;</TD>
    <TD STYLE="width: 24px">(3)</TD>
    <TD>Level 3 inputs include:</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 48px">&nbsp;</TD>
    <TD STYLE="width: 24px">&#9679;</TD>
    <TD>Stock price- Given that management did not believe our trading market price was indicative of the fair value of our common stock at the measurement date, the stock price was determined implicitly from an iterative process based upon the assumption that the consideration of the Private Placement was the result of an arm&rsquo;s length transaction.</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 48px">&nbsp;</TD>
    <TD STYLE="width: 24px">&#9679;</TD>
    <TD>Remaining term- We do not have a history to develop the expected term for our warrants.&nbsp;&nbsp;Accordingly, we have used the contractual remaining term in our calculations.</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The following is a summary of the status and activity of warrants
outstanding as of December 31, 2010:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: left">&nbsp;</TD><TD COLSPAN="8" STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: center">Outstanding Warrants</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right">Exercise Price</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; font-weight: bold; text-align: right">Number of Warrants</TD><TD STYLE="padding-bottom: 1pt; font-weight: bold; text-align: left">&nbsp;</TD><TD STYLE="font-weight: bold; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: center; border-bottom: Black 1pt solid">Average Remaining Contractual Life</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 25%; text-align: right">5.06</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 25%; text-align: right">982,362</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 44%; text-align: center">3.32 years</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt; text-align: left">$</TD><TD STYLE="padding-bottom: 1pt; text-align: right">4.84</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">171,911</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="text-align: center; padding-bottom: 1pt">3.32 years</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt; text-align: right">Total</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 2.5pt double; text-align: left">&nbsp;</TD><TD STYLE="border-bottom: Black 2.5pt double; text-align: right">1,154,273</TD><TD STYLE="padding-bottom: 2.5pt; text-align: left">&nbsp;</TD><TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="text-align: center; padding-bottom: 2.5pt">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; font-weight: bold; text-align: center">Number of Warrants</TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD STYLE="width: 65%">Outstanding as of January 1, 2011</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 32%; text-align: right">1,154,273</TD>
    <TD STYLE="width: 1%">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD>Granted</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD>Forfeited</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="padding-bottom: 1pt">Exercised</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right">-</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD STYLE="padding-bottom: 2.5pt">Outstanding as of December 31, 2011</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right">1,154,273</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 3%; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 14%; font-weight: bold">NOTE&nbsp;18.</TD>
    <TD STYLE="width: 83%; font-weight: bold; text-align: justify">SHARE-BASED COMPENSATION</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As of December 31, 2011, the Company had one share-based compensation
plan as described below.&nbsp;&nbsp;The compensation cost that had been charged against income for the plan was $428,702 and $549,106
for the years ended December 31, 2011 and 2010 respectively.&nbsp;&nbsp;The related income tax benefit recognized was $150,046
and $192,187 for the years ended December 31, 2011 and 2010, respectively.&nbsp;&nbsp;A 100% valuation allowance was assessed against
the deferred tax assets derived from such tax benefit as of December 31, 2011 and 2010.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On November 4, 2010, the Company&rsquo;s Board of Directors
approved the Company&rsquo;s 2010 Share Incentive Plan (the &ldquo;Plan&rdquo;).&nbsp;&nbsp;Under the Plan, 1,000,000 shares of
the Company&rsquo;s common stock shall be allocated to and authorized for use pursuant to the terms of the Plan.&nbsp;&nbsp;On
November 8, 2010, a total of 931,000 non-qualified incentive stock options were approved by our Board of Directors and granted
under the Plan, including 851,000 options granted to the Company&rsquo;s executives and key employees (collectively, &ldquo;Employees&rdquo;)
and 80,000 options granted to consultants and independent directors of the Board (collectively, &ldquo;Non-employees&rdquo;), at
an exercise price of $4.40 per share.&nbsp;&nbsp;On December 15, 2010, 40,000 non-qualified incentive stock options were approved
by our Board of Directors and granted under the Plan to a consultant at an exercise price of $4.40 per share.&nbsp;&nbsp;The option
award granted in 2010 shall vest as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 9%; text-align: right">(i)</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 90%">33 1/3% of the option grants be vested one (1) month after the date of grant;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: right">(ii)</TD>
    <TD>&nbsp;</TD>
    <TD>33 1/3% of the option grants be vested twelve (12) months after the date of grant; and</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: right">(iii)</TD>
    <TD>&nbsp;</TD>
    <TD>33 1/3% of the option grants be vested twenty-four (24) months after the date of grant</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;The fair value of each option award was estimated on the
date of grant using a Black-Scholes option pricing model that uses the assumptions noted in the following table.&nbsp;&nbsp;The
model is based on the assumption that it is possible to set up a perfectly hedged position consisting of owning the shares of stock
and selling a call option on the stock.&nbsp;&nbsp;Any movement in the price of the underlying stock will be offset by an opposite
movement in the options value, resulting in no risk to the investor.&nbsp;&nbsp;This perfect hedge is riskless and, therefore,
should yield the riskless rate of return.&nbsp;&nbsp;As the Black-Scholes option pricing model applies to stocks that do not pay
dividends, we made an adjustment developed by Robert Merton to approximate the option value of a dividend-paying stock.&nbsp;&nbsp;Under
this adjustment method, it is assumed that the Company&rsquo;s stock will generate a constant dividend yield during the remaining
life of the options.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The following tables reflect assumptions used to determine the
fair value of the option award:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Options granted on November 8, 2010:</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="border-bottom: black 1pt solid; font-weight: bold">Exercisable Period</TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD>
    <TD NOWRAP COLSPAN="2" STYLE="border-bottom: black 1pt solid; font-weight: bold; text-align: center">12/8/2010 - 11/8/2020</TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD>
    <TD NOWRAP COLSPAN="2" STYLE="border-bottom: black 1pt solid; font-weight: bold; text-align: center">11/8/2011 - 11/8/2020</TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD>
    <TD NOWRAP COLSPAN="2" STYLE="border-bottom: black 1pt solid; font-weight: bold; text-align: center">11/8/2012 - 11/8/2020</TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD STYLE="width: 49%">Risk-free Rate (%)</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 14%; text-align: right">1.12</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 14%; text-align: right">1.27</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 14%; text-align: right">1.46</TD>
    <TD STYLE="width: 1%">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD>Expected Lives (years)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">5.04</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">5.50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">6.00</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD>Expected Volatility (%)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">46.10</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">44.49</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">43.04</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD>Expected forfeitures per year (%)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">0.00-18.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">0.00-18.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">0.00-18.00</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD>Dividend Yield (%)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">0.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">0.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">0.00</TD>
    <TD>&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><I>Options granted on December 15, 2010:</I></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="border-bottom: black 1pt solid">Exercisable Period</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD NOWRAP COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center">1/15/2011 - 12/15/2020</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD NOWRAP COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center">12/15/2011 - 12/15/2020</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD NOWRAP COLSPAN="2" STYLE="border-bottom: black 1pt solid; text-align: center">12/15/2012 - 12/15/2020</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD STYLE="width: 49%">Risk-free Rate (%)</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 14%; text-align: right">2.15</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 14%; text-align: right">2.32</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 14%; text-align: right">2.50</TD>
    <TD STYLE="width: 1%">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD>Expected Lives (years)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">5.04</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">5.50</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">6.00</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD>Expected Volatility (%)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">46.15</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">44.52</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">43.09</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD>Expected forfeitures per year (%)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">0.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">0.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">0.00</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD>Dividend Yield (%)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">0.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">0.00</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">0.00</TD>
    <TD>&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<!-- Field: Page; Sequence: 117; Value: 1 -->
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    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Fair value hierarchy of the above assumptions can be categorized
as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 19px">(1)</TD>
    <TD>There were no Level 1 inputs.</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.35in; text-indent: -0.1in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px">&nbsp;</TD>
    <TD STYLE="width: 19px">(2)</TD>
    <TD>Level 2 inputs include:</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 43px">&nbsp;</TD>
    <TD STYLE="width: 24px">&#9679;</TD>
    <TD>Risk-free rate- This rate is based on continuous compounding of publicly-available yields on U.S. Treasury securities with remaining terms to maturity consistent with the expected term of the options at the dates of grant.</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 43px">&nbsp;</TD>
    <TD STYLE="width: 24px">&#9679;</TD>
    <TD>Expected volatility- We did not have a historical trading history sufficient to develop an internal volatility rate for use in the model.&nbsp;&nbsp;As a result, we have used a peer approach wherein the historical trading volatilities of certain companies with similar characteristics as ours and who had a sufficient trading history were used as an estimate of our volatility.&nbsp;&nbsp;In developing this model, no one company was weighted more heavily.</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 24px; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 19px">(3)</TD>
    <TD STYLE="text-align: justify">Level 3 inputs include:</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 43px">&nbsp;</TD>
    <TD STYLE="width: 24px">&#9679;</TD>
    <TD>Expected lives- The expected lives of options granted were derived from the output of the option valuation model and represented the period of time that options granted are expected to be outstanding.</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in; text-indent: -0.25in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 43px">&nbsp;</TD>
    <TD STYLE="width: 24px">&#9679;</TD>
    <TD>Expected forfeitures per year- The expected forfeitures are estimated at the dates of grant and will be revised in subsequent periods pursuant to actual forfeitures, if significantly different from the previous estimates.</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The estimates of fair value from the model are theoretical values
of stock options and changes in the assumptions used in the model could result in materially different fair value estimates.&nbsp;&nbsp;The
actual value of the stock options will depend on the market value of the Company&rsquo;s common stock when the stock options are
exercised.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">A summary of option activity under the Plan as of December 31,
2011, and changes during the year then ended is presented below:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="border-bottom: black 1pt solid; font-weight: bold">Options</TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; font-weight: bold; text-align: center">Shares</TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD>
    <TD NOWRAP COLSPAN="2" STYLE="border-bottom: black 1pt solid; font-weight: bold; text-align: center">Weighted-<BR> Average<BR> Exercise<BR> Price</TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD>
    <TD NOWRAP STYLE="border-bottom: black 1pt solid; font-weight: bold; text-align: center">Weighted-<BR> Average<BR> Remaining<BR> Contractual<BR> Term</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD STYLE="width: 57%">Outstanding as of January 1, 2011</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 12%; text-align: right">971,000</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">$</TD>
    <TD STYLE="width: 12%; text-align: right">4.40</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 12%; text-align: right">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD>Granted</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD>Exercised</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="padding-bottom: 1pt">Forfeited</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right">(156,000</TD>
    <TD STYLE="padding-bottom: 1pt">)</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD>$</TD>
    <TD STYLE="text-align: right">4.40</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; text-align: right">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD STYLE="padding-bottom: 2.5pt">Outstanding as of December 31, 2011</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right">815,000</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD>$</TD>
    <TD STYLE="text-align: right">4.40</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: right">4.57 years</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="padding-bottom: 2.5pt">Exercisable as of December 31, 2011</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right">543,333</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD>$</TD>
    <TD STYLE="text-align: right">4.40</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: right">4.43 years</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD STYLE="padding-bottom: 2.5pt">Vested and expected to vest *</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right">672,145</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">$</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: right">4.40</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt; text-align: right">4.56 years</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">* Includes vested shares and unvested shares after a forfeiture
rate is applied.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">A summary of the status of the Company&rsquo;s unvested shares
as of December 31, 2011, and changes during the year ended December 31, 2011, is presented below:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<!-- Field: Page; Sequence: 118; Value: 1 -->
    <DIV STYLE="margin-top: 12pt; margin-bottom: 6pt; border-bottom: Black 1pt solid"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">F-<!-- Field: Sequence; Type: Arabic; Name: PageNo -->31<!-- Field: /Sequence --></TD></TR></TABLE></DIV>
    <DIV STYLE="page-break-before: always; margin-top: 6pt; margin-bottom: 12pt"><TABLE CELLPADDING="0" CELLSPACING="0" STYLE="width: 100%; font: 10pt Times New Roman, Times, Serif"><TR><TD STYLE="text-align: center; width: 100%">&nbsp;</TD></TR></TABLE></DIV>
    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: bottom">
    <TD NOWRAP STYLE="border-bottom: black 1pt solid; font-weight: bold">Unvested Shares</TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="border-bottom: black 1pt solid; font-weight: bold; text-align: center">Shares</TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD>
    <TD NOWRAP COLSPAN="2" STYLE="border-bottom: black 1pt solid; font-weight: bold; text-align: center">Weighted-<BR> Average<BR> Grant-<BR> Date Fair<BR> Value</TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD STYLE="width: 70%">Unvested as of January 1, 2011</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 12%; text-align: right">647,334</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%">$</TD>
    <TD STYLE="width: 12%; text-align: right">1,162,373</TD>
    <TD STYLE="width: 1%">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD>Granted</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD>Vested</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">(271,667</TD>
    <TD>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">(487,814</TD>
    <TD>)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="padding-bottom: 1pt">Forfeited</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right">(104,000</TD>
    <TD STYLE="padding-bottom: 1pt">)</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right">(186,746</TD>
    <TD STYLE="padding-bottom: 1pt">)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD STYLE="padding-bottom: 2.5pt">Unvested as of December 31, 2011</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right">271,667</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double">$</TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right">487,813</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 3%; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 14%; font-weight: bold">NOTE&nbsp;19.</TD>
    <TD STYLE="width: 83%; font-weight: bold; text-align: justify">RELATED PARTY TRANSACTIONS</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Transactions</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center">For The Years Ended</TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="border-bottom: black 1pt solid; font-weight: bold; text-align: center">Decmeber 31,</TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="background-color: white">
    <TD STYLE="width: 72%; vertical-align: bottom; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 2%; vertical-align: top; padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD STYLE="width: 1%; vertical-align: top; border-bottom: black 1pt solid; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD STYLE="width: 10%; vertical-align: top; border-bottom: black 1pt solid; font-weight: bold; text-align: center">2011</TD>
    <TD STYLE="width: 1%; vertical-align: top; padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD STYLE="width: 2%; vertical-align: top; padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD STYLE="width: 1%; vertical-align: top; border-bottom: black 1pt solid; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD STYLE="width: 10%; vertical-align: top; border-bottom: black 1pt solid; font-weight: bold; text-align: center">2010</TD>
    <TD STYLE="width: 1%; vertical-align: top; padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD>Sales to Beijing Yilian Gifts Tech. Development Co., Ltd.</TD>
    <TD>&nbsp;</TD>
    <TD>$</TD>
    <TD STYLE="text-align: right">3,250,946</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>$</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD>Sales to Tieling Zhongnong Agriculture Technology Development Co., Ltd.</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">1,114,581</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD STYLE="padding-bottom: 2.5pt">Sales to Beijing Doukounianhua Biotechnology Co., Ltd.</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right">21,471</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right">-</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Mr. Yongqin Ren, Vice President of the corn division of the
Company is the legal representative of Tieling Zhongnong Agriculture Technology Development Co., Ltd. Mr. Jianming Hao, Chief Executive
Officer of the Company is the Executive Director of Beijing Yilian Gifts Tech. Development Co., Ltd. Mr. Wenjun Tian, the President
and Executive Director of the Company is the Executive Director of Jinshang International Finance Leasing Co., Ltd. The prices
in the transactions with related parties were determined according to market price sold to or purchased from third parties.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The company purchased a batch of sunflower seed of RMB 16 million
($2,6 million) from Tieling Zhongnong Agriculture Technology Development Co., Ltd. in June, 2011 and returned the goods at original
cost for quality rejection.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Due from related parties</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">December 31,</TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">December 31,</TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="background-color: white">
    <TD STYLE="width: 72%; vertical-align: bottom; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 2%; vertical-align: top; padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD STYLE="width: 1%; vertical-align: top; border-bottom: black 1pt solid; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD STYLE="width: 10%; vertical-align: top; border-bottom: black 1pt solid; font-weight: bold; text-align: center">2011</TD>
    <TD STYLE="width: 1%; vertical-align: top; padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD STYLE="width: 2%; vertical-align: top; padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD STYLE="width: 1%; vertical-align: top; border-bottom: black 1pt solid; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD STYLE="width: 10%; vertical-align: top; border-bottom: black 1pt solid; font-weight: bold; text-align: center">2010</TD>
    <TD STYLE="width: 1%; vertical-align: top; padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Due from Beijing Yilian Gifts Tech. Development Co., Ltd.</TD>
    <TD>&nbsp;</TD>
    <TD>$</TD>
    <TD STYLE="text-align: right">468,976</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>$</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Due from Deyufarm Innovation Food (Beijing) Co., Ltd.</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">89,929</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Due from Beijing Doukounianhua Biotechnology Co., Ltd.</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">24,666</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 1pt">Due form Jinshang International Finance Leasing Co., Ltd.</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right">3,537</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right">-</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 2.5pt">Total</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double">$</TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right">587,108</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double">$</TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right">-</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Due to related parties</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">December 31,</TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">December 31,</TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="background-color: white">
    <TD STYLE="width: 72%; vertical-align: bottom; padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="width: 2%; vertical-align: top; padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD STYLE="width: 1%; vertical-align: top; border-bottom: black 1pt solid; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD STYLE="width: 10%; vertical-align: top; border-bottom: black 1pt solid; font-weight: bold; text-align: center">2011</TD>
    <TD STYLE="width: 1%; vertical-align: top; padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD STYLE="width: 2%; vertical-align: top; padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD STYLE="width: 1%; vertical-align: top; border-bottom: black 1pt solid; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD STYLE="width: 10%; vertical-align: top; border-bottom: black 1pt solid; font-weight: bold; text-align: center">2010</TD>
    <TD STYLE="width: 1%; vertical-align: top; padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold; text-align: right">&nbsp;</TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>Due to Dongsheng International Investment Co., Ltd.</TD>
    <TD>&nbsp;</TD>
    <TD>$</TD>
    <TD STYLE="text-align: right">2,899,633</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>$</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Due to Mr. Wenjun Tian</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">2,542,144</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="padding-bottom: 1pt">Due to Deyufarm Innovation Food(Beijing) Co., Ltd.</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right">3,338</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="padding-bottom: 2.5pt">Total</TD>
    <TD STYLE="padding-bottom: 2.5pt; font-weight: bold">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double; font-weight: bold">$</TD>
    <TD STYLE="border-bottom: black 2.25pt double; font-weight: bold; text-align: right">5,445,115</TD>
    <TD STYLE="padding-bottom: 2.5pt; font-weight: bold">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt; font-weight: bold">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double; font-weight: bold">$</TD>
    <TD STYLE="border-bottom: black 2.25pt double; font-weight: bold; text-align: right">-</TD>
    <TD STYLE="padding-bottom: 2.5pt; font-weight: bold">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Mr. Wenjun Tian, the President and Executive Director of the
Company is also the President and Executive Director of Dongsheng International Investment Co., Ltd. Those advances as of December
31, 2011 and 2010 are unsecured, bear no interest and no due date is specified.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Guarantees</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As of December 31, 2011, Zhongyuan Guoxin Credit Guarantee Co.,
Ltd., China Agriculture Credit Guarantee Co., Ltd., Tian Wenjun and Jianming Hao provided guarantees on short-term loans obtained
by Detain Yu. Yuci Jinmao Food Processing Factory of which the legal representative is Junlian Zheng, the wife of Junde Zhang,
Vice President of the Company provided guarantees on short-term loans obtained by Jinzhong Yongcheng and Jinzhong Yulian.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As of December 31, 2010, Jinzhong Deyu provided guarantees on
short-term loans obtained by Jinzhong Yuliang and Jinzhong Yongcheng. Jinzhong Yuliang also provided guarantees on a short-term
loan obtained by Jinzhong Yongcheng.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 3%; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 14%; font-weight: bold">NOTE&nbsp;20.</TD>
    <TD STYLE="width: 83%; font-weight: bold; text-align: justify">SEGMENT REPORTING</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company defined reportable segments according to ASC Topic
280. In the fourth quarter of 2011, the management changed the structure of allocating resources and assessing performance of the
group. The new three segments were identified primarily based on the structure of allocating resources and assessing performance
of the group, including corn division, grain division and bulk trade division. The segment reporting information for the year ended
December 31, 2011 was based on these three segments and that for the year ended December 31, 2010 was restated.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The corn division is in the business of purchasing corns from
farmers, processing simply and distributing to agricultural product trading companies through wholesale.&nbsp;&nbsp;The business
of grain division is conducted by purchasing of grains from farmers and distributing to wholesalers and supermarkets after processing
with our own brand names, including &ldquo;Deuu&rdquo; and &ldquo;Shi-Tie&rdquo; for certified organic grain products.&nbsp;&nbsp;The
business of bulk trading division is conducted by bulk purchasing and selling of raw grain.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-weight: bold; text-align: center">For The Year Ended</TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">Corn</TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">Grain</TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">Bulk<BR>
Trading</TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">&nbsp;</TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold; text-align: center">&nbsp;</TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="background-color: white">
    <TD STYLE="vertical-align: bottom; padding-bottom: 1pt; font-weight: bold; text-align: center">December 31, 2011</TD>
    <TD STYLE="vertical-align: bottom; padding-bottom: 1pt; font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="vertical-align: top; border-bottom: black 1pt solid; font-weight: bold; text-align: center">Division</TD>
    <TD STYLE="vertical-align: top; padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD STYLE="vertical-align: top; padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="vertical-align: top; border-bottom: black 1pt solid; font-weight: bold; text-align: center">Division</TD>
    <TD STYLE="vertical-align: top; padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD STYLE="vertical-align: top; padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="vertical-align: top; border-bottom: black 1pt solid; font-weight: bold; text-align: center">Division</TD>
    <TD STYLE="vertical-align: top; padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD STYLE="vertical-align: top; padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="vertical-align: top; border-bottom: black 1pt solid; font-weight: bold; text-align: center">Others</TD>
    <TD STYLE="vertical-align: top; padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD STYLE="vertical-align: top; padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" STYLE="vertical-align: top; border-bottom: black 1pt solid; font-weight: bold; text-align: center">Total</TD>
    <TD STYLE="vertical-align: bottom; padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD STYLE="width: 30%">Revenues from external customers</TD>
    <TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%">$</TD>
    <TD STYLE="width: 10%; text-align: right">177,723,149</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%">$</TD>
    <TD STYLE="width: 10%; text-align: right">40,507,527</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%">$</TD>
    <TD STYLE="width: 10%; text-align: right">43,345,990</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%">$</TD>
    <TD STYLE="width: 10%; text-align: right">-</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%">$</TD>
    <TD STYLE="width: 10%; text-align: right">261,576,666</TD>
    <TD STYLE="width: 1%">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD>Intersegment revenues</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD>Interest revenue</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">33,733</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">3,867</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">4,469</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">90</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">42,159</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD>Interest expense</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">(608,337</TD>
    <TD>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">(119,835</TD>
    <TD>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">(77,429</TD>
    <TD>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">(805,601</TD>
    <TD>)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD>Net interest (expense) income</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">(574,604</TD>
    <TD>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">(115,968</TD>
    <TD>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">(72,960</TD>
    <TD>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">90</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">(763,442</TD>
    <TD>)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD>Depreciation and amortization</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">479,538</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">475,854</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">92</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">23,813</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">979,297</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD>Noncontrolling interest</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">38,673</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">38,673</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD>Segment net profit (loss)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">19,388,742</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">2,500,612</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">2,964,146</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">(4,338,239</TD>
    <TD>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">20,515,261</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR>
    <TD NOWRAP STYLE="vertical-align: bottom; font-weight: bold; text-align: center">For The Year Ended</TD>
    <TD NOWRAP STYLE="vertical-align: bottom; font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="vertical-align: bottom; font-weight: bold; text-align: center">Corn</TD>
    <TD NOWRAP STYLE="vertical-align: top; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD NOWRAP STYLE="vertical-align: top; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="vertical-align: bottom; font-weight: bold; text-align: center">Grain</TD>
    <TD NOWRAP STYLE="vertical-align: top; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD NOWRAP STYLE="vertical-align: top; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="vertical-align: top; font-weight: bold; text-align: center">Bulk<BR>
Trading</TD>
    <TD NOWRAP STYLE="vertical-align: top; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD NOWRAP STYLE="vertical-align: top; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="vertical-align: top; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD NOWRAP STYLE="vertical-align: top; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD NOWRAP STYLE="vertical-align: top; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD NOWRAP STYLE="vertical-align: top; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD NOWRAP STYLE="vertical-align: top; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD NOWRAP STYLE="vertical-align: top; font-weight: bold; text-align: center">&nbsp;</TD></TR>
<TR STYLE="background-color: white">
    <TD NOWRAP STYLE="vertical-align: top; padding-bottom: 1pt; font-weight: bold; text-align: center">December 31, 2010</TD>
    <TD NOWRAP STYLE="vertical-align: top; padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="vertical-align: top; border-bottom: black 1pt solid; font-weight: bold; text-align: center">Division</TD>
    <TD NOWRAP STYLE="vertical-align: top; padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD NOWRAP STYLE="vertical-align: top; padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="vertical-align: top; border-bottom: black 1pt solid; font-weight: bold; text-align: center">Division</TD>
    <TD NOWRAP STYLE="vertical-align: top; padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD NOWRAP STYLE="vertical-align: top; padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="vertical-align: top; border-bottom: black 1pt solid; font-weight: bold; text-align: center">Division</TD>
    <TD NOWRAP STYLE="vertical-align: top; padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD NOWRAP STYLE="vertical-align: top; padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="vertical-align: top; border-bottom: black 1pt solid; font-weight: bold; text-align: center">Others</TD>
    <TD NOWRAP STYLE="vertical-align: top; padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD NOWRAP STYLE="vertical-align: top; padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="vertical-align: top; border-bottom: black 1pt solid; font-weight: bold; text-align: center">Total</TD>
    <TD NOWRAP STYLE="vertical-align: bottom; padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD>Revenues from external customers</TD>
    <TD>&nbsp;</TD>
    <TD>$</TD>
    <TD STYLE="text-align: right">69,516,954</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>$</TD>
    <TD STYLE="text-align: right">11,474,912</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>$</TD>
    <TD STYLE="text-align: right">4,183,018</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>$</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>$</TD>
    <TD STYLE="text-align: right">85,174,884</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD>Intersegment revenues</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD>Interest revenue</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">4,823</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">8,283</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">4,394</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">17,505</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD>Interest expense</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">(317,142</TD>
    <TD>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">(24,413</TD>
    <TD>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">(341,555</TD>
    <TD>)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD>Net interest (expense) income</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">(312,319</TD>
    <TD>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">(16,130</TD>
    <TD>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">4,394</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">5</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">(324,050</TD>
    <TD>)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD>Depreciation and amortization</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">(164,598</TD>
    <TD>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">(372,597</TD>
    <TD>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">63,171</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">(15,355</TD>
    <TD>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">(489,379</TD>
    <TD>)</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD>Noncontrolling interest</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD>Segment net profit (loss)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">11,298,781</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">3,321,566</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">(255,912</TD>
    <TD>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">(1,777,981</TD>
    <TD>)</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">12,586,454</TD>
    <TD>&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">All of our revenues were generated from customers in China.&nbsp;&nbsp;All
long-lived assets are located in China.&nbsp;&nbsp;The following tables set forth our three major customers in each segment:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="font-weight: bold; text-align: center">For The Years Ended</TD>
    <TD STYLE="font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="6" STYLE="border-bottom: black 1pt solid; font-weight: bold; text-align: center">December 31,</TD>
    <TD STYLE="padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="background-color: white">
    <TD STYLE="width: 76%; vertical-align: bottom; padding-bottom: 1pt; text-decoration: underline">Corn Division:</TD>
    <TD STYLE="width: 1%; vertical-align: top; padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD STYLE="width: 1%; vertical-align: top; border-bottom: black 1pt solid; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD STYLE="width: 9%; vertical-align: top; border-bottom: black 1pt solid; font-weight: bold; text-align: center">2011</TD>
    <TD STYLE="width: 1%; vertical-align: top; padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD STYLE="width: 1%; vertical-align: top; padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD STYLE="width: 1%; vertical-align: top; border-bottom: black 1pt solid; font-weight: bold; text-align: center">&nbsp;</TD>
    <TD STYLE="width: 9%; vertical-align: top; border-bottom: black 1pt solid; font-weight: bold; text-align: center">2010</TD>
    <TD STYLE="width: 1%; vertical-align: top; padding-bottom: 1pt; font-weight: bold; text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD>Chengdu Zhengda Co., Ltd.</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">5.7</TD>
    <TD>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">3.7</TD>
    <TD>%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD>Shanxi Pingyao Longhai Industrial Co., Ltd.</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">3.8</TD>
    <TD>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD STYLE="padding-bottom: 1pt">Chengdu Yifenghang Feed Co., Ltd.</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right">3.7</TD>
    <TD STYLE="padding-bottom: 1pt">%</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right">0.9</TD>
    <TD STYLE="padding-bottom: 1pt">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="padding-bottom: 2.5pt">Top Three Customers as % of Total Gross Sales:</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right">13.2</TD>
    <TD STYLE="padding-bottom: 2.5pt">%</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right">4.6</TD>
    <TD STYLE="padding-bottom: 2.5pt">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="padding-bottom: 1pt; text-decoration: underline">Grain Division:</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD>Beijing Yilian Gifts Tech. Development Co., Ltd.</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">8.0</TD>
    <TD>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">0.1</TD>
    <TD>%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD>Tianjing Haoshoucheng Logestic Co., Ltd.</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">4.8</TD>
    <TD>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">0.9</TD>
    <TD>%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD STYLE="padding-bottom: 1pt">Tianjing Hongfuyongsheng Trading Co., Ltd.</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right">4.1</TD>
    <TD STYLE="padding-bottom: 1pt">%</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right">0.3</TD>
    <TD STYLE="padding-bottom: 1pt">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="padding-bottom: 2.5pt">Top Three Customers as % of Total Gross Sales</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right">16.9</TD>
    <TD STYLE="padding-bottom: 2.5pt">%</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right">1.3</TD>
    <TD STYLE="padding-bottom: 2.5pt">%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="padding-bottom: 1pt; text-decoration: underline">Bulk Trading Division:</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD>Tianjin Yimingda Grain Division</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">28.3</TD>
    <TD>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">27.0</TD>
    <TD>%</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD>Shanxi Helifeihua Trading Co., Ltd.</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">8.9</TD>
    <TD>%</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">-</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: #CCFFCC">
    <TD STYLE="padding-bottom: 1pt">Shanxi Guchuan Food Co., Ltd.</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right">8.3</TD>
    <TD STYLE="padding-bottom: 1pt">%</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right">-</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: white">
    <TD STYLE="padding-bottom: 2.5pt">Top Three Customers as % of Total Gross Sales:</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right">45.5</TD>
    <TD STYLE="padding-bottom: 2.5pt">%</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double; text-align: right">27.0</TD>
    <TD STYLE="padding-bottom: 2.5pt">%</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;</B>&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 3%; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 14%; font-weight: bold">NOTE&nbsp;21.</TD>
    <TD STYLE="width: 83%; font-weight: bold; text-align: justify">CONCENTRATION OF CREDIT RISK</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">As of December 31, 2011 and 2010, all of the Company&rsquo;s
cash balances in bank were maintained within the PRC where no rule or regulation currently in place to provide obligatory insurance
for bank deposits in the event of bank failure.&nbsp;&nbsp;However, the Company has not experienced any losses in such accounts
and believes it is not exposed to such risks on its cash balances in bank.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">For the years ended December 31, 2011 and 2010, all of the Company&rsquo;s
sales were generated in the PRC.&nbsp;&nbsp;In addition, all accounts receivable as of December 31, 2011 and 2010 were due from
customers located in the PRC.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">No single customer accounted for greater than 10% of the Company&rsquo;s
consolidated gross revenue for the year ended December 31, 2011 or consolidated accounts receivable as of December 31, 2011. For
the year ended December 31, 2010, one customer accounted for 18% of the Company&rsquo;s consolidated gross revenue while no other
single customer accounted for greater than 10%. The same customer accounted for 3% of the Company&rsquo;s consolidated accounts
receivable as of December 31, 2010 while no single customer accounted for greater than 10%.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 3%; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 14%; font-weight: bold">NOTE&nbsp;22.</TD>
    <TD STYLE="width: 83%; font-weight: bold; text-align: justify">COMMITMENTS AND CONTINGENCIES</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Lease Commitments</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company leases railroad lines, warehouses, and offices under
operating leases.&nbsp;&nbsp;Future minimum lease payments under operating leases with initial or remaining terms of one year or
more are as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 55%; margin-left: 1.5in">
<TR>
    <TD COLSPAN="2" NOWRAP STYLE="vertical-align: top; text-align: right">As of December 31,</TD>
    <TD NOWRAP STYLE="vertical-align: bottom; padding-bottom: 1pt">&nbsp;</TD>
    <TD NOWRAP STYLE="vertical-align: bottom; padding-bottom: 1pt; font-weight: bold">&nbsp;</TD>
    <TD COLSPAN="2" NOWRAP STYLE="vertical-align: bottom; border-bottom: black 1pt solid; font-weight: bold; text-align: right">Operating Leases</TD>
    <TD NOWRAP STYLE="vertical-align: bottom; padding-bottom: 1pt; font-weight: bold">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 69%; text-align: right">2,012</TD>
    <TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 2%">&nbsp;</TD>
    <TD STYLE="width: 1%">$</TD>
    <TD STYLE="width: 25%; text-align: right">134,402</TD>
    <TD STYLE="width: 1%">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">2,013</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">90,206</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">2,014</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">85,409</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">2,015</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">85,409</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">2,016</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">85,409</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">Thereafter</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid">&nbsp;</TD>
    <TD STYLE="border-bottom: black 1pt solid; text-align: right">908,892</TD>
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD>
    <TD STYLE="text-align: right">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 2.5pt; font-weight: bold">&nbsp;</TD>
    <TD STYLE="border-bottom: black 2.25pt double; font-weight: bold">$</TD>
    <TD STYLE="border-bottom: black 2.25pt double; font-weight: bold; text-align: right">1,389,727</TD>
    <TD STYLE="padding-bottom: 2.5pt; font-weight: bold">&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Contingencies</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On February 12, 2012, the Company&rsquo;s former Chief Financial
Officer alleged that the Company may have violated certain regulations and upon receipt of such allegations, the Company's Audit
Committee retained K&amp;L Gates LLP to conduct an inquiry into such allegations. On March 27, 2012, the Company received a letter
asserting a claim of wrongful termination wherein the former Chief Financial Officer seeks payment of $250,000 plus the issuance
of 60,000 shares of common stock in settlement for the claimed damages therein.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">The Company believes that such allegations and claims are without
merit and intends to vigorously defend such allegations and claims. Because the inquiry is in its initial stages, the Company is
not currently able to predict the probability of a favorable or unfavorable outcome, or the amount of any possible loss in the
event of an unfavorable outcome. Consequently, no material provision or liability has been recorded for such allegations and claims
as of December 31, 2011. However, management is confident in its defenses to such allegations and claims.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%; border-collapse: collapse">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 3%; text-align: justify">&nbsp;</TD>
    <TD STYLE="width: 14%; font-weight: bold">NOTE&nbsp;23.</TD>
    <TD STYLE="width: 83%; font-weight: bold; text-align: justify">SUBSEQUENT EVENTS</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On January 11, 2012, Detain Yu obtained a bank loan of $262,158
(or RMB 1,650,000) from China Merchants Bank Beijing, bearing interest at a floating rate of prime rate plus 20% of prime rate,
of which prime rate was based on one-year loan interest rate released by The People's Bank of China. The term of the loan started
from January 11, 2012 with maturity date on January 10, 2013. The loan was guaranteed by China Agriculture Credit Guarantee Co.,
Ltd. for a period of one year starting from January 11, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On February 2, 2012, Shenzhen Redsun, a wholly-owned subsidiary
of the Company entered into a Stock Equity Transfer Agreement whereby Shenzhen Redsun acquired 100% of the issued and outstanding
registered share capital of Taizihu<U> </U>and its subsidiary, Huichun. The total amount of the consideration paid for the acquisition
of the Taizihu Group is RMB34.7 million ($5.5 million), and such consideration was determined pursuant to arm&rsquo;s length negotiations
between the parties. As a result of the acquisition, the Company now owns and controls 100% of the Taizihu Group.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On March 19, 2012, Jinzhong Deyu, a wholly-owned subsidiary
of the Company entered into an Assets Exchange Agreement with a third party whereby Jinzhong Deyu exchange its timberland with
RMB10.3 million ($1.6 million) of carrying amount for an office building with paying cash consideration of RMB7.2 million ($1.1
million) for the variance between the fair values of the office building and the timberland. No material gain or loss was generated
from this exchange transaction.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">On March 8, 2012, the Company&rsquo;s Board of Directors allocated
to and authorized for use the maximum number of shares allowable pursuant to the terms of the Plan and granted 420,000 options
under the Plan, of which 264,000 were new options and 156,000 were re-granted after such options were forfeited by employees as
a result of their resignations from the Company in accordance with the terms of their option agreements. All of the newly granted
options vest as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">50% of the options granted will vest six
(6) months after the date of the grant; and</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">50% of the options granted will vest twelve
(12) months after the date of the grant.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">Management was in the process of completing the fair value measurement
of the 420,000 options granted as of the date of this filing.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"></P>

<!-- Field: Rule-Page --><DIV ALIGN="LEFT" STYLE="margin-top: 3pt; margin-bottom: 3pt"><DIV STYLE="font-size: 1pt; border-top: Black 1pt solid; width: 100%">&nbsp;</DIV></DIV><!-- Field: /Rule-Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Up to 250,000 Shares</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>DEYU AGRICULTURE CORP.</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Common Stock</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>PROSPECTUS</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">______________ ___, 2012</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>Dealer Prospectus Delivery Obligation</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">Until [*], 2012, 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">You should rely only on the information
contained in this prospectus. We have not authorized anyone to provide you with information different from that which is set forth
in this prospectus. We are offering to sell shares of our common stock and seeking offers to buy shares of our common stock only
in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the
date of this prospectus, regardless of the time of delivery of this prospectus or any sale of these securities. Our business, financial
condition, results of operation and prospects may have changed after the date of this prospectus.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify">&nbsp;&nbsp;</P>

<!-- Field: Rule-Page --><DIV ALIGN="LEFT" STYLE="margin-top: 3pt; margin-bottom: 3pt"><DIV STYLE="font-size: 1pt; border-top: Black 1pt solid; width: 100%">&nbsp;</DIV></DIV><!-- Field: /Rule-Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: justify"></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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    <!-- Field: /Page -->

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>PART II</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>INFORMATION NOT REQUIRED IN PROSPECTUS
</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Item&nbsp;13. <I>Other Expenses of Issuance and Distribution.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" ALIGN="CENTER" STYLE="width: 75%; font: 10pt Times New Roman, Times, Serif">
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="width: 88%; text-align: left">SEC registration fee</TD><TD STYLE="width: 1%">&nbsp;</TD>
    <TD STYLE="width: 1%; text-align: left">$</TD><TD STYLE="width: 9%; text-align: right">95</TD><TD STYLE="width: 1%; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Printing and engraving expenses</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">2,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Legal fees and expenses</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">15,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left">Accounting fees and expenses</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">5,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD STYLE="text-align: left">Transfer agent and registrar fees and expenses</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">1,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD STYLE="text-align: left; padding-bottom: 1pt">Miscellaneous expenses</TD><TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="border-bottom: Black 1pt solid; text-align: left">$</TD><TD STYLE="border-bottom: Black 1pt solid; text-align: right">1,905</TD><TD STYLE="padding-bottom: 1pt; text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: rgb(204,255,204)">
    <TD>&nbsp;</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">&nbsp;</TD><TD STYLE="text-align: right">&nbsp;</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom; background-color: White">
    <TD>Total</TD><TD>&nbsp;</TD>
    <TD STYLE="text-align: left">$</TD><TD STYLE="text-align: right">25,000</TD><TD STYLE="text-align: left">&nbsp;</TD></TR>
</TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">All amounts are estimates other than the
Commission&rsquo;s registration fee. We are paying all expenses of the offering listed above. No portion of these expenses will
be borne by the selling stockholder. The selling stockholder, however, will pay any other expenses incurred in selling their common
stock, including any brokerage commissions or costs of sale.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Item&nbsp;14. <I>Indemnification of Directors and Officers.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Nevada Revised Statute 78.037 permits a
corporation to eliminate or limit the personal liability of a director or officer to the corporation or its stockholders for damages
relating to breach of fiduciary duty as a director or officer, but such a provision must not eliminate or limit the liability of
a director or officer for (a) acts or omissions which involve intentional misconduct, fraud or a knowing violation of law or (b)
the payment of distributions in violation of Nevada Revised Statute 78.300.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Nevada Revised Statutes 78.7502 provides
as follows with respect to indemnification of directors, officers, employees and agents:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 3%">&nbsp;</TD>
    <TD STYLE="width: 3%">(a)</TD>
    <TD STYLE="width: 94%">We may indemnify any person who was or is a party or is threatened to be made a party to any action, except an action by us, by reason of the fact that he is or was our director, officer, employee or agent, or is or was serving as a director, officer, employee or agent of any other person at our request, against expenses actually and reasonably incurred by him in connection with the action, suit or proceeding if he: (i) is not liable for breach of his fiduciary duties as a director or officer pursuant to Nevada Revised Statutes 78.138; and (ii) acted in good faith and in a manner which he reasonably believed to be in or not opposed to our best interests and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful.</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 3%">&nbsp;</TD>
    <TD STYLE="width: 3%">(b)</TD>
    <TD STYLE="width: 94%">We may indemnify any person who was or is a party or is threatened to be made a party to any action by us, by reason of the fact that he is or was our director, officer, employee or agent, or is or was serving as a director, officer, employee or agent of any other person at our request, against expenses actually and reasonably incurred by him in connection with the defense or settlement of the action or suit if he: (i) is not liable for breach of his fiduciary duties pursuant to Nevada Revised Statutes 78.138; and (ii) acted in good faith and in a manner which he reasonably believed to be in or not opposed to our best interest.&nbsp;&nbsp;We may not indemnify him for any claim, issue or matter as to which he has been adjudged by a court of competent jurisdiction, after exhaustion of all appeals therefrom, to be liable to us or for amounts paid in settlement to us, unless and only to the extent that the court in which the action or suit was brought or other court of competent jurisdiction determines upon application that in view of all the circumstances of the case, he is fairly and reasonably entitled to indemnity for such expenses as the court deems proper.</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 3%">&nbsp;</TD>
    <TD STYLE="width: 3%">(c)</TD>
    <TD STYLE="width: 94%">To the extent that our director, officer, employee or agent has been successful on the merits or otherwise in defense of any action, suit or proceeding, or in defense of any claim, issue or matter therein, we are required to indemnify him against expenses, including attorneys&rsquo; fees actually and reasonably incurred by him in connection with the defense.</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Our Articles of Incorporation and Bylaws
provide for elimination of any liability of our directors and officers and indemnity of our directors and officers to the fullest
extent permitted by Nevada law.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The above-described provisions relating
to the exclusion of liability and indemnification of directors and officers are sufficiently broad to permit the indemnification
of such persons in certain circumstances against liabilities arising under the Securities Act of 1933.&nbsp;&nbsp;Insofar as indemnification
for liabilities arising under the Securities Act of 1933 may be permitted to our directors and officers and to persons controlling
us pursuant to the foregoing provisions, we have been informed that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Item&nbsp;15. <I>Recent Sales of Unregistered Securities.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">In connection with the Share Exchange, on
April 27, 2010, we issued an aggregate of 8,736,932 shares of our common stock to the shareholders of City Zone.&nbsp;&nbsp;We
received in exchange from the City Zone shareholders 100% of the shares of City Zone, which exchange resulted in City Zone becoming
our wholly owned subsidiary. The issuance of such securities was exempt from registration pursuant to Section 4(2) of, and Regulation
D and/or Regulation S promulgated under the Securities Act of 1933, as amended.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Simultaneous with the closing the Share
Exchange, we entered into the Purchase Agreement with certain accredited Investors for the issuance and sale in a private placement
of Units, consisting of 2,455,863 shares of our Series A convertible preferred stock, par value $0.001 per share and Series A warrants
to purchase up to 982,362 shares of our common stock, for aggregate gross proceeds of approximately $10,805,750. The issuances
of the aforementioned securities were exempt from registration pursuant to Section 4(2) of, and Regulation D and/or Regulation
S promulgated under the Securities Act of 1933, as amended.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On November 4, 2010, the Company&rsquo;s
Board of Directors approved the Company&rsquo;s 2010 Share Incentive Plan.&nbsp;&nbsp;Under the Plan, 1,000,000 shares of the Company&rsquo;s
common stock shall be allocated to and authorized for use pursuant to the terms of the Plan.&nbsp;&nbsp;On November 8, 2010, a
total of 931,000 non-qualified incentive stock options were approved by our Board of Directors and granted under the Plan to executives,
key employees, independent directors, and consultants at an exercise price of $4.40 per share and on December 15, 2010, 40,000
non-qualified incentive stock shares were approved by our Board of Directors and granted under the Plan to a consultant at an exercise
price of $4.40 per share, of which shall vest as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">33 1/3% of the option grants vested one (1) month
after the date of grant;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">33 1/3% of the option grants vested twelve (12) months
after the date of grant; and</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0 0pt 0.5in">33 1/3% of the option grants will vest twenty-four
(24) months after the date of grant.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">On March 8, 2012, the Company&rsquo;s Board
of Directors allocated to and authorized for use the maximum number of shares allowable pursuant to the terms of the Plan and granted
420,000 options under the Plan, of which 264,000 were new options and 156,000 were re-granted after such options were forfeited
by employees as a result of their resignations from the Company in accordance with the terms of their option agreements. All of
the newly granted options vest as follows:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">50% of the options granted will vest six
(6) months after the date of the grant; and</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">50% of the options granted will vest twelve
(12) months after the date of the grant.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The issuances of the aforementioned securities
under the Plan were exempt from registration pursuant to Section 4(2) of, and Regulation D and/or Regulation S promulgated under
the Securities Act of 1933, as amended.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>Item&nbsp;16. <I>Exhibits and Financial Statement Schedules.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>(a) <I>Exhibits</I> </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 10%">2.1</TD>
    <TD STYLE="width: 90%">Share Exchange Agreement Dated April 27, 2010 (1)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>3.1</TD>
    <TD>Articles of Incorporation of Deyu Agriculture Corp. (2)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>3.2</TD>
    <TD>Certificate of Amendment of Articles of Incorporation of Deyu Agriculture Corp. (3)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>3.3</TD>
    <TD>Bylaws of Deyu Agriculture Corp. (2)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>4.1</TD>
    <TD>Certificate of Designation of Rights and Preferences of Series A Convertible Preferred Stock (1)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>4.2</TD>
    <TD>Form of Series A Warrant (1)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>5.1</TD>
    <TD>Opinion of Burton Bartlett &amp; Glogovac*</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.1</TD>
    <TD>Securities Purchase Agreement Dated April 27, 2010 (1)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.2</TD>
    <TD>Registration Rights Agreement Dated April 27, 2010 (1)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.3</TD>
    <TD>Form of Lock-Up Agreement Dated April 27, 2010 (1)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.4</TD>
    <TD>Securities Escrow Agreement Dated April 27, 2010 (1)</TD></TR>
<TR>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.5</TD>
    <TD>Placement Agent Agreement between the Company and Maxim Group, LLC dated January 27, 2010(6)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.6</TD>
    <TD>Share Transfer Agreement between Hong Wang and Yam Sheung Kwok dated April 26, 2010 (6)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.7</TD>
    <TD>Share Transfer Agreement between Jianming Hao and Yam Sheung Kwok dated April 26, 2010 (6)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.8</TD>
    <TD>Share Transfer Agreement between Wenjun Tian and Yam Sheung Kwok dated April 26, 2010 (6)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.9</TD>
    <TD>Share Transfer Agreement between Yongqing Ren and Yam Sheung Kwok dated April 26, 2010 (6)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.10</TD>
    <TD>Share Transfer Agreement between Junde Zhang and Yam Sheung Kwok dated April 26, 2010 (6)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.11</TD>
    <TD>Employment Agreement between David Lethem, as Chief Financial Officer, and the Company dated June 18, 2010 (4)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.12</TD>
    <TD>Certificate from China Organic Food Certification Center dated December 21, 2009 (6)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.13</TD>
    <TD>Corn Purchase Letter of Intent between Shanghai Yihai Trading Co., Ltd., Shanxi Office and Jinzhong Yuliang Agricultural Trading Co., Limited dated December 20, 2009 (6)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.14</TD>
    <TD>Warehouse Lease Agreement between Shanxi 661 Warehouse and Jinzhong Yongcheng Agricultural Trading Co., Limited dated December 21, 2006 (6)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.15</TD>
    <TD>Warehouse Lease Agreement between Shanxi Means of Production Company, Yuci Warehouse (formerly, the 671 Warehouse) and Jinzhong Yongcheng Agricultural Trading Co., Limited dated December 28, 2008 (6)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.16</TD>
    <TD>Railway Lease Agreement between Shanxi Cereal &amp; Oil Group, Mingli Reservation Depot and Jinzhong Yongcheng Agriculture Trading Co., Limited dated December 21, 2006 (6)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.17</TD>
    <TD>Railway Lease Agreement between Shanxi Yuci Cereal Reservation Depot and Jinzhong Yongcheng Agriculture Trading Co., Limited dated November 15, 2007 (6)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.18</TD>
    <TD>Railway Lease Agreement between Yuci Dongzhao Railway Freight Station and Jinzhong Yongcheng Agriculture Trading Co., Limited dated December 21, 2006 (6)</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 10%">10.19</TD>
    <TD STYLE="width: 90%">Agricultural Technology Cooperation Agreement between Jinzhong Deyu Agriculture Trading Co., Ltd. and Millet Research Institute, Shanxi Academy of Agricultural Science dated October 2007 (6)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.20</TD>
    <TD>Agricultural Technology Cooperation Agreement between Sorghum Institute, Shanxi Academy of Agricultural Sciences and Jinzhong Deyu Agriculture Trading Co., Ltd. dated August 24, 2008 (6)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.21</TD>
    <TD>Certificate of Forest Rights for the Yuci Forest Right Certificate (2005) No. 01518 dated August 11, 2006 (6)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.22</TD>
    <TD>Farmland Transfer Agreement between Detian Yu Biotechnology (Beijing) Co. Ltd. and Shanxi Jinbei Plant Technology Co, Ltd. dated September 30, 2010 (6)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.23</TD>
    <TD>Land Use Rights Acquisition Contract Dated September 30, 2010 (5)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.24</TD>
    <TD>Deyu Agriculture Corp. 2010 Share Incentive Plan (7)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.25</TD>
    <TD>Exclusive Management and Consulting Service Agreement, dated November 16, 2010, by and between Detian Yu Biotechnology (Beijing) Co. Limited and Beijing Jundaqianyuan Investment Management Co., Ltd. (English translated version) (8)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.26</TD>
    <TD>Exclusive Management and Consulting Service Agreement, dated November 16, 2010, by and between Detian Yu Biotechnology (Beijing) Co. Limited and Jinzhong Longyue Investment Consulting Co., Ltd. (English translated version) (8)</TD></TR>
<TR>
    <TD COLSPAN="2" STYLE="text-align: center">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;10.27</TD>
    <TD>Business Cooperation Agreement, dated November 16, 2010, by and between Detian Yu Biotechnology (Beijing) Co. Limited and Beijing Jundaqianyuan Investment Management Co., Ltd. (English Translated Version) (8)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.28</TD>
    <TD>Business Operation Agreement, dated November 16, 2010, by and among Detian Yu Biotechnology (Beijing) Co. Limited, Beijing Jundaqianyuan Investment Management Co., Ltd. and each of the shareholders of Beijing Jundaqianyuan Investment Management Co., Ltd. (English translated version) (8)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.29</TD>
    <TD>Business Operation Agreement, dated November 16, 2010, by and among Detian Yu Biotechnology (Beijing) Co. Limited, Jinzhong Longyue Investment Consulting Co., Ltd. and both of the shareholders of Jinzhong Longyue Investment Consulting Co., Ltd. (English translated version) (8)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.30</TD>
    <TD>Share Pledge Agreement, dated November 16, 2010, by and among Detian Yu Biotechnology (Beijing) Co. Limited and the following shareholders of Beijing Jundaqianyuan Investment Management Co., Ltd.: Tian Wenjun, Hao Jianming, Yang Jianhui, Zhou Jianbin, Ren Li, Ren Yongqing, Zhang Junde and Wang Tao (English translated version) (8)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.31</TD>
    <TD>Share Pledge Agreement, dated November 16, 2010, by and among Detian Yu Biotechnology (Beijing) Co. Limited and the following shareholders of Jinzhong Longyue Investment Consulting Co., Ltd.: Zhao Jing and Zhao Peilin (English translated version) (8)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.32</TD>
    <TD>Form of Power of Attorney (English translated version) (8)&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.33</TD>
    <TD>Equity Acquisition Option Agreement, dated November 16, 2010,&nbsp;&nbsp;by and among Detian Yu Biotechnology (Beijing) Co. Limited and the following shareholders of Beijing Jundaqianyuan Investment Management Co., Ltd.: Tian Wenjun, Hao Jianming, Yang Jianhui, Zhou Jianbin, Ren Li, Ren Yongqing, Zhang Junde and Wang Tao (English translated version) (8)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.34</TD>
    <TD>Equity Acquisition Option Agreement, dated November 16, 2010,&nbsp;&nbsp;by and among Detian Yu Biotechnology (Beijing) Co. Limited and the following shareholders of Jinzhong Longyue Investment Consulting Co., Ltd.: Zhao Jing and Zhao Peilin (English translated version) (8)</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 10%">10.35</TD>
    <TD STYLE="width: 90%">Business Cooperation Agreement, dated November 16, 2010, by and between Detian Yu Biotechnology (Beijing) Co. Limited and Jinzhong Longyue Investment Consulting Co., Ltd. (English Translated Version) (8)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.36</TD>
    <TD>Village Collective Farmland Transfer Agreement, dated December&nbsp;20, 2010, by and between Detian Yu Biotechnology (Beijing) Co., Ltd. and Shanxi Jinbei Plant Technology Development Co., Ltd. (English Translated and Mandarin Versions)&nbsp;(9)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.37</TD>
    <TD>Contract of Agreement, effective as of January 10, 2011,&nbsp;&nbsp;by and between Deyu Agriculture Corp. and Charlie Lin (10)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.38</TD>
    <TD>Termination Agreement Regarding the Exclusive Management and Consulting Service Agreement, by and between Detian Yu Biotechnology (Beijing) Co. Limited and Beijing Jundaqianyuan Investment Management Co., Ltd. (English translated version) (14)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.39</TD>
    <TD>Termination Agreement Regarding the Exclusive Management and Consulting Service Agreement, by and between Detian Yu Biotechnology (Beijing) Co. Limited and Jinzhong Longyue Investment Consulting Co., Ltd. (English translated version) (14)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.40</TD>
    <TD>Termination Agreement Regarding the Business Cooperation Agreement, by and between Detian Yu Biotechnology (Beijing) Co. Limited and Beijing Jundaqianyuan Investment Management Co., Ltd. (English Translated Version) (14)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.41</TD>
    <TD>Termination Agreement Regarding the Business Cooperation Agreement, by and between Detian Yu Biotechnology (Beijing) Co. Limited and Jinzhong Longyue Investment Consulting Co., Ltd. (English Translated Version) (14)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.42</TD>
    <TD>Termination Agreement Regarding the Business Operation Agreement, by and among Detian Yu Biotechnology (Beijing) Co. Limited, Beijing Jundaqianyuan Investment Management Co., Ltd. and each of the shareholders of Beijing Jundaqianyuan Investment Management Co., Ltd. (English translated version) (14)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.43</TD>
    <TD>Termination Agreement Regarding the Business Operation Agreement, by and among Detian Yu Biotechnology (Beijing) Co. Limited, Jinzhong Longyue Investment Consulting Co., Ltd. and both of the shareholders of Jinzhong Longyue Investment Consulting Co., Ltd. (English translated version) (14)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.44</TD>
    <TD>Termination Regarding the Equity Pledge Agreement, by and among Detian Yu Biotechnology (Beijing) Co. Limited and the following shareholders of Beijing Jundaqianyuan Investment Management Co., Ltd.: Tian Wenjun, Hao Jianming, Yang Jianhui, Zhou Jianbin, Ren Li, Ren Yongqing, Zhang Junde and Wang Tao (English translated version) (14)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.45</TD>
    <TD>Termination Regarding the Equity Pledge Agreement, by and among Detian Yu Biotechnology (Beijing) Co. Limited and the following shareholders of Jinzhong Longyue Investment Consulting Co., Ltd.: Zhao Jing and Zhao Peilin (English translated version) (14)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.46</TD>
    <TD>Form of Termination Notice of the Power of Attorney (English translated version) (14)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.47</TD>
    <TD>Termination Agreement Regarding the Equity Acquisition Option Agreement, dated November 16, 2010,&nbsp;&nbsp;by and among Detian Yu Biotechnology (Beijing) Co. Limited and the following shareholders of Beijing Jundaqianyuan Investment Management Co., Ltd.: Tian Wenjun, Hao Jianming, Yang Jianhui, Zhou Jianbin, Ren Li, Ren Yongqing, Zhang Junde and Wang Tao (English translated version) (14)</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 10%">10.48</TD>
    <TD STYLE="width: 90%">Termination Agreement Regarding the Equity Acquisition Option Agreement, dated November 16, 2010,&nbsp;&nbsp;by and among Detian Yu Biotechnology (Beijing) Co. Limited and the following shareholders of Jinzhong Longyue Investment Consulting Co., Ltd.: Zhao Jing and Zhao Peilin (English translated version) (14)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.49</TD>
    <TD>Stock Equity Transfer Agreement in relation to Shanxi Taizihu Food Co., LTd. and Shanxi Huichun Bean Products Co., Ltd., dated February 2, 2012, by and among Redsun, HE Hao, an individual, XU Qinghe, an individual, XIE Jinqing, an individual and Beijing Kanggang Food Development Co., Ltd. (Chinese and English Translated Versions) (15)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>10.50</TD>
    <TD>Cooperation Agreement, by and between the Administration Committee of Sino-Singapore Tianjin Eco-city and Tianjin Detian Yu (Tianjin) Co., Ltd., dated June 16, 2011 (English translated and&nbsp;Chinese versions) (13)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>14.1</TD>
    <TD>Code of Conduct (6)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>16.1</TD>
    <TD>Letter from Auditor (11)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>21</TD>
    <TD>List of Subsidiaries (12)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>23.1</TD>
    <TD>Consent of Morison Cogen LLP, independent registered public accounting firm</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>23.2</TD>
    <TD>Consent of Burton Bartlett &amp; Glogovac (contained in Exhibit 5.1)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>99.1</TD>
    <TD>Audit Committee Charter adopted August 19, 2010 (6)</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>101. INS</TD>
    <TD>XBRL Instance Document*</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>101. CAL</TD>
    <TD>XBRL Taxonomy Extension Calculation Link base Document*</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>101. DEF</TD>
    <TD>XBRL Taxonomy Extension Definition Link base Document*</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>101. LAB</TD>
    <TD>XBRL Taxonomy Label Link base Document*</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>101. PRE</TD>
    <TD>XBRL Extension Presentation Link base Document*</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>101. SCH</TD>
    <TD>XBRL Taxonomy Extension Scheme Document*</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 5%; text-align: center">&nbsp;(1)&nbsp;</TD>
    <TD STYLE="width: 95%">Incorporated by reference to our Form 8-K filed on May 3, 2010</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: center">(2)</TD>
    <TD>Incorporated by reference to our Registration Statement on Form S-1 filed on July 8, 2009</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: center">(3)</TD>
    <TD>Incorporated by reference to our Form 8-K filed on June 4, 2010</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: center">(4)</TD>
    <TD>Incorporated by reference to our Form 8-K filed on June 18, 2010</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: center">(5)</TD>
    <TD>Incorporated by reference to our Form 8-K filed on October 6, 2010</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: center">(6)</TD>
    <TD>Incorporated by reference to our Form S-1/A filed on October 21, 2010</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: center">(7)</TD>
    <TD>Incorporated by reference to our Form S-8 filed on November 5, 2010</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: center">(8)</TD>
    <TD>Incorporated by reference to our Form 8-K filed on November 17, 2010</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: center">(9)</TD>
    <TD>Incorporated by reference to our Form 8-K filed on December 21, 2010</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: center">(10)</TD>
    <TD>Incorporated by reference to our Form 8-K filed on January 10, 2011</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: center">&nbsp;(11)</TD>
    <TD>Incorporated by reference to our Form 8-K filed on May 3, 2010</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: center">(12)</TD>
    <TD>Incorporated by reference to our Form 10-K filed on March 30, 2012</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: center">(13)</TD>
    <TD>Incorporated by reference to our Form 8-K filed on June 21, 2011</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: center">(14)</TD>
    <TD>Incorporated by reference to our Form 8-K filed on December 27, 2011</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="text-align: center">(15)</TD>
    <TD>Incorporated by reference to our Form 8-K filed on February 8, 2012</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">* &nbsp;&nbsp;Filed herewith.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B><I>(b) Financial Statement Schedules</I> </B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">No financial statement schedules are provided
because the information called for is not required or is shown either in the financial statements or the notes thereto.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0"><B>&nbsp;Item&nbsp;17. <I>Undertakings.</I></B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">The undersigned registrant hereby undertakes:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">(1)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To
file, during any period in which offers or sales are being made, a post-effective amendment to this registration statement:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 1in">(i)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;To
include any prospectus required by Section 10(a)(3) of the Securities Act of 1933, as amended (the &ldquo;Securities Act&rdquo;);</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 1in">(ii)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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 &quot;Calculation of Registration Fee&quot; table in the effective registration statement, and</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 1in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 1in">(iii)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">(2)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;That,
for the purpose of determining any liability under the Securities Act of 1933, 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">(3)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">(4)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;For
determining liability of the undersigned registrant under the Securities Act to any purchaser in the initial distribution of the
securities, the undersigned 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 the 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:</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 1in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 1in">(i)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any
preliminary prospectus or prospectus of the undersigned registrant relating to the offering required to be filed pursuant to Rule
424;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 1in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 1in">(ii)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 1in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 1in">(iii)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;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</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 1in">(iv)&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;Any
other communication that is an offer in the offering made by the undersigned registrant to the purchaser.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">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 Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act and is, therefore, unenforceable.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">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 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.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Each prospectus filed pursuant to Rule 424(b)
as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than
prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the
date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus
that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration
statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior
to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of
the registration statement or made in any such document immediately prior to such date of first use.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

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<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>&nbsp;</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center"><B>SIGNATURES</B></P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-align: center">&nbsp;</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">Pursuant to the requirements of the Securities
Act, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized,
in the City of Newark, State of Delaware, on the 4th  day of May, 2012.</P>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: 0.5in">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD COLSPAN="2" STYLE="font-weight: bold">DEYU AGRICULTURE CORP.</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 49%">&nbsp;</TD>
    <TD STYLE="width: 4%">&nbsp;</TD>
    <TD STYLE="width: 47%">&nbsp;</TD></TR>
<TR STYLE="vertical-align: top">
    <TD STYLE="padding-bottom: 1pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1pt">By:</TD>
    <TD STYLE="font-style: italic; padding-bottom: 1pt; border-bottom: Black 1pt solid">/s/ Jianming Hao</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>Jianming Hao, Principal Executive Officer, President, Chief Executive Officer and Chairman of the Board</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: -1.5pt">&nbsp;</P>

<TABLE CELLPADDING="0" CELLSPACING="0" WIDTH="100%" STYLE="font: 10pt Times New Roman, Times, Serif; margin-top: 0pt; margin-bottom: 0pt"><TR STYLE="vertical-align: top">
<TD STYLE="width: 0"></TD><TD STYLE="width: 0"></TD><TD>Pursuant to the requirements of the Securities Act, this Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.</TD></TR></TABLE>

<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: -1.5pt">&nbsp;</P>

<TABLE CELLSPACING="0" CELLPADDING="0" STYLE="font: 10pt Times New Roman, Times, Serif; width: 100%">
<TR STYLE="vertical-align: top">
    <TD STYLE="width: 26%; font-weight: bold; border-bottom: Black 1pt solid">Signatures</TD>
    <TD STYLE="width: 2%; padding-bottom: 1.5pt">&nbsp;</TD>
    <TD STYLE="width: 52%; font-weight: bold; border-bottom: Black 1pt solid">Title</TD>
    <TD STYLE="width: 2%; padding-bottom: 1.5pt">&nbsp;</TD>
    <TD STYLE="width: 18%; font-weight: bold; border-bottom: Black 1pt solid">Date</TD></TR>
<TR STYLE="vertical-align: top">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-style: italic; border-bottom: Black 1pt solid">/s/ Jianming Hao</TD>
    <TD STYLE="padding-bottom: 1.5pt">&nbsp;</TD>
    <TD>Principal Executive Officer, President, Chief Executive Officer and Chairman of the Board</TD>
    <TD STYLE="padding-bottom: 1.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1.5pt">May 4, 2012</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>Jianming Hao</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-style: italic; border-bottom: Black 1pt solid">/s/ Amy He</TD>
    <TD STYLE="padding-bottom: 1.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1.5pt">Principal Financial and Accounting Officer and Acting Chief Financial Officer</TD>
    <TD STYLE="padding-bottom: 1.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1.5pt">May 4, 2012</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>Amy He</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-style: italic; border-bottom: Black 1pt solid">/s/ Jianbin Zhou</TD>
    <TD STYLE="padding-bottom: 1.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1.5pt">Chief Operating Officer</TD>
    <TD STYLE="padding-bottom: 1.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1.5pt">May 4, 2012</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>Jianbin Zhou</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-style: italic; border-bottom: Black 1pt solid">/s/ Al Carmona</TD>
    <TD STYLE="padding-bottom: 1.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1.5pt">Independent Director</TD>
    <TD STYLE="padding-bottom: 1.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1.5pt">May 4, 2012</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>Al Carmona</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-style: italic; border-bottom: Black 1pt solid">/s/ Longjiang Yuan</TD>
    <TD STYLE="padding-bottom: 1.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1.5pt">Independent Director</TD>
    <TD STYLE="padding-bottom: 1.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1.5pt">May 4, 2012</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>Longjiang Yuan</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-style: italic; border-bottom: Black 1pt solid">/s/ Timothy Stevens</TD>
    <TD STYLE="padding-bottom: 1.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1.5pt">Independent Director</TD>
    <TD STYLE="padding-bottom: 1.5pt">&nbsp;</TD>
    <TD STYLE="padding-bottom: 1.5pt">May 4, 2012</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>Timothy Stevens</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD STYLE="font-style: italic; border-bottom: Black 1pt solid">/s/ Hong Wang</TD>
    <TD>&nbsp;</TD>
    <TD>Director</TD>
    <TD>&nbsp;</TD>
    <TD>May 4, 2012</TD></TR>
<TR STYLE="vertical-align: bottom">
    <TD>Hong Wang</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD>
    <TD>&nbsp;</TD></TR>
</TABLE>
<P STYLE="font: 10pt Times New Roman, Times, Serif; margin: 0pt 0; text-indent: -1.5pt">&nbsp;</P>

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[{"type": "S-1", "sequence": "1", "filename": "v311739_s1.htm", "description": "FORM S-1", "secsgml_size_bytes": 1394504}]
{"company-data": {"conformed-name": "Deyu Agriculture Corp.", "cik": "0001467746", "assigned-sic": "2040", "irs-number": "000000000", "state-of-incorporation": "NV", "fiscal-year-end": "1231"}, "filing-values": {"form-type": "S-1", "act": "33", "file-number": "333-181149", "film-number": "12813633"}, "business-address": {"street1": "9TH FLOOR, BLOCK 8, AOLINJIATAI BUILDING", "street2": "1 KEHUIQIAN STREET", "city": "CHAOYANG DISTRICT, BEIJING", "state": "F4", "zip": "10086", "phone": "86 10 5524 1802"}, "mail-address": {"street1": "9TH FLOOR, BLOCK 8, AOLINJIATAI BUILDING", "street2": "1 KEHUIQIAN STREET", "city": "CHAOYANG DISTRICT, BEIJING", "state": "F4", "zip": "10086"}, "former-company": [{"former-conformed-name": "Eco Building International, Inc.", "date-changed": "20100510"}, {"former-conformed-name": "Eco Building International Inc", "date-changed": "20090706"}]}
As Filed with the Securities and Exchange Commission on May 4, 2012
Registration No. 333-
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM S-1
REGISTRATION STATEMENT UNDER THE SECURITIES
ACT OF 1933
DEYU AGRICULTURE CORP.
(Name of Registrant As Specified in
its Charter)
Nevada
3080
80-0329825
(State or Other Jurisdiction of
(Primary Standard Industrial
(I.R.S. Employer Identification No.)
Incorporation
Classification Code Number)
or Organization)
Headquarters in China
8th Floor, Block 5, Aolinjiatai Building
1 Kehuiqian Street
Chaoyang District, Beijing, China
Zip Code: 100192
Telephone: 86-10-5224 1802
Office in the United States
Columbus Circle 5
1790 Broadway, 8th Floor
New York, New York
Zip Code: 10019
Telephone: (646) 820-8060
(Address and Telephone Number
of Principal Executive Offices)
Val-U-Corp Services, Inc.
1802 North Carson Street. Suite
        108
Carson City, NV 89701
Telephone: (800) 555-9141
(Name, Address and Telephone Number
of Agent for Service)
Copies to:
Clayton E. Parker, Esq.
Matthew Ogurick, Esq.
K&L Gates LLP
200 South Biscayne Boulevard, Suite 3900
Miami, Florida 33131-2399
Telephone: (305) 539-3306
Facsimile: (305) 358-7095
Approximate Date of Proposed Sale to the Public:
As
soon as practicable after this Registration Statement becomes effective.
If any of the 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.
¨
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.
¨
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 the same offering.
¨
Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions
of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule
12b-2 of the Exchange Act. (Check one):
Large accelerated filer
¨
Accelerated filer
¨
Non-accelerated filer
¨
(Do not check if a smaller
reporting company)
Smaller reporting company
þ
CALCULATION OF REGISTRATION FEE
Title of Each Class of
Securities to be
Registered
Amount
to be
Registered (1)
Proposed
Maximum
Offering
Price per Unit (2)
Proposed
Maximum
Aggregate
Offering Price (2)
Amount of
Registration
Fee
Common Stock, $0.001 par value per share
250,000
$
1.65
$
412,500
$
48
(1) Pursuant to Rule 416 under the Securities Act, the
shares being registered hereunder include such indeterminate number of shares of common stock as may be issuable with respect
to the shares being registered hereunder as a result of stock splits, stock dividends or similar transactions.
(2) Estimated solely for purposes of calculating the registration
fee in accordance with Rule 457(c) and Rule 457(g) under the Securities Act of 1933, using the average of the high and low price
as reported on the OTC Markets-OTC Pink on April 27, 2012, which was $1.65 per share.
The Registrant 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 hereafter 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 Section 8(a), may determine.
The information in this prospectus is not complete and may
be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission
becomes effective. This prospectus is not an offer to sell these securities and we are not soliciting offers to buy these securities
in any state where the offer or sale is not permitted.
PRELIMINARY PROSPECTUS
SUBJECT TO COMPLETION
MAY 4, 2012
Up to 250,000 Shares
Of
DEYU AGRICULTURE CORP.
Common Stock
This prospectus relates to the sale of
up to 250,000
shares of our common stock, par value $0.001 per share, which may be offered by the selling stockholder from
time to time. All of the shares of common stock offered by this prospectus are being sold by the selling stockholder, and such
shares consist of shares which had been previously issued by us to the selling stockholder on April 27, 2010 pursuant to a share
exchange transaction. Such registration does not mean that the selling stockholder will actually offer or sell any of these shares.
We will not receive any proceeds from the sales of shares of our common stock by the selling stockholder.
The selling stockholder
has advised us that it will sell the shares of common stock from time to time in the open market, on the OTC Markets-OTC Pink,
in privately negotiated transactions or a combination of these methods, at market prices prevailing at the time of sale or at
prices related to the prevailing market prices or at negotiated prices.
Investing in our securities involves
a high degree of risk. See "Risk Factors" beginning on page 12 of this prospectus for a discussion of information
that should be considered in connection with an investment in our securities.
The selling stockholder
may sell the common shares to or through underwriters, brokers or dealers or directly to purchasers. Underwriters, brokers or
dealers may receive discounts, commissions or concessions from the selling stockholder, purchasers in connection with sales of
the common shares, or both. Additional information relating to the distribution of the common shares by the selling stockholder
can be found in this prospectus under the heading "Plan of Distribution." If underwriters or dealers are involved
in the sale of any securities offered by this prospectus, their names, and any applicable purchase price, fee, commission or discount
arrangement between or among them, will be set forth, or will be calculable from the information set forth, in a supplement to
this prospectus. We will pay the expenses of registering these shares.
We are a reporting company pursuant to
Section 12(g) of the Securities Exchange Act of 1934, or the Exchange Act, and our common stock is currently quoted on the OTC
Markets-OTC Pink under the symbol "DEYU.PK".  On April 27, 2012, the last reported sale price of our common stock
was $1.65
per share.
You should rely
only on the information contained in this prospectus or any prospectus supplement or amendment thereto. We have not authorized
anyone to provide you with different information.
Neither the Securities and Exchange
Commission nor any state securities regulators have 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 ________
___, 2012.
-
2
-
TABLE OF CONTENTS
PROSPECTUS SUMMARY
6
SUMMARY FINANCIAL DATA
RISK FACTORS
12
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
4
USE OF PROCEEDS
25
CAPITALIZATION
MARKET FOR COMMON EQUITY AND RELATED SHAREHOLDER MATTERS
26
SELECTED FINANCIAL DATA
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
29
BUSINESS
43
MANAGEMENT
59
EXECUTIVE COMPENSATION
66
CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
70
PRINCIPAL SHAREHOLDERS
73
SELLING STOCKHOLDER
76
DESCRIPTION OF SECURITIES
80
PLAN OF DISTRIBUTION
83
LEGAL MATTERS
85
EXPERTS
85
WHERE YOU CAN FIND ADDITIONAL INFORMATION
85
DISCLOSURE OF COMMISSION POSITION ON INDEMNIFICATION
FOR SECURITIES ACT LIABILITY
86
FINANCIAL STATEMENTS
87
INFORMATION NOT REQUIRED IN PROSPECTUS
89
SIGNATURES
97
-
3
-
SPECIAL NOTE REGARDING FORWARD-LOOKING
STATEMENTS
This prospectus contains forward-looking
statements that involve substantial risks and uncertainties. The forward-looking statements are contained principally in the sections
entitled "Prospectus Summary", "Risk Factors", "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Business" but are also contained elsewhere in this prospectus. In
some cases, you can identify forward-looking statements by the words "may", "might", "will",
"could", "would", "should", "expect", "intend", "plan",
"objective", "anticipate", "believe", "estimate", "predict", "project",
"potential", "continue" and "ongoing," or the negative of these terms, or other comparable
terminology intended to identify statements about the future. These statements involve known and unknown risks, uncertainties
and other factors that may cause our actual results, levels of activity, performance or achievements to be materially different
from the information expressed or implied by these forward-looking statements. Although we believe that we have a reasonable basis
for each forward-looking statement contained in this prospectus, we caution you that these statements are based on a combination
of facts and factors currently known by us and our expectations of the future, about which we cannot be certain. Forward-looking
statements include, but are not limited to, statements about:
·
Our business;
·
Our business strategy;
·
Our future operating results;
·
Our ability to obtain external financing;
·
Our understanding of our competition;
·
Industry and market trends;
·
Future capital expenditures; and
·
The impact of technology on our products, operations and business.
In addition, you should refer to the "Risk
Factors" section of this prospectus for a discussion of other important factors that may cause our actual results to differ
materially from those expressed or implied by our forward-looking statements. As a result of these factors, we cannot assure you
that the forward-looking statements in this prospectus will prove to be accurate or that we will achieve the plans, intentions
or expectations expressed or implied in our forward-looking statements. Furthermore, if our forward-looking statements prove to
be inaccurate, the inaccuracy may be material. In light of the significant uncertainties in these forward-looking statements,
you should not regard these statements as a representation or warranty by us or any other person that we will achieve our objectives
and plans in any specified time frame, or at all. Any forward-looking statements we make in this prospectus speak only as of its
date, and we undertake no obligation to publicly update any forward-looking statements, whether as a result of new information,
future events or otherwise, except as required by law.
You should read this prospectus and the
documents that we reference in this prospectus and have filed as exhibits to the registration statement, of which this prospectus
is a part, completely and with the understanding that our actual future results may be materially different from what we expect.
We qualify all of our forward-looking statements by these cautionary statements.
-
4
-
ABOUT THIS PROSPECTUS
You should rely only on the information
contained in this prospectus. We have not authorized anyone to provide you with information different from that contained in this
prospectus. The selling stockholder is offering to sell and seeking offers to buy shares of our common stock only in jurisdictions
where offers and sales are permitted. The information contained in this prospectus is accurate only as of the date of this prospectus,
regardless of the time of delivery of this prospectus or of any sale of our common stock. The prospectus will be updated and updated
prospectuses made available for delivery to the extent required by the federal securities laws.
No person is authorized in connection with
this prospectus to give any information or to make any representations about us, the selling stockholder, the securities or any
matter discussed in this prospectus, other than the information and representations contained in this prospectus. If any other
information or representation is given or made, such information or representation may not be relied upon as having been authorized
by us or the selling stockholder. This prospectus does not constitute an offer to sell, or a solicitation of an offer to buy the
securities in any circumstances under which the offer or solicitation is unlawful. Neither the delivery of this prospectus nor
any distribution of securities in accordance with this prospectus shall, under any circumstances, imply that there has been no
change in our affairs since the date of this prospectus. The prospectus will be updated and updated prospectuses made available
for delivery to the extent required by the federal securities laws.
-
5
-
PROSPECTUS SUMMARY
This summary highlights
information contained throughout this prospectus and is qualified in its entirety to the more detailed information and financial
statements included elsewhere in this prospectus. This summary does not contain all of the information that should be considered
before investing in our common stock. Investors should read the entire prospectus carefully, including the more detailed
information regarding our business, the risks of purchasing our common stock discussed in this prospectus under "Risk Factors"
beginning on page 12 of this prospectus and our financial statements and the accompanying notes beginning on page F-1 of this
prospectus.
In this prospectus, unless otherwise indicated,
the words "we", "us" and "our" refer to Deyu Agriculture Corp., a Nevada corporation and all
entities owned or controlled by Deyu Agriculture Corp.  All references to "Deyu" or the "Company"
in this prospectus mean Deyu Agriculture Corp., and all entities owned or controlled by Deyu Agriculture Corp., except where it
is made clear that the term only means the parent or a subsidiary company. References in this prospectus to the "PRC"
or "China" are to the People's Republic of China and references to "SEC" are to the U.S. Securities
and Exchange Commission.
Our Company Overview
We are a vertically integrated producer,
processor, marketer and distributor of organic and other agricultural products made from corn and grains operating in Shanxi Province
in the People's Republic of China. The Company has access to over 109,000 acres of farmland in Shanxi Province for breeding, cultivating,
processing, warehousing, and distributing grain and corn products. We have an extensive wholesale network in over 15 provinces
and a retail distribution network of approximately 20,000 supermarkets and convenience stores in 29 provinces across China. We
are equipped with advanced production lines and modern warehouses with production capacity of over 105,000 tons for grain products,
capacity of storage of over 100,000 tons and annual turnover of 700,000 tons for our corn products.
Our farming operations are conducted through
our wholly-owned PRC subsidiaries, Jinzhong Deyu Agriculture Trading Co. Limited ("Jinzhong Deyu"), Jinzhong Yongcheng
Agriculture Trading Co. Limited ("Yongcheng") and Jinzhong Yuliang Agriculture Trading Co. Limited ("Yuliang"). Yongcheng
and Yuliang focus on processing and distributing our corn and corn byproducts. Our grain processing and distribution are conducted
through our wholly-owned PRC subsidiaries, Jinzhong Deyu, Shanxi Taizihu Food Co. Ltd. ("Taizihu"), Shanxi Huichun
Bean Products Co., Ltd. Our other wholly-owned PRC subsidiaries, Detian Yu Biotechnology (Beijing) Co., Ltd. ("Detian Yu")
and Tianjin Guandu Food Co., Ltd. ("Tianjin Guandu"), and our majority-owned PRC subsidiary Hebei Yugu Grain Co., Ltd.
("Hebei Yugu") together with Jinzhong Deyu are engaged in bulk trading of rice, flour, wheat and other agriculture products
and the distribution of our processed grain products.
A brief description of our products is
set forth below, by division:
·
Corn Division
–Yongcheng and Yuliang
process and distribute corn and corn byproducts. Yongcheng and Yuliang acquire unprocessed corn and perform value-added processes
to the corn such as cleaning, drying and packaging.  Consumers range from livestock feed companies to corn oil/corn
starch manufacturing companies and governmental procurement agencies in China.
·
Grain Division
–Jinzhong Deyu acquires
unprocessed grains including millet, green bean, soy bean, black rice and many other varieties of grains traditionally grown and
consumed in China and performs value-added processes to the grains such as peeling, cleaning, grinding and packaging. Taizihu
and Huichun mainly produce and distribute deep processed grain products, including bean based products, fruit vinegars and juices
and other grain products. The finished products of this division are then sold directly to supermarkets and convenience stores
in China and overseas.
·
Bulk Trading Division
–Jinzhong Deyu,
Detian Yu, Tianjin Guandu and Hebei Yugu conduct bulk trading through procuring and wholesaling rice, flour, wheat, kidney beans,
green beans and other agricultural products. The majority of our customers for this division are food manufacturers, grain trading
companies, wholesalers and governmental procurement agencies in China.
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Operating revenue from continuing operations
for the year ended December 31, 2011 was $261,576,666, representing a 207% increase from $85,174,884 for the year ended December
31, 2010. Our net income available to common stockholders for the year ended December 31, 2011 was $17,335,442, representing
a 50.7% increase from $11,502,253 for the year ended December 31, 2010.
Competitive Advantages
Cultivation Base
Our grains are mainly grown in the hilly
area near Taihang Mountain, at an altitude of between 5,000 to 8,000 feet above sea level. This region has a wide temperature
variation between night and day and a long daily exposure to sunlight. These geographic characteristics produce grains that are
rich in nutrients, especially minerals, rutin, cellulose, amino acids, chlorophyll, lecithin and linoleic acid.
Partnership with Farmers
Agricultural land for large scale farming
of grains is becoming a rarity in China. With the support of our local government, we have adopted the operation mode of "Company
+ Farmers + Base on a large scale". We have the cultivation base of 109,000 acres in Jinzhong in Shanxi Province for the
supply of corn and grain by obtaining the land use rights of 17, 000 acres of farmland with average remaining use life of 38 years
and signing agricultural co-operative agreements with the governments of the counties and villages for the development of 92,000
acres for 20 years. We have established stable partnerships with over 60,000 farmers to grow crops on the farmland. We provide
instruction to the farmers for planting crops and technical support for seeding and cultivation. The scale cultivation ensures
our stable supply of raw material with high quality.
Advanced Production Lines
We have a modern processing center for
corn with five drying cylinders and six warehouses, the construction of which was completed in 2011. Our total capacity of storage
and annual turnover of corn has exceeded 100,000 tons and 700,000 tons, respectively. We are also equipped with fully automatic
and advanced production lines for grain processing with a total production capacity of over 105,000 tons. The advanced production
lines and production technologies help produce grain products with high quality by maintaining the nutritional components of the
products.
Warehousing and Logistics
We operate six self-owned warehouses, one
rental warehouse and some temporary warehouses with total storage capacity of over 100,000 tons of food products and an annual
turnover of 700,000 tons. This capacity helps us to reach economies of scale with low cost of processing and storage. Our production
bases are located in Jinzhong and Quwo in Shanxi Province with convenient transportation. The Jinzhong facilities and warehouses
are in proximity to Shitai Railway and Provincial Road 317. The Quwo facilities are several kilometers away from Houma, a transportation
hub. We have exclusive lease agreements with three railway lines for freight transportation in Jinzhong: (a) Shanxi Cereal &
Oil Group, Mingli Reservation Depot; (b) Shanxi Yuci Cereal Reservation Depot; and (c) Yuci Dongzhao Railway Freight Station.  These
advantageous geographical positions and exclusive agreements help us ensure speedy delivery of our products at a low cost.
Established Sales Network
We have cultivated an extensive wholesale
network for corn and bulk trading with customers including various livestock feed companies, food manufacturers, corn oil/corn
starch manufacturing companies, grain trading companies, wholesalers and governmental procurement agencies in approximately 15
provinces. Meanwhile, our retail sales network for processed grain covers approximately 20,000 supermarkets and convenience stores
with distribution to over 29 provinces in China, including the cities of Beijing, Tianjin, Jinan, Fuzhou, Chengdu and Shijiazhuang,
in some of the world's widely known supermarkets. We believe the rapid development of our sales network has increased our
revenue as well as our brand awareness.
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Recent Developments
On June 16, 2011, Tianjin Guandu (previously
named Tianjin Detianyu Food Co., Ltd. before October 24, 2011), a newly formed wholly-owned subsidiary of Detian Yu with RMB10,000,000
($1,544,497) registered capital entered into a Cooperation Agreement with the Administrative Committee of Sino-Singapore Tianjin
Eco-city (the "Agency"), the representative organization of the Tianjin Municipal Government. The agreement provides
for a cooperative relationship between Tianjin Guandu and the Agency regarding Tianjin Guandu's establishment of its operations
in Tianing's Eco-city, particularly with respect to certain tax arrangements. Tianjin Guandu is in the business of wholesale
distribution of simple-processed and deep-processed packaged food products and staple foods.
On July 25, 2011, we incorporated and registered
Hebei Yugu, a 70%-owned subsidiary of Detian Yu with RMB10,000,000 ($1,563,824) in registered capital, in Gaocheng City of Shijiazhuang,
Hebei Province, China. Hebei Yugu is primarily engaged in wholesale distribution of grains, beans and potatoes.
On February 2, 2012, RedSun Technology
(Shenzhen) Co. Limited ( "Redsun"), a wholly-owned subsidiary of the Company, acquired 100% of the issued and outstanding
registered share capital of Taizihu and its subsidiary, Huichun (together with Taizihu, the "Taizihu Group") in consideration
of RMB34,705,000 ($5,502,181). The Taizihu Group is in the business of producing and selling bean based products, fruit vinegars
and juices and other grain products. The Company will file the audited financial statements of the Taizihu Group and pro forma
financial information required to be filed with the SEC not later than April 19, 2012 in accordance with the rules of the SEC.
Corporate Information
Our principal office is located at 8th
Floor, Block 5, Aolinjiatai Building, 1 Kehuiqian Street, Chaoyang District, Beijing, China 100192. Our telephone number in China
is +(8610)-5224 1802 and our fax number is +(8610)-5224 1822. Our telephone number in the United States is (646) 820-8060. Our
corporate website is
www.deyuagri.com
(information on our website is not made a part of this prospectus).
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The Offering
Common stock outstanding prior to the offering
10,566,766
Common Stock offered by the selling stockholder
Up to 250,000 shares
Common stock outstanding after the offering
10,566,766
Use of proceeds
We will not receive any proceeds from the sale of the shares of common stock by the selling stockholder.
OTC Markets-OTC Pink
DEYU.PK
Risk factors
This investment involves a high degree of risk. See "Risk Factors" for a discussion of factors you should
    consider carefully before making an investment decision.
The above information regarding common
stock to be outstanding after the offering is based on 10,566,766 shares of common stock outstanding as of the date of this prospectus,
and excludes 1,995,475 shares of common stock issuable upon the conversion of convertible preferred stock, 1,154,272 shares of
common stock issuance upon the exercise of warrants and 543,333 shares of common stock issuance upon the exercise of exercisable
stock options.
2010 Share Exchange
On April 27, 2010, we entered into a Share
Exchange Agreement ("Exchange Agreement") by and among (i) City Zone Holdings Limited, an emerging organic and non-organic
agricultural products distributor in Shanxi Province, China, engaged in procuring, processing, marketing and distributing various
grain and corn products ("City Zone"), (ii) City Zone's shareholders, including, without limitation, Expert
Venture Limited, a company organized under the laws of the British Virgin Islands and the selling stockholder hereunder and (iii)
certain of our principal shareholders, whereby Expert Venture Limited and the other City Zone shareholders transferred to us all
of the shares of City Zone in exchange for the issuance of an aggregate 8,736,932 shares of our common stock, of which 6,238,205
shares were issued to Expert Venture Limited. As a result of the Exchange Agreement, Expert Venture Limited and other minority
shareholders of City Zone owned a majority of our outstanding shares, City Zone became our wholly-owned subsidiary and we acquired
100% of the processing and production operations of City Zone and its subsidiaries, the business and operations of which
now constitutes the primary business and operations of the Company.   The 250,000 shares of our common stock being
registered hereunder were part of the issuance by us to Expert Venture Limited pursuant to the Exchange Agreement.
2010 Private Placement
Simultaneously with the acquisition of
City Zone, we completed a private placement offering in the gross amount of $8,211,166 of the sale of securities to accredited
investors at $4.40 per unit, with each "Unit" consisting of one share of our Series A convertible preferred stock
and one warrant to purchase 0.4 shares of our common stock with an exercise price of $5.06 per share. On May 10, 2010, we closed
on the second and final round of the private placement offering as disclosed in our Current Report on Form 8-K filed with the
SEC on May 3, 2010 through the sale of 589,689 Units comprised of 589,689 shares of our Series A convertible preferred stock and
235,882 five-year warrants with an exercise price of $5.06 per share, to certain accredited investors for total gross proceeds
of $2,594,607. We raised an aggregate amount of $10,805,750 in the two rounds of offerings.
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In connection with the financing transaction,
we entered into (i) a Securities Purchase Agreement, (ii) a Registration Rights Agreement, (iii) a Lock-Up Agreement and (iv)
a Securities Escrow Agreement for a make good arrangement with our management (collectively, the "Financing Documents").
The private placement closed simultaneously
with the signing of the Financing Documents and our issuing of 2,455,863 shares of Series A convertible preferred stock and warrants
exercisable into 982,362 shares of common stock to certain investors (collectively, the "Investors").  Pursuant
to its terms, the Series A convertible preferred stock receive cumulative dividends at a rate of 5% per annum and can be converted
into common stock on a 1:1 basis, subject to applicable adjustments.  Pursuant to its terms, the warrants can be converted
into 982,362 shares of common stock at an exercise price of $5.06 per share (the "Warrants").  The Warrants
will expire on April 27, 2015.
Pursuant to the Registration Rights Agreement,
we agreed to file a registration statement on Form S-1 (or other applicable Form) within 60 days of the close of such financing.  We
filed a Registration Statement on Form S-1 with the SEC on June 15, 2010 (, and on October 21, 2010, the SEC declared the
Form S-1 effective.
We also entered into a Lock-Up Agreement
with the Investors, pursuant to which the common stock owned by the management of City Zone was locked-up for the six (6) month
period following the effectiveness of the Registration Statement is declared effective. The Lock-Up Agreement expired on April
21, 2011.
Lastly, pursuant to the Securities Escrow
Agreement, Expert Venture Limited pledged 2,455,863 shares of common stock of the Company (the "Make Good Shares")
to secure the obligation that we reach certain earnings thresholds for the fiscal years ended 2010 and 2011. One half (or 1,227,932
shares) of the Make Good Shares were allocated to the 2010 earnings requirement and the other half (1,227,931 shares) of the Make
Good Shares were allocated to the 2011 earnings requirement. For the fiscal year 2010, we met our threshold requirement of reporting
net income of at least 95% of $11,000,000. If we meet the threshold in 2011 of reporting net income of at least 95% of $15,000,000
(i.e., at least $14,250,000), the remainder of the Make Good Shares will be returned to Expert Venture Limited, however if we
fail to meet our threshold, then the Make Good Shares will be released from escrow based on the following terms and conditions:
·
If we achieve net
                                                                                                          income of less than
                                                                                                          50% of $15,000,000 (or
                                                                                                          $7,500,000), then 1,227,931
                                                                                                          shares shall be released
                                                                                                          to the investors on
                                                                                                          a pro rata basis (based
                                                                                                          on the amount of each
                                                                                                          investors investment).
·
If we achieve net
                                                                                                          income of between 50%
                                                                                                          and less than 95% of
                                                                                                          $15,000,000, then a
                                                                                                          portion of the 1,227,931
                                                                                                          shares held in escrow
                                                                                                          shall be disbursed to
                                                                                                          the Investors (the remaining
                                                                                                          shares will be returned
                                                                                                          to Expert Venture Limited). 
                                                                                                          The number of shares
                                                                                                          released to the investors
                                                                                                          shall be determined
                                                                                                          by doubling the percentage
                                                                                                          missed between the actual
                                                                                                          net income as compared
                                                                                                          to the make good target
                                                                                                          and then multiplying
                                                                                                          that by the 1,227,931
                                                                                                          escrow shares.
The 250,000 shares being registered hereunder
are not part of the 2,455,863 shares pledged by Expert Venture Limited pursuant to the Securities Escrow Agreement.
Share Transfer Agreements
Pursuant to a share transfer agreement
dated April 26, 2010, Mr. Hong Wang, a Director of the Company, has the option, subject to certain performance targets (discussed
in more detail below), to purchase from Mr. Yam Sheung Kwok, the current sole shareholder of Expert Venture Limited, up to
120 shares of Expert Venture Limited. Accordingly, upon exercise of such option, Mr. Wang will indirectly (through his ownership
of Expert Venture Limited) own and control 664,142 shares, which equal 4.66% of the fully-diluted percentage of outstanding shares
as of the date of this prospectus. Since the performance targets set forth in the share transfer agreement have been met, the
option has vested and become exercisable to Mr. Wang. As a result, the number of shares of beneficial ownership has included 664,142
shares of common stock that have become transferrable to Mr. Wang after adjusting proportionally to the reduction of total number
of shares held by Expert Venture Limited since April 2010.
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Pursuant to a share transfer agreement
dated April 26, 2010, Mr. Jianming Hao, the Chairman of the Board and the President and Chief Executive Officer of the Company,
has the option, subject to certain performance targets, to purchase from Mr. Yam Sheung Kwok, the current sole shareholder
of Expert Venture Limited, up to 101 shares of Expert Venture Limited. Accordingly, upon exercise of such option, Mr. Hao
will indirectly (through his ownership of Expert Venture Limited) own and control 558,986 shares, which equal 3.92%
of the fully-diluted percentage of outstanding shares as of the date of this prospectus. Since the performance targets set forth
in the share transfer agreement have been met, the option has vested and become exercisable to Mr. Hao. As a result, the number
of shares of beneficial ownership has included 558,986 shares of common stock that have become transferrable to Mr. Hao after
adjusting proportionally to the reduction of total number of shares held by Expert Venture Limited since April 2010.
Pursuant to a share transfer agreement
dated April 26, 2010, Mr. Wenjun Tian, a former Director and former President of the Company, will have an option, subject
to certain performance targets (discussed in more detail below), to purchase from Mr. Yam Sheung Kwok, the current sole shareholder
of Expert Venture Limited, up to 300 shares of Expert Venture Limited, which constitutes 30% of Expert Venture Limited. Accordingly,
upon exercise of such option, Mr. Tian will indirectly (through his ownership of Expert Venture Limited) own and control
1,660,354 shares, which equal 11.64% of the fully-diluted percentage of outstanding shares as of the date of this prospectus.
Since the performance targets set forth in the share transfer agreement have been met, the option has vested and become exercisable
to Mr. Tian. As a result, the number of shares of beneficial ownership has included 1,660,354 shares of common stock that have
become transferrable to Mr. Tian after adjusting proportionally to the reduction of total number of shares held by Expert Venture
Limited since April 2010.
Pursuant to a share transfer agreement
dated April 26, 2010, Mr. Yongqing Ren, Vice President of the Corn Division of the Company, will have an option, subject
to certain performance targets (discussed in more detail below), to purchase from Mr. Yam Sheung Kwok, the current sole shareholder
of Expert Venture Limited, up to 200 shares of Expert Venture Limited. Accordingly, upon exercise of such option, Mr. Ren
will indirectly (through his ownership of Expert Venture Limited) own and control 1,106,903 shares, which equal 7.76% of the fully-diluted
percentage of outstanding shares as of the date of this prospectus. Since the performance targets set forth in the share transfer
agreement have been met, the option has vested and become exercisable to Mr. Ren. As a result, the number of shares of beneficial
ownership has included 1,106,903 shares of common stock that have become transferrable to Mr. Ren after adjusting proportionally
to the reduction of total number of shares held by Expert Venture Limited since April 2010.
Pursuant to a share
transfer agreement dated April 26, 2010, Mr. Junde Zhang, Vice President of the Grain Division of the Company, will have
an option, subject to certain performance targets (discussed in more detail below), to purchase from Mr. Yam Sheung Kwok,
the current sole shareholder of Expert Venture Limited, up to 200 shares of Expert Venture Limited. Accordingly, upon exercise
of such option, Mr. Zhang will indirectly (through his ownership of Expert Venture Limited) own and control 1,106,903 shares,
which equal 7.76% of the fully-diluted percentage of outstanding shares of common stock. Since the performance targets set forth
in the share transfer agreement have been met, the option has vested and become exercisable to Mr. Zhang. As a result, the number
of shares of beneficial ownership has included 1,106,903 shares of common stock that have become transferrable to Mr. Zhang after
adjusting proportionally to the reduction of total number of shares held by Expert Venture Limited since April 2010.
Plan of Distribution
This offering is not being underwritten. The
selling stockholder will sell its shares of our common stock at prevailing market prices or privately negotiated prices. The
selling stockholder itself directly, or through its agents, or through its brokers or dealers, may sell its shares from time to
time, in (i) privately negotiated transactions, (ii) in one or more transactions, including block transactions in accordance
with the applicable rules of the OTC Markets-OTC Pink or (iii) otherwise in accordance with the section of this prospectus
entitled "Plan of Distribution." To the extent required, the specific shares to be sold, the name of the selling
stockholder, the respective purchase prices and public offering prices, the names of any agent, broker or dealer and any applicable
commission or discounts with respect to a particular offer will be described in an accompanying prospectus supplement. In
addition, any securities covered by this prospectus which qualify for sale pursuant to Rule 144 may be sold under Rule 144 rather
than pursuant to this prospectus.
For additional information
on the methods of sale, you should refer to the section of this prospectus entitled "Plan of Distribution" beginning
on page 83.
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RISK FACTORS
Before you make a decision to invest
in our securities, you should consider carefully the risks described below, together with other information in this prospectus.
If any of the following events actually occur, our business, operating results, prospects or financial condition could be materially
and adversely affected. This could cause the trading price of our common stock to decline and you may lose all or part of your
investment. The risks described below are not the only ones that we face. Additional risks not presently known to us or that we
currently deem immaterial may also significantly impair our business operations and could result in a complete loss of your investment.
Risks Relating to Our Business
Substantially all of our business, assets and operations
are located in PRC and substantially all of our revenue is derived from our operations in PRC which subjects us to the risks related
to economic, political and legal developments in PRC.
Substantially all of our business, assets
and operations are located in China. The economy of the PRC differs from the economies of most developed countries in many respects.
The economy of PRC has been transitioning from a planned economy to a market-oriented economy. Although in recent years the PRC
government has implemented measures 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 the PRC is still owned by the PRC government. In addition, the PRC 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. Some of these measures benefit the overall economy of China, but
may have a negative effect on us.
Our success depends on our management team and other key
personnel, the loss of any of whom could disrupt our business operations.
Our future success will depend in substantial
part on the continued services of our senior management. The loss of the services of one or more of our key personnel could impede
implementation of our business plan and result in reduced profitability. Our future success will also depend on the continued
ability to attract, retain and motivate highly qualified technical sales and marketing customer support. Because of the rapid
growth of the economy in the PRC, competition for qualified personnel is intense. We cannot guarantee that we will be able to
retain our key personnel or that we will be able to attract, assimilate or retain qualified personnel in the future. If we are
unsuccessful in our efforts in this regard, it could have an adverse effect on our business, financial condition and results of
operations.
Any disruption of the operations in our factories would
damage our business
.
Our operations could be interrupted by
fire, flood, earthquake and other events beyond our control for which we may not carry adequate insurance. Any disruption of the
operations in our factories would have a significant negative impact on our ability to store, package, manufacture, and deliver
products which would cause a potential diminution in sales, the cancellation of orders, damage to our reputation and potential
lawsuits.
Adverse weather conditions could reduce supply and/or demand
for our products
.
The supply of and demand for our corn and
grain products fluctuate significantly with weather conditions, which could have either a positive or negative effect on production.
If any natural disasters, such as flood, drought, hail, tornadoes or earthquakes, occur, supply for our products would likely
be reduced.
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We may encounter substantial competition in our business
and our failure to compete effectively may adversely affect our ability to generate revenue
.
We believe that existing and new competitors
will continue to improve their products and to introduce new products with competitive price and performance characteristics.
We expect that we will be required to continue to invest in product development and productivity improvements to compete effectively
in our markets. Our competitors could develop a more efficient product or undertake more aggressive and costly marketing campaigns
than ours, which may adversely affect our marketing strategies and could have a material adverse effect on our business, results
of operations and financial condition.
Our major competitors may be better able
than we to successfully endure downturns in our sector. In periods of reduced demand for our products, we can either choose to
maintain market share by reducing our selling prices to meet competition or maintain selling prices, which would likely sacrifice
market share. Sales and overall profitability would be reduced in either case. In addition, we cannot assure you that additional
competitors will not enter our existing markets, or that we will be able to compete successfully against existing or new competition.
We may not be able to obtain regulatory or governmental
approvals for our products which may delay or suspend the production, packaging and/or distribution of our products
.
The manufacture and sale of our agricultural
products in the PRC is regulated by the PRC and the local Provincial Government. The legal and regulatory regime governing our
industry is evolving, and we may become subject to different, including more stringent, requirements than those currently applicable
to us. We may be vulnerable to local and national government agencies or other parties who wish to renegotiate the terms and conditions
of, or terminate their agreements or other understandings with us, or implement new or more stringent requirements, which may
require us to suspend or delay production of their products. Our many permits and licenses related to the agricultural and food
industries may expire and there is not guarantee the government or certifying agency will renew our licenses and/or certifications.
Potential environmental liability could have a material
adverse effect on our operations and financial condition
.
To the knowledge of our management team,
neither the production nor the sale of our products constitutes activities, or generates materials that create any environmental
hazards or violates PRC environmental laws. Although it has not been alleged by PRC government officials that we have violated
any current environmental regulations, we cannot assure you that the PRC government will not amend the current PRC environmental
protection laws and regulations. Our business and operating results may be materially and adversely affected if we were to be
held liable for violating existing environmental regulations or if we were to increase expenditures to comply with environmental
regulations affecting our operations.
We do not have key man insurance on our Chairman and CEO,
on whom we rely for the management of our business and any loss of service by our Chairman and CEO could cause a material adverse
effect on our business
.
We depend, to a large extent, on the abilities
and participation of our current management team, but have a particular reliance upon Mr. Jianming Hao, our CEO and Chairman of
the Board. The loss of the services of Mr. Hao, for any reason, may have a material adverse effect on our business and prospects.
We cannot assure you that the services of Mr. Hao will continue to be available to us, or that we will be able to find a suitable
replacement for him. We do not carry key man life insurance for any key personnel.
Any significant fluctuation in price of our raw materials
may substantially increase our manufacturing costs
.
The prices for the raw materials that we
use in the manufacture of our fertilizer products are subject to market forces largely beyond our control, including the price
of coal, our energy costs, organic chemical feedstock costs, market demand, and freight costs. The prices for these raw materials
may fluctuate significantly based upon changes in these forces. If we are unable to pass any raw material price increases through
to our customers, we could incur significant losses and a diminution of the market price of our common stock.
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Our plans to build additional plants and to improve and
upgrade our internal control and management system will require capital expenditures in the future which could result in a shortage
of cash.
Our plans to build additional plants and
to improve and upgrade our internal control and management system will require capital expenditures in the future. We may also
need further funding for working capital, investments, potential acquisitions and joint ventures and other corporate requirements.
We cannot assure you that cash generated from our operations will be sufficient to fund these development plans, or that our actual
capital expenditures and investments will not significantly exceed our current planned amounts. If either of these conditions
arises, we may have to seek external financing to satisfy our capital needs. Our ability to obtain external financing at reasonable
costs is subject to a variety of uncertainties. Failure to obtain sufficient external funds for our development plans could adversely
affect our business, financial condition and operating performance.
Our planned expansion and technical
improvement projects could be delayed or adversely affected by, among other things, failures to receive regulatory approvals,
difficulties in obtaining sufficient financing, technical difficulties, or human or other resource constraints.
Our planned expansion and technical improvement
projects could be delayed or adversely affected by, among other things, failures to receive regulatory approvals, difficulties
in obtaining sufficient financing, technical difficulties, or human or other resource constraints. Moreover, the costs involved
in these projects may exceed those originally contemplated. Costs savings and other economic benefits expected from these projects
may not materialize as a result of any such project delays, cost overruns or changes in market circumstances. Failure to obtain
intended economic benefits from these projects could adversely affect our business, financial condition and operating performances.
We need to manage growth in operations to maximize our potential
growth and achieve our expected revenues and our failure to manage growth will cause a disruption of our operations resulting
in the failure to generate revenue at levels we expect.
In order to maximize potential growth in
our current and potential markets, we believe that we must expand our manufacturing and marketing operations. This expansion will
place a significant strain on our management and our operational, accounting, and information systems. We expect that we will
need to continue to improve our financial controls, operating procedures, and management information systems. We will also need
to effectively train, motivate, and manage our employees. Our failure to manage our growth could disrupt our operations and ultimately
prevent us from generating the revenues we expect.
We cannot assure you that our organic growth strategy will
be successful which may result in a negative impact on our growth, financial condition, results of operations and cash flow.
One of our strategies is to grow organically
through increasing the distribution and sales of our products by penetrating existing markets in PRC and entering new geographic
markets in PRC. However, many obstacles to entering such new markets exist including, but not limited to, established companies
in such existing markets in the PRC. We cannot, therefore, assure you that we will be able to successfully overcome such obstacles
and establish our products in any additional markets. Our inability to implement this organic growth strategy successfully may
have a negative impact on our growth, future financial condition, results of operations or cash flows.
If we need additional capital to fund our growing operations,
we may not be able to obtain sufficient capital and may be forced to limit the scope of our operations.
If adequate additional financing is not
available on reasonable terms, we may not be able to undertake plant expansion, purchase additional machinery and purchase equipment
for our operations and we would have to modify our business plans accordingly. There is no assurance that additional financing
will be available to us.
In connection with our growth strategies,
we may experience increased capital needs and accordingly, we may not have sufficient capital to fund our future operations without
additional capital investments. Our capital needs will depend on numerous factors, including (i) our profitability; (ii) the release
of competitive products by our competition; (iii) the level of our investment in research and development; and (iv) the amount
of our capital expenditures. We cannot assure you that we will be able to obtain capital in the future to meet our needs.
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In recent years, the securities markets
in the United States have experienced a high level of price and volume volatility, and the market price of securities of many
companies have experienced wide fluctuations that have not necessarily been related to the operations, performances, underlying
asset values or prospects of such companies. For these reasons, our shares of common stock can also be expected to be subject
to volatility resulting from purely market forces over which we will have no control. If we need additional funding we will, most
likely, seek such funding in the United States (although we may be able to obtain funding in the PRC) and the market fluctuations
affect on our stock price could limit our ability to obtain equity financing.
If we cannot obtain additional funding,
we may be required to: (i) limit our plant expansion; (ii) limit our marketing efforts; and (iii) decrease or eliminate capital
expenditures.
Such reductions could materially adversely
affect our business and our ability to compete.
Even if we do find a source of additional
capital, we may not be able to negotiate terms and conditions for receiving the additional capital that are acceptable to us.
Any future capital investments could dilute or otherwise materially and adversely affect the holdings or rights of our existing
shareholders. In addition, new equity or convertible debt securities issued by us to obtain financing could have rights, preferences
and privileges senior to the units. We cannot give you any assurance that any additional financing will be available to us, or
if available, will be on terms favorable to us.
Labor disputes could significantly affect our operations.
Labor disputes with our employees or labor
disputes, work stoppages or slowdowns at any of its subcontractors or suppliers could significantly disrupt operations or expansion
plans. Delays caused by any such disruptions could materially affect projections for increased capacity, production and revenues,
which could have a material adverse effect on our business, financial condition, results of operations and prospects.
Because all of our operations and most of our directors
and officers may reside in the PRC and outside the United States and because we may not consent to service of process in the United
States or to the jurisdiction of any United States court, it may be difficult for you to enforce your rights against us or enforce
United States judgments against us in the PRC.
After the completion of this reverse merger,
substantially all of our operations and all of our directors and officers may reside outside of the United States.  Foreign
officers or directors may not consent to service of process in the United States or to the jurisdiction of any United States Court.  It
may therefore be difficult for investors in the United States to enforce their legal rights, to effect service of process upon
us, our directors or officers or to enforce judgments of United States courts predicated upon civil liabilities and criminal penalties
of our directors and officers under United States federal securities laws.  Moreover, we have been advised that the
PRC 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 the PRC would permit effective enforcement of
criminal penalties of the United States federal securities laws.
Risks Relating to the People's Republic
of China
Certain political, geographic and economic factors relating
to operating in the PRC could adversely affect our business operations.
The PRC is transitioning from a planned
economy to a market economy. While the PRC government has pursued economic reforms since its adoption of the open-door policy
in 1978, a large portion of the PRC economy is still operating under five-year plans and annual state plans. Through these plans
and other economic measures, such as control on foreign exchange, taxation and restrictions on foreign participation in the domestic
market of various industries, the PRC government exerts considerable direct and indirect influence on the economy. Many of the
economic reforms carried out by the PRC government are unprecedented or experimental, and are expected to be refined and improved.
Other political, economic and social factors can also lead to further readjustment of such reforms. This refining and readjustment
process may not necessarily have a positive effect on our operations or future business development. Our operating results may
be adversely affected by changes in the PRC's economic and social conditions as well as by changes in the policies of the PRC
government, such as changes in laws and regulations (or the official interpretation thereof), measures which may be introduced
to control inflation, changes in the interest rate or method of taxation, and the imposition of restrictions on currency conversion
in addition to those described below.
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The uncertain application of many relatively new PRC laws
that may apply to us create an unpredictable environment for our business operations and could have a material adverse effect
on us.
The PRC legal system is a civil law system.
Unlike the common law system, the civil law system is based on written statutes in which decided legal cases have little value.
In 1979, the PRC began to promulgate a comprehensive system of laws and has since introduced many laws and regulations to provide
general guidance on economic and business practices in the PRC and to regulate foreign investment. Progress has been made in the
promulgation of laws and regulations dealing with economic matters such as corporate organization and governance, foreign investment,
commerce, taxation and trade. The promulgation of new laws, changes of existing laws and the abrogation of local regulations by
national laws could have a negative impact on our business and business prospects.
Labor costs may be increased due to the implementation of
the new PRC Labor Contract Law.
The PRC Labor Contract Law was adopted
by the Standing Committee of the National People's Congress of PRC on June 29, 2007 and became effective on January 1, 2008.
The implementation of the new law, especially the following provisions, may increase our labor costs: (a) an employer shall make
monetary compensation, which shall be based on the number of an employee's working years with the employer at the rate of
one month's wage for each year, to the employee upon termination of the employment contract with certain exceptions (for
example, in the circumstances where the term of a fixed-term employment contract expires and the employee does not agree to renew
the contract even though the conditions offered by the employer are the same as or better than those stipulated in the current
contract); (b) the wages of an employee on probation may not be less than the lowest wage level for the same job with the employer
or less than 80% of the wage agreed upon in the employment contract, and may not be less than the local minimum wage rate; (c)
if an employee has been working for the employer for a consecutive period of not less than 10 years, or if a fixed-term employment
contract with an employee was entered into on two consecutive occasions, generally the employer should enter into an open-ended
employment with such employee, unless the employee requests for a fixed-term employment contract; (d) if an employer fails, in
violation of the related provisions, to enter into an open-ended contract with an employee, it shall each month pay to the employee
twice his wage, starting from the date on which an open-ended employment contract should have been entered into; (e) if an employer
fails to enter into a written employment contract with an employee more than one month but less than one year after the date on
which the employer started using him, the employer shall each month pay to the employee twice his wage; and (f) if an employer
hires an employee whose employment contract with another employer has not yet been terminated or ended, causing the other employer
to suffer a loss, it shall be jointly and severally liable with the employee for the compensation of such loss. Our labor costs
may increase due to the implementation of the new PRC Labor Contract Law and our business and results of operations may be materially
and adversely affected.
Fluctuations in the exchange rate could have an adverse
effect upon our business and reported financial results.
We conduct our business in Renminbi, thus
our functional currency is the Renminbi, while our reporting currency is the U.S. dollar.  The value of the Renminbi
against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, the political situation as
well as economic policies and conditions. On July 21, 2005, the PRC government changed its decade old policy of pegging its currency
to the U.S. currency. Under that policy, the Renminbi is permitted to fluctuate within a narrow and managed band against a basket
of certain foreign currencies. This change in policy has resulted in an approximate 21% appreciation of the Renminbi against the
U.S. dollar between 2005 and 2008. However, the PRC government decided to repeg the Renminbi to U.S. Dollars in response to the
financial crisis in 2008.  On June 19, 2010, China ended the peg of Renminbi to the U.S. Dollar which allowed a greater
flexibility of its exchange rate.  There remains significant international pressure on the appreciation of the Renminbi
against the U.S. Dollar.  To the extent any of our future revenues are denominated in currencies other than the United
States dollar, we would be subject to increased risks relating to foreign currency exchange rate fluctuations which could have
a material adverse affect on our financial condition and operating results since operating results are reported in United States
dollars and significant changes in the exchange rate could materially impact our reported earnings.
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The PRC government imposes control over
the conversion of Renminbi into foreign currencies. Under the current unified floating exchange rate system, the People's Bank
of China publishes an exchange rate, which we refer to as the PBOC exchange rate, based on the previous day's dealings in the
inter-bank foreign exchange market. Financial institutions authorized to deal in foreign currency may enter into foreign exchange
transactions at exchange rates within an authorized range above or below the PBOC exchange rate according to market conditions.
Pursuant to the Foreign Exchange Control
Regulations of the PRC issued by the State Council which came into effect on April 1, 1996, and the Regulations on the Administration
of Foreign Exchange Settlement, Sale and Payment of the PRC which came into effect on July 1, 1996, regarding foreign exchange
control, conversion of Renminbi into foreign exchange by Foreign Investment Enterprises, or FIEs, for use on current account items,
including the distribution of dividends and profits to foreign investors, is permissible. FIEs are permitted to convert their
after-tax dividends and profits to foreign exchange and remit such foreign exchange to their foreign exchange bank accounts in
the PRC. Conversion of Renminbi into foreign currencies for capital account items, including direct investment, loans, and security
investment, is still under certain restrictions. On January 14, 1997, the State Council amended the Foreign Exchange Control Regulations
and added, among other things, an important provision, which provides that the PRC government shall not impose restrictions on
recurring international payments and transfers under current account items.
Enterprises in the PRC (including FIEs)
which require foreign exchange for transactions relating to current account items, may, without approval of the State Administration
of Foreign Exchange, or "SAFE," effect payment from their foreign exchange account or convert and pay at the designated
foreign exchange banks by providing valid receipts and proofs.
Convertibility of foreign exchange in respect
of capital account items, such as direct investment and capital contribution, is still subject to certain restrictions, and prior
approval from the SAFE and its relevant branches must be sought.
Furthermore, the Renminbi is not freely
convertible into foreign currencies nor can it be freely remitted abroad. Under the PRC's Foreign Exchange Control Regulations
and the Administration of Settlement, Sales and Payment of Foreign Exchange Regulations, Foreign Invested Enterprises are permitted
either to repatriate or distribute its profits or dividends in foreign currencies out of its foreign exchange accounts, or exchange
Renminbi for foreign currencies through banks authorized to conduct foreign exchange business. The conversion of Renminbi into
foreign exchange by Foreign Invested Enterprises for recurring items, including the distribution of dividends to foreign investors,
is permissible. The conversion of Renminbi into foreign currencies for capital items, such as direct investment, loans and security
investment, is subject, however, to more stringent controls.
The PRC government exerts substantial influence over the
manner in which we must conduct our business activities and any increased scrutiny or regulation could have a material adverse
impact over our operations.
We are dependent on our relationship with
the local government in the province in which we operate our business. Chinese government has exercised and continues to exercise
substantial control over virtually every sector of the Chinese economy through regulation and state ownership. Our ability to
operate in the PRC may be harmed by changes in its laws and regulations, including those relating to taxation, environmental regulations,
land use rights, property and other matters. We believe that our operations in PRC are in material compliance with all applicable
legal and regulatory requirements. However, the central or local governments of these jurisdictions may impose new, stricter regulations
or interpretations of existing regulations that would require additional expenditures and efforts on our part to ensure our compliance
with such regulations or interpretations. Accordingly, government actions in the future, including any decision not to continue
to support recent economic reforms and to return to a more centrally planned economy or regional or local variations in the implementation
of economic policies, could have a significant effect on economic conditions in the PRC or particular regions thereof, and could
require us to divest ourselves of any interest we then hold in Chinese properties.
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Future inflation in the PRC may inhibit
our ability to conduct business in China. In recent years, the Chinese economy has experienced periods of rapid expansion and
high rates of inflation. Rapid economic growth can lead to growth in the money supply and rising inflation. If prices for our
products rise at a rate that is insufficient to compensate for the rise in the costs of supplies, it may have an adverse effect
on profitability. These factors have led to the adoption by Chinese government, from time to time, of various corrective measures
designed to restrict the availability of credit or regulate growth and contain inflation. High inflation may in the future cause
Chinese government to impose controls on credit and/or prices, or to take other action, which could inhibit economic activity
in China, and thereby harm the market for our products.
Since most of our assets are located in the PRC, any dividends
of proceeds from liquidation is subject to the approval of the relevant Chinese government agencies.
Our assets are predominantly located inside
PRC. Under the laws governing Foreign Invested Enterprises in PRC, dividend distribution and liquidation are allowed but subject
to special procedures under the relevant laws and rules. Any dividend payment will be subject to the decision of the board of
directors and subject to foreign exchange rules governing such repatriation. Any liquidation is subject to the relevant government
agency's approval and supervision as well as the foreign exchange control. This may generate additional risk for our investors
in case of dividend payment and liquidation.
Risks Associated with our Securities
We may be subject to penny stock rules which will make the
shares of our common stock more difficult to sell.
We may be subject now and in the future
to the SEC's "penny stock" rules if our shares of common stock sell below $5.00 per share. Penny stocks generally
are equity securities with a per share price of less than $5.00. The penny stock rules require broker-dealers to deliver a standardized
risk disclosure document prepared 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.
In addition, the penny stock rules require
that prior to a transaction the broker 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 shares of our common stock. As long as our shares of common
stock are subject to the penny stock rules, the holders of such shares of common stock may find it more difficult to sell their
securities.
FINRA sales practice requirements may limit a stockholder's
ability to buy and sell our stock.
FINRA has adopted rules that require that
in recommending an investment to a customer, a broker-dealer must have reasonable grounds for believing that the investment is
suitable for that customer. Prior to recommending speculative low priced securities to their non-institutional customers, broker-dealers
must make reasonable efforts to obtain information about the customer's financial status, tax status, investment objectives
and other information. Under interpretations of these rules, FINRA believes that there is a high probability that speculative
low priced securities will not be suitable for certain customers. FINRA requirements will likely make it more difficult for broker-dealers
to recommend that their customers buy our common stock, which may have the effect of reducing the level of trading activity in
our common stock.
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Our shares of common stock are very thinly traded, and the
price may not reflect our value and there can be no assurance that there will be an active market for our shares of common stock
either now or in the future.
Our shares of common stock are thinly traded.
Due to the illiquidity, the market price may not accurately reflect our  relative value. There can be no assurance that
there will be an active market for our shares of common stock either now or in the future. Investors may not be able to liquidate
their investment or liquidate it at a price that reflects the value of the business. If a more active market should develop, the
price may be highly volatile. Because there may be a low price for our shares of common stock, many brokerage firms may not be
willing to effect transactions in the securities. Even if an investor finds a broker willing to effect a transaction in the shares
of our common 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 such shares of common stock as collateral for
a loans.
Because we became public by means of a "reverse merger,"
we may not be able to attract the attention of major brokerage firms.
Additional risks may exist because we became
public through a "reverse merger". Security analysts of major brokerage firms may not cover us since there is no incentive
to brokerage firms to recommend the purchase of our common stock. No assurance can be given that brokerage firms will want to
conduct any secondary offerings on our behalf in the future.
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CHINA REGULATIONS AFFECTING OUR BUSINESS
This section sets forth a summary of the
most significant Chinese regulations or requirements that may affect our business activities in China or our shareholders'
right to receive dividends and other distributions of profits from the PRC subsidiaries.
Foreign Investment in PRC Operating Companies
The
Foreign Investment Industrial Catalogue
jointly issued by the Ministry of Commerce for the People's Republic of China and the National Development and Reform
Commission in 2011 classified various industries/business into three different categories: (i) encouraged for foreign investment;
(ii) restricted to foreign investment; and (iii) prohibited from foreign investment. For any industry/business not covered by
any of these three categories, they will be deemed industries/business permitted to have foreign investment. Except for those
expressly provided restrictions, encouraged and permitted industries/business are usually 100% open to foreign investment and
ownership. With regard to those industries/business restricted to or prohibited from foreign investment, there is always a limitation
on foreign investment and ownership. The PRC Subsidiary's business does not fall under the industry categories that are
restricted to, or prohibited from foreign investment and is not subject to limitation on foreign investment and ownership.
Regulation of Foreign Currency Exchange
Foreign currency exchange in the PRC is
governed by a series of regulations, including the
Foreign Currency Administrative Rules
(1996), as amended, and the
Administrative
Regulations Regarding Settlement, Sale and Payment of Foreign Exchange
(1996), as amended. Under these regulations, the Renminbi
is freely convertible for trade and service-related foreign exchange transactions, but not for direct investment, loans or investments
in securities outside the PRC without the prior approval of China's State Administration of Foreign Exchange. Pursuant to
the
Administrative Regulations Regarding Settlement, Sale and Payment of Foreign Exchange
(1996), Foreign Investment Entities
may purchase foreign exchange without the approval of the State Administration of Foreign Exchange for trade and service-related
foreign exchange transactions by providing commercial documents evidencing these transactions. They may also retain foreign exchange,
subject to a cap approved by the State Administration of Foreign Exchange, to satisfy foreign exchange liabilities or to pay dividends.
However, the relevant Chinese government authorities may limit or eliminate the ability of foreign investment entities to purchase
and retain foreign currencies in the future. In addition, foreign exchange transactions for direct investment, loan and investment
in securities outside the PRC are still subject to limitations and require approvals from the State Administration of Foreign
Exchange.
On July 21, 2005, the PRC government changed
its decade old policy of pegging its currency to the U.S. currency. Under that policy, the Renminbi is permitted to fluctuate
within a narrow and managed band against a basket of certain foreign currencies. This change in policy has resulted in an approximate
21% appreciation of the Renminbi against the U.S. dollar between 2005 and 2008. However, the PRC government decided to repeg the
Renminbi to U.S. Dollars in response to the financial crisis in 2008.  On June 19, 2010, China ended the peg of Renminbi
to the U.S. Dollar which allowed a greater flexibility of its exchange rate.  There remains significant international
pressure on the appreciation of the Renminbi against the U.S. Dollar.  To the extent any of our future revenues are
denominated in currencies other than the United States dollar, we would be subject to increased risks relating to foreign currency
exchange rate fluctuations which could have a material adverse affect on our financial condition and operating results since operating
results are reported in United States dollars and significant changes in the exchange rate could materially impact our reported
earnings.
Regulation of Foreign Investment Entities' Dividend
Distribution
The principal laws and regulations in the
PRC governing distribution of dividends by foreign investment entities include:
(i)
The
Sino-foreign Equity Joint Venture Law
(1979),
as amended, and the
Regulations for the Implementation of the Sino-foreign Equity Joint Venture Law
(1983), as amended;
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(ii)
The
Sino-foreign Cooperative Enterprise Law
(1988), as
                                                             amended, and the
Detailed Rules for the Implementation of the
                                                             Sino-foreign Cooperative Enterprise Law
(1995), as amended;
(iii)
The
Foreign Investment Enterprise Law
(1986), as amended,
                                                              and the
Regulations of Implementation of the Foreign Investment
                                                              Enterprise Law
(1990), as amended.
Under these regulations, foreign investment
entities in the PRC may pay dividends only out of their accumulated profits, if any, determined in accordance with Chinese accounting
standards and regulations. In addition, foreign-invested enterprises in the PRC are required to set aside at least 10% of their
respective accumulated profits each year, if any, to fund certain reserve funds unless such reserve funds have reached 50% of
their respective registered capital. These reserves are not distributable as cash dividends. The board of directors of a foreign
investment entity has the discretion to allocate a portion of its after-tax profits to staff welfare and bonus funds, which may
not be distributed to equity owners except in the event of liquidation.
Regulation of a Foreign Currency's Conversion into
Renminbi and Investment by Foreign Investment Entities
On August 29, 2008, the State Administration
of Foreign Exchange issued a
Notice of the General Affairs Department of the State Administration of Foreign Exchange on the
Relevant Operating Issues concerning the Improvement of the Administration of Payment and Settlement of Foreign Currency Capital
of Foreign-Invested Enterprises
or Notice 142, to further regulate the foreign exchange of foreign investment entities. According
to the Notice 142, foreign investment entities shall obtain verification report from a local accounting firm before converting
its registered capital of foreign currency into Renminbi, and the converted Renminbi shall be used for the business within its
permitted business scope. The Notice 142 explicitly prohibits foreign investment entities from using Renminbi converted from foreign
capital to make equity investments in the PRC, unless the domestic equity investment is within the approved business scope of
the foreign investment entity and has been approved by the State Administration of Foreign Exchange in advance.
Regulation of Foreign Exchange in Certain Onshore and
Offshore Transactions
In October 2005, the State Administration
of Foreign Exchange issued the
Notice on Issues Relating to the Administration of Foreign Exchange in Fund-raising and Return
Investment Activities of Domestic Residents Conducted via Offshore Special Purpose Companies
, or the State Administration
of Foreign Exchange Notice 75, which became effective as of November 1, 2005, and was further supplemented by three implementation
notices issued by the State Administration of Foreign Exchange on November 24, 2005 May 29, 2007 and May 20, 2011, respectively.
The State Administration of Foreign Exchange Notice 75 states that PRC residents, whether natural or legal persons, must register
with the relevant local State Administration of Foreign Exchange branch prior to establishing or taking control of an offshore
entity established for the purpose of overseas equity financing involving onshore assets or equity interests held by them. The
term "PRC legal person residents" as used in the State Administration of Foreign Exchange Notice 75 refers to those
entities with legal person status or other economic organizations established within the territory of the PRC. The term "PRC
natural person residents" as used in the State Administration of Foreign Exchange Notice 75 includes all PRC citizens and
all other natural persons, including foreigners, who habitually reside in the PRC for economic benefit. The State Administration
of Foreign Exchange implementation notice of November 24, 2005 further clarifies that the term "PRC natural person residents"
as used under the State Administration of Foreign Exchange Notice 75 refers to those "PRC natural person residents"
defined under the relevant PRC tax laws and those natural persons who hold any interests in domestic entities that are classified
as "domestic-funding" interests.
PRC residents are required to complete
amended registrations with the local State Administration of Foreign Exchange branch upon: (i) injection of equity interests or
assets of an onshore enterprise to the offshore entity, or (ii) subsequent overseas equity financing by such offshore entity.
PRC residents are also required to complete amended registrations or filing with the local State Administration of Foreign Exchange
branch within 30 days of any material change in the shareholding or capital of the offshore entity, such as changes in share capital,
share transfers and long-term equity or debt investments and these changes do not relate to return investment activities. PRC
residents who have already organized or gained control of offshore entities that have made onshore investments in the PRC before
the State Administration of Foreign Exchange Notice 75 was promulgated must register their shareholdings in the offshore entities
with the local State Administration of Foreign Exchange branch on or before March 31, 2006.
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Under the State Administration of Foreign
Exchange Notice 75, PRC residents are further required to repatriate into the PRC all of their dividends, profits or capital gains
obtained from their shareholdings in the offshore entity within 180 days of their receipt of such dividends, profits or capital
gains. The registration and filing procedures under the State Administration of Foreign Exchange Notice 75 are prerequisites for
other approval and registration procedures necessary for capital inflow from the offshore entity, such as inbound investments
or shareholders loans, or capital outflow to the offshore entity, such as the payment of profits or dividends, liquidating distributions,
equity sale proceeds, or the return of funds upon a capital reduction.
Government Regulations Relating to Taxation
On March 16, 2007, the National People's
Congress, approved and promulgated the
PRC Enterprise Income Tax Law
. The
PRC Enterprise Income Tax Law
took effect
on January 1, 2008. Under the
PRC Enterprise Income Tax Law
, foreign investment entities and domestic companies are subject
to a uniform tax rate of 25%. The
PRC Enterprise Income Tax Law
provides a five-year transition period starting from its
effective date for those enterprises which were established before the promulgation date of the
PRC Enterprise Income Tax Law
and which were entitled to a preferential lower tax rate under the then-effective tax laws or regulations.
On December 26, 2007, the State Council
issued a
Notice on Implementing Transitional Measures for Enterprise Income Tax
, providing that the enterprises that have
been approved to enjoy a low tax rate prior to the promulgation of the
PRC Enterprise Income Tax Law
will be eligible for
a five-year transition period since 1 January, 2008, during which time the tax rate will be increased step by step to the 25%
unified tax rate set out in the
PRC Enterprise Income Tax Law
. From 1 January, 2008, for the enterprises whose applicable
tax rate was 15% before the promulgation of the
PRC Enterprise Income Tax Law
, the tax rate will be increased to 18% for
year 2008, 20% for year 2009, 22% for year 2010, 24% for year 2011, 25% for year 2012. For the enterprises whose applicable tax
rate was 24%, the tax rate will be changed to 25% from January 1, 2008.
The
PRC Enterprise Income Tax Law
provides that an income tax rate of 20% may be applicable to dividends payable to non-PRC investors that are "non-resident
enterprises". Non-resident enterprises refer to enterprises which do not have an establishment or place of business in the
PRC, or which have such establishment or place of business in the PRC but the relevant income is not effectively connected with
the establishment or place of business, to the extent such dividends are derived from sources within the PRC. The income tax for
non-resident enterprises shall be subject to withholding at the income source, with the payor acting as the obligatory withholder
under the
PRC Enterprise Income Tax Law
, and therefore such income taxes generally called withholding tax in practice.
The State Council of the PRC has reduced the withholding tax rate from 20% to 10% through the Implementation Rules of the
PRC
Enterprise Income Tax Law
. It is currently unclear in what circumstances a source will be considered as located within the
PRC. We are a U.S. holding company and substantially all of our income is derived from dividends we receive from our subsidiaries
located in the PRC. Thus, if we are considered as a "non-resident enterprise" under the
PRC Enterprise Income Tax
Law
and the dividends paid to us by our subsidiary in the PRC are considered income sourced within the PRC, such dividends
may be subject to a 10% withholding tax.
Such income tax may be exempted or reduced
by the State Council of the PRC or pursuant to a tax treaty between the PRC and the jurisdictions in which our non-PRC shareholders
reside. For example, the 10% withholding tax is reduced to 5% pursuant to the
Double Tax Avoidance Agreement Between Hong Kong
and Mainland China
if the beneficial owner in Hong Kong owns more than 25% of the registered capital in a company in the PRC.
The new tax law provides only a framework
of the enterprise tax provisions, leaving many details on the definitions of numerous terms as well as the interpretation and
specific applications of various provisions unclear and unspecified. Any increase in the combined company's tax rate in
the future could have a material adverse effect on its financial conditions and results of operations.
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Regulations of Overseas Investments and Listings
On August 8, 2006, six PRC regulatory agencies,
including the Ministry of Commerce of the People's Republic of China, the China Securities Regulatory Commission, the State-owned
Assets Supervision and Administration Commission of the State Council, the State Administration of Taxation, the State Administration
for Industry and Commerce, and the State Administration of Foreign Exchange, jointly amended and released the Merger & Acquisition
Rules, which became effective on September 8, 2006. This regulation, among other things, includes provisions that purport to require
that an offshore special purpose vehicle formed for purposes of overseas listing of equity interest in PRC companies and controlled
directly or indirectly by PRC companies or individuals obtain the approval of the China Securities Regulatory Commission prior
to the listing and trading of such special purpose vehicle's securities on an overseas stock exchange.
On September 21, 2006, the China Securities
Regulatory Commission published on its official website procedures regarding its approval of overseas listings by special purpose
vehicles. The China Securities Regulatory Commission approval procedures require the filing of a number of documents with China
Securities Regulatory Commission and it would take several months to complete the approval process. The application of the Merger
& Acquisition Rules with respect to overseas listings of special purpose vehicles remains unclear with no consensus currently
existing among the leading PRC law firms regarding the scope of the applicability of the China Securities Regulatory Commission
approval requirement.
Regulation of Work Safety
On June 29, 2002, the Work Safety Law of
the PRC was adopted by the Standing Committee of the 9th National People's Congress and came into effect on November 1,
2002, as amended on August 27, 2009. The Work Safety Law provides general work safety requirements for entities engaging in manufacturing
and business activities within the PRC. Additionally, Regulation on Work Safety Licenses, as adopted by the State Council on January
7, 2004 effective on January 13, 2004, requires enterprises engaging in the manufacture of dangerous chemicals to obtain a work
safety license with a term of three years. If a work safety license needs to be extended, the enterprise must go through extension
procedures with authorities three months prior to its expiration. In addition, on May 17, 2004, the Measures for Implementation
of Work Safety Licenses of Dangerous Chemicals Production was promulgated as implementing measures to the Regulation on Work Safety
Licenses which provides that entities producing dangerous chemicals are required to obtain work safety licenses pursuant to specific
requirements. Without work safety licenses, no entity may engage in the formal manufacture of dangerous chemicals.
The Regulations on the Safety Administration
of Dangerous Chemicals was promulgated by the State Council on January 26, 2002, effective as of March 15, 2002. It sets forth
general requirements for manufacturing and the storage of dangerous chemicals in China. The Regulations on the Safety Administration
of Dangerous Chemicals requires that companies manufacturing dangerous chemicals establish and strengthen their internal regulations
and rules on safety control and fulfill the national standards and other relevant provisions of the State. In addition, according
to the Regulations on the Safety Administration of Dangerous Chemicals, companies that manufacture, store, transport or use dangerous
chemicals shall be required to obtain corresponding approvals or licenses with the State Administration of Work Safety and its
local branches and other proper authorities. Companies that manufacture or store dangerous chemicals without approval or registration
with the proper authorities can be shut down, ordered to stop manufacturing or ordered to destroy the dangerous chemicals. Such
companies can also be subject to fines. If criminal law is violated, the persons chiefly liable, along with other personnel directly
responsible for such impropriety, shall be subject to relevant criminal liability.
Regulations on Environmental Protection
According to the Prevention and Control
of Water Pollution Law, as adopted by the Standing Committee of the 10th National People's Congress on February 28, 2008
and effective on June 1, 2008, China adopted a licensing system for pollutant discharge. Companies directly or indirectly responsible
for discharge of industrial waste water or medical sewage to waters shall be required to obtain a pollutant discharge license.
All companies are prohibited from discharging wastewater and sewage to waters without or in violation of the terms of the pollutant
discharge license.
-
23
-
The Regulations on the Administration of
Construction Projects Environmental Protection, as adopted by the State Council on November 18, 1998 and effective on November
29, 1998, governs construction projects and the impact such projects will have on the environment. Pursuant to the Regulations
on the Administration of Construction Projects Environmental Protection, the governing body is responsible for supervising the
implementation of a three tiered system that includes (i) reviewing and approving a construction project, (ii) overseeing the
construction project and (iii) to inspect the finished construction project and ensure that all harmful pollutants are disposed
of correctly. Manufacturing companies are required to apply for inspection with environment protection authorities upon completion
of a construction project.
Food Safety Law of the People's Republic of China
The Food Safety Law of the People's
Republic of China as adopted at the 7th Session of the Standing Committee of the 11th National People's Congress of the
People's Republic of China and effective on June 1, 2009, governs the food safety in food production and business operation
activities. Pursuant to the Food Safety Law of the People's Republic of China, food producers must establish an internal
inspection and record system for raw materials and predelivery products, and food distributors must also establish internal systems
to record and inspect food products procured from suppliers. In addition, any food addictives that are not in the approved government
catalog must not be used and no food products can be sold inspection-free.
Regulations on the Implementation of the Food Safety
Law of the People's Republic of China
The Regulations on the Implementation of
the Food Safety Law of the People's Republic of China as adopted at the 73rd Standing Committee Meeting of the State Council
on July 8, 2009 and effective on July 20, 2009, are promulgated in accordance with the Food Safety Law of the People's Republic
of China. The Regulations require that the local People's Government at or above the country level shall perform the responsibility
specified in the Food Safety Law of the People's Republic of China, improve the ability for supervision and administration
of food safety, ensure supervision and administration of food safety; establish and improve the coordination mechanism between
food safety regulatory authorities, integrate and improve the food safety information network, and realize the sharing of food
safety and food inspection information and other technical resources.
Law of the People's Republic of China on Quality
and Safety of Agricultural Products
The Law of the People's Republic
of China on Quality and Safety of Agricultural Products was adopted at the 21st Meeting of the Standing Committee of the Tenth
National People's Congress on April 29, 2006. This Law was enacted in order to ensure the quality and safety of agricultural
products, maintain the health of the general public, and promote the development agriculture and rural economy. Pursuant to this
Law, agricultural products distribution enterprises shall establish a sound system of inspection and acceptance for their purchases.
In addition, agricultural products that fail to pass the inspection based on the quality and safety standards of agricultural
products cannot be marketed.
Regulations for Export Food Manufacturers
The Administrative Provisions on the Filing
of Export Food Manufacturers, promulgated by the General Administration of Quality Supervision, Inspection and Quarantine of the
People's Republic of China and effective as of October 1, 2011, implements a filing system on enterprises producing, processing
or storing food for export. For those export food covered by the List of Products for Carrying out Filing of Export Food Manufacturers,
enterprises can be allowed to produce, process or store the food for export only after obtaining the filing certificates.
According to the Safety and Hygiene Requirements
for Export Food Manufacturers, export food manufacturers shall establish safety and hygiene control system pursuant to the requirements
listed in Safety and Hygiene Requirements for Export Food Manufacturers. Enterprises whose products are also covered by the List
of Products for Carrying out Filing of Export Food Manufacturers shall further establish and implement HACCP system in accordance
with the requirements of Hazard Analysis and Critical Control Point (HACCP) system and its Application.
-
24
-
USE OF PROCEEDS
The selling stockholder will receive all
proceeds from the sale of the shares of our common stock in this offering. We will not receive any proceeds from the sale of the
shares of our common stock offered pursuant to this Prospectus by the selling stockholder. We will bear all expenses other than
transfer taxes of registration incurred in connection with this offering, but all commissions, selling and other expenses incurred
by the selling stockholder to underwriters, agents, brokers and dealers will be borne by the selling stockholder.
-
25
-
MARKET FOR COMMON EQUITY AND RELATED
SHAREHOLDER MATTERS
Market Information
Our common stock is quoted on the OTC Markets-OTC
Pink under the symbol "DEYU.PK".  There can be no assurance that a liquid market for our securities will
ever develop.  Transfer of our common stock may also be restricted under the securities or blue sky laws of various
states and foreign jurisdictions.  Consequently, investors may not be able to liquidate their investments and should
be prepared to hold the common stock for an indefinite period of time.
The following table summarizes the high
and low closing sales prices per share of the common stock for the periods indicated as reported:
Closing Bid Prices
High ($)
Low ($)
Fiscal Year Ending December 31, 2012
1
St
Quarter (January 2 – March 30)
1.75
1.25
Fiscal Year Ended December 31, 2011
1st Quarter (January 3 – March 31):
4.08
2.75
2rd Quarter (April 1 – June 30):
3.01
1.50
3nd Quarter (July 1 – September 30):
2.20
1.01
4th Quarter (October 3 – December 30):
2.10
1.01
Fiscal Year Ended December 31, 2010
1st Quarter (January 4 – March 31):
NONE
NONE
2rd Quarter (April 1 – June 30):
7.10
5.00
3nd Quarter (July 1 – September 30):
7.75
6.00
4th Quarter (October 1 – December 31):
7.00
3.00
The following table presents certain information
with respect to our equity compensation plan as of December 31, 2011:
Number of
securities remaining
Number of securities
available for future
to be issued
Weighted-average
issuance under equity
upon exercise of
exercise price of
compensation plans
outstanding options,
outstanding options,
(excluding securities
warrants and rights
warrants and rights
reflected in column (a))
Plan Category
(a)
(b)
(c)
Equity compensation plans
approved by security holders
—
$
—
—
Equity compensation plans
not approved by security holders(1)
971,000
4.40
29,000
Total
971,000
$
4.40
29,000
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26
-
(1) On November 4, 2010, the Company's Board of Directors
approved the Company's 2010 Share Incentive Plan.  Under the Plan, 1,000,000 shares of the Company's common
stock were originally allocated to and authorized for use pursuant to the terms of the Plan.  On November 8, 2010, a
total of 931,000 non-qualified incentive stock options were approved by our Board of Directors and granted under the Plan to executives,
key employees, independent directors, and consultants at an exercise price of $4.40 per share and on December 15, 2010, 40,000
non-qualified incentive stock shares were approved by our Board of Directors and granted under the Plan to a consultant at an
exercise price of $4.40 per share, of which shall vest as follows:
33 1/3% of the option grants vested one (1) month
after the date of grant;
33 1/3% of the option grants vested twelve (12) months
after the date of grant; and
33 1/3% of the option grants will vest twenty-four
(24) months after the date of grant.
On March 8, 2012, the Company's Board
of Directors allocated to and authorized for use the maximum number of shares allowable pursuant to the terms of the Plan and
granted 420,000 options under the Plan, of which 264,000 were new options and 156,000 were re-granted after such options were
forfeited by employees as a result of their resignations from the Company in accordance with the terms of their option agreements.
All of the newly granted options vest as follows:
50% of the options granted will vest six
(6) months after the date of the grant; and
50% of the options granted will vest twelve
(12) months after the date of the grant.
On November 5, 2010, we filed a Registration
Statement with the SEC on Form S-8 covering up to 1,000,000 shares underlying options which may be granted under the Plan. As
of March 28, 2012, none of the options granted pursuant to the Plan have been exercised.
Recent Sales of Unregistered Securities; Use of Proceeds
from Registered Securities
In connection with the Share Exchange,
on April 27, 2010, we issued an aggregate of 8,736,932 shares of our common stock to the shareholders of City Zone.  We
received in exchange from the City Zone shareholders 100% of the shares of City Zone, which exchange resulted in City Zone becoming
our wholly owned subsidiary. The issuance of such securities was exempt from registration pursuant to Section 4(2) of, and Regulation
D and/or Regulation S promulgated under the Securities Act of 1933, as amended.
Simultaneous with the closing the Share
Exchange, we entered into the Purchase Agreement with certain accredited Investors for the issuance and sale in a private placement
of Units, consisting of 2,455,863 shares of our Series A convertible preferred stock, par value $0.001 per share and Series A
warrants to purchase up to 982,362 shares of our common stock, for aggregate gross proceeds of approximately $10,805,750. The
issuances of the aforementioned securities were exempt from registration pursuant to Section 4(2) of, and Regulation D and/or
Regulation S promulgated under the Securities Act of 1933, as amended.
On November 4, 2010, the Company's
Board of Directors approved the Company's 2010 Share Incentive Plan.  Under the Plan, 1,000,000 shares of the
Company's common stock shall be allocated to and authorized for use pursuant to the terms of the Plan.  On November
8, 2010, a total of 931,000 non-qualified incentive stock options were approved by our Board of Directors and granted under the
Plan to executives, key employees, independent directors, and consultants at an exercise price of $4.40 per share and on December
15, 2010, 40,000 non-qualified incentive stock shares were approved by our Board of Directors and granted under the Plan to a
consultant at an exercise price of $4.40 per share, of which shall vest as follows:
33 1/3% of the option grants vested one (1) month
after the date of grant;
33 1/3% of the option grants vested twelve (12) months
after the date of grant; and
33 1/3% of the option grants will vest twenty-four
(24) months after the date of grant.
-
27
-
On March 8, 2012, the Company's Board
of Directors allocated to and authorized for use the maximum number of shares allowable pursuant to the terms of the Plan and
granted 420,000 options under the Plan, of which 264,000 were new options and 156,000 were re-granted after such options were
forfeited by employees as a result of their resignations from the Company in accordance with the terms of their option agreements.
All of the newly granted options vest as follows:
50% of the options granted will vest six
(6) months after the date of the grant; and
50% of the options granted will vest twelve
(12) months after the date of the grant.
On November 5, 2010, we filed a Registration Statement with
the SEC on Form S-8 covering up to 1,000,000 shares underlying options which may be granted under the Plan. As of March 28, 2012,
none of the options granted pursuant to the Plan have been exercised.
Holders of Common Equity
On April 27, 2012, we had 10,566,766 shares
of common stock issued and outstanding to 84 holders of record, and the closing price of our common stock as quoted on the OTC
Markets-OTC Pink was $1.65 per share.  The number of record holders does not include beneficial owners of common stock
whose shares are held in the names of banks, brokers, nominees or other fiduciaries.
Dividends
We have not paid cash dividends on any
class of common equity since formation.
In connection with our private placement
in May 2010, we issued an aggregate 2,455,863 shares of our Series A convertible preferred shares and warrants exercisable into
982,362 shares of common stock to Investors.  Pursuant to the terms of our Series A convertible preferred share designations,
the holders of our Series A convertible preferred shares are entitled to receive cumulative dividends at a rate of 5% per annum,
and such shares of Series A convertible preferred stock are convertible into shares of our common stock on a 1:1 basis, subject
to applicable adjustments.
On July 29, 2011, we distributed 66,379
shares of Series A convertible preferred shares as a cumulative Series A convertible preferred share dividend of $212,420 in aggregate,
to such holders of Series A convertible preferred stock on a pro rata basis and on January 27, 2012, we issued a Series A convertible
preferred share dividend equal to $219,721, in the aggregate, to such holders of Series A convertible preferred stock on a pro
rata basis.
-
28
-
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Forward Looking Statements
The following is management's discussion
and analysis of certain significant factors which have affected our financial position and operating results during the periods
included in the accompanying consolidated financial statements, as well as information relating to the plans of our current management.
This prospectus includes forward-looking statements. Generally, the words "believes ", "anticipates",
" may ", " will ", " should ", " expect ", " intend ", "estimate",
"continue" and similar expressions or the negative thereof or comparable terminology are intended to identify forward-looking
statements. Such statements are subject to certain risks and uncertainties, including the matters set forth in this prospectus
or other reports or documents we file with the SEC from time to time, which could cause actual results or outcomes to differ materially
from those projected. Undue reliance should not be place on these forward-looking statements which speak only as of the date hereof.
We undertake no obligation to update these forward-looking statements.
The following discussion and analysis should
be read in conjunction with our consolidated financial statements and the related notes thereto and other financial information
contained elsewhere in this prospectus.
Summary of our Business
We are a vertically integrated producer,
processor, marketer and distributor of organic and other agricultural products made from corn and grains operating in Shanxi Province
in the PRC. The Company has access to over 109,000 acres of farmland in Shanxi Province for breeding, cultivating, processing,
warehousing and distributing grain and corn products. We have an extensive wholesale network in over 15 provinces and retail distribution
network of around 20,000 supermarkets and convenience stores in 29 provinces across China. We are equipped with advanced production
lines and modern warehouses with production capacity of over 105,000 tons for grain products, capacity of storage of over 100,000
tons and annual turnover of 700,000 tons for corn products.
We have experienced high growth in both
revenue and net income.  Operating revenue from continuing operations for the year ended December 31, 2011 was $261,576,666,
representing a 207% increase from $85,174,884 for the year ended December 31, 2010. Our net income attributable to common stockholders
for the year ended December 31, 2011 was $17,335,442, representing a 50.7% increase from $11,502,253 for the year ended December
31, 2010.
Restructuring of Business Divisions
In the fourth quarter of 2011, we adjusted
the structure of our business divisions in order to better allocate resources and to assess the performance of the group according
to our growth strategy. Our Deep Processed Division was dissolved because of the termination of our control agreements with the
VIE Group on December 20, 2011, which conducted most of the business of our Deep Processed Division. We changed the name of our
Simple Processed Grain Division to the Grain Division, which conducts processed grain products being sold through our retail sales
network. With the rapid growth of our bulk trading business, we set up a new division called the Bulk Trading Division, the activities
of which were previously conducted in the Grain Division. We now have three business divisions: the Corn Division, the Grain Division
and the Bulk Trading Division. According to FASB Accounting Standard Codification Topic 280, we prepared the financial information
for these segments for the year ended December 31, 2011 and restated the comparable information for the year ended December 31,
2010.
Because our control over the VIE Group
terminated on December 20, 2011, the operations results of the VIE Group have been presented as discontinued operations. Therefore,
management's discussion and analysis set forth herein below are based on the results of continuing operations.
On February 2, 2012, we acquired the Taizihu
Group, which is in business of producing and selling bean-based products, fruit vinegars and juices and other grain products.
The business of Taizihu Group is conducted as part of the business of the Grain Division. However, management's discussion
and analysis of results of operations for the years ended December 31, 2011 and 2010 set forth herein below do not include the
operations results of Taizihu Group, for the Taizihu Group's financial statements are not required to be consolidated prior
to February 2, 2012, the acquisition date according to US GAAP.
-
29
-
Results of Operations for the Year Ended December 31, 2011
as Compared to the Year Ended December 31, 2010
For The Years Ened
December 31,
2011
2010
Change
%
Net revenue
$
261,576,666
$
85,174,884
$
176,401,782
207.1
%
Cost of goods sold
(218,480,009
)
(63,250,363
)
(155,229,646
)
245.4
%
Gross Profit
43,096,657
21,924,521
21,172,136
96.6
%
Selling expenses
(13,231,094
)
(6,281,768
)
(6,949,326
)
110.6
%
General and administrative expenses
(8,222,182
)
(3,627,860
)
(4,594,322
)
126.6
%
Total Operating Expense
(21,453,276
)
(9,909,628
)
(11,543,648
)
116.5
%
Operating income
21,643,381
12,014,893
9,628,488
80.1
%
Interest income
42,159
17,505
24,654
140.8
%
Interest expense
(805,601
)
(341,555
)
(464,046
)
135.9
%
Non-operating income
(180,294
)
(18,174
)
(162,120
)
892.0
%
Total Other Expense
(943,736
)
(342,224
)
(601,512
)
175.8
%
Income from continuing operations before income taxes
20,699,645
11,672,669
9,026,976
77.3
%
Income taxes
(184,384
)
913,785
(1,098,169
)
(120.2
)%
Income from continuing operations
20,515,261
12,586,454
7,928,807
63.0
%
Loss from discontinued operations, net of income taxes
(3,891,830
)
(756,480
)
(3,135,350
)
414.5
%
Net income
16,623,431
11,829,974
4,793,457
40.5
%
Net loss attributable to noncontrolling interests
1,139,928
-
1,139,928
Net income attributable to Deyu Agriculture Corp.
17,763,359
11,829,974
5,933,385
50.2
%
Preferred stock dividends
(427,917
)
(327,721
)
(100,196
)
30.6
%
Net income available to common stockholders
$
17,335,442
$
11,502,253
$
5,833,189
50.7
%
Net Revenue
Our net revenue for the year ended December
31, 2011 was $261.6 million compared with $85.2 million for the year ended December 31, 2010, an increase of $176.4 million, or
207%, of which $108.2 million was attributable to corn sales, $29 million to grain sales and the remaining $39.2 million to bulk
trading sales. Sales derived from our Corn Division, Grain Division and Bulk Trading Division for the year ended December
31, 2011 were $177.7 million, $40.5 million and $43.3 million respectively, accounting for 67.9%, 15.5% and 16.6% of total net
revenue, respectively.
-
30
-
The following table breaks down the distribution
of our sales volume and amount by division and as a percentage of gross sales:
For The Years Ended December 31,
2011
2010
Volume
(ton)
Net Revenue
% of
total
sales
Volume
(ton)
Net Revenue
% of
total
sales
Changes
%
Corn Division
531,165
$
177,723,149
67.9
%
240,375
$
69,516,954
81.6
%
$
108,206,195
155.7
%
Grain Division
31,878
40,507,527
15.5
%
8,565
11,474,912
13.5
%
29,032,615
253.0
%
Bulk Trading Division
76,125
43,345,990
16.6
%
1,470
4,183,018
4.9
%
39,162,971
936.2
%
Total
639,168
$
261,576,666
100.0
%
250,410
$
85,174,884
100.0
%
$
176,401,782
207.1
%
Net revenue from our Corn Division for
the year ended December 31, 2011 was approximately $177.7 million, an increase of $108.2 million, or approximately 155.7%, as
compared the year ended December 31, 2010. This growth was attributable to the expansion of our sales network, the increase
in our storage capacity and turnover and the obtainment of sufficient working capital. Further, our corn sales network has been
extended to approximately 15 provinces in 2011 from 7 provinces in 2010, which now include sales to more livestock feed companies,
corn oil/corn starch manufacturing companies and governmental procurement agencies. Our capacity of storage and turnover increased
from 50,000 tons and 250,000 tons to over 100,000 tons and 700,000 tons, respectively, when the new processing center with five
drying cylinders and six warehouses went into operation in June 2011. We obtained sufficient working capital from bank loans and
bank notes to support corn purchases from farmers and suppliers. The average balance of our bank loans and bank notes increased
to $9.3 million for the year ended December 31, 2011 from $2.2 million for the year ended December 31, 2010. Our sales volume
and revenue from the Corn Division for the year ended December 31, 2011 reached 531,165 tons and $177.7 million, respectively.
Net revenue from our Grain Division for
the year ended December 31, 2011 was $40.5 million, an increase of $29 million, or 253%, as compared to the year ended December
31, 2010. The increase was primarily due to growth of our market share through the expansion of our sales network and promotional
activities. Our retail distribution network covered approximately 20,000 supermarkets and convenience stores as of December 31,
2011, as compared to approximately 10,000 stores as of December 31, 2010. We developed special counters in over 200 supermarkets
with open and loose grains in baskets where customers can scoop the grains into plastic bags to determine the volume they want.
This sales strategy targets a large number of consumers and significantly contributes to our net revenue increase. Our marketing
initiatives such as promotion and hosting new product press conferences also increased our brand awareness among customers as
well as sales revenue. The sales volume and revenue from our Grain Division for the year ended December 31, 2011 reached 31,878
tons and $40.5 million, respectively.
Revenue from our Bulk Trading Division
for the year ended December 31, 2011 was $43 million, an increase of $39 million, or 936.2%, as compared to the year ended December
31, 2010. Our bulk trading of grain was a newly-added business commencing from the fourth quarter of 2010, which we found can
fully utilize our existing resources including our supply and sales networks, warehousing and logistics. Based on our extensive
wholesale network in 15 provinces and sufficient working capital from bank loans and bank notes, the sales volume and revenue
from our Bulk Trading Division grew rapidly, reaching 76,124 tons and $43 million, respectively.
Cost of Goods Sold
Cost of goods sold mainly consisted of
cost of raw materials, labor, utilities, manufacturing costs, manufacturing related depreciation and packaging costs. Our
cost of goods sold increased by 245.4% from $63.3 million in the year ended December 31, 2010 to $218.5 million for the year ended
December 31, 2011, due to increases in sales volume and purchase prices. Our total sales volume for the year ended December 31,
2011 increased to 639, 168 tons, or 155.2%, from 250,410 tons for the year ended December 31, 2010.
As a percentage of net revenue, cost of
goods sold increased by 920 basis points from 74.3% for the year ended December 31, 2010 to 83.5% for the year ended December
31, 2011. We experienced a purchase cost increase on both corn and grains caused by the inflation in prices of raw materials in
China. Our sales expansion strategies that we implemented by lowering the average selling price compared with the market price
reduced our profit margin. The increasing percentage by 1170 basis points of bulk trading of total sales with a margin of 8.3%
for the year ended December 31, 2011 also negatively affected our overall profit margin.
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31
-
Gross Profit
The following table breaks down the gross
profit and gross margin by division:
For The Years Ened December 31,
2011
2010
Gross
Profit
% of
total
Gross
Profit
Margin
Gross
Profit
% of
total
Gross
Profit
Margin
Corn Division
$
29,388,328
68.2
%
16.5
%
$
15,383,113
70.2
%
22.1
%
Grain Division
10,095,678
23.4
%
24.9
%
6,478,610
29.5
%
56.5
%
Bulk Trading Division
3,612,651
8.4
%
8.3
%
62,798
0.3
%
1.5
%
Total
43,096,657
100.0
%
16.5
%
$
21,924,521
100.0
%
25.7
%
Our gross profit increased by $21.2 million,
or 96.8%, from $21.9 million for the year ended December 31, 2010 to $43.1 million for the year ended December 31, 2011. The increase
was attributable to an increase in sales volume, including an increase of $14 million in the Corn Division, $3.6 million in the
Grain Division and $3.6 million in the Bulk Trading Division.  Our gross margin decreased from 25.7% in the year ended
December 31, 2010 to 16.5% in the year ended December 31, 2011. The decrease in gross margin was the combined result of a drop
in gross margin in our Corn Division, a drop in grain sales and a low margin contributed by our bulk trading business, a newly-added
business in the fourth quarter of 2010.
Gross profit in Corn Division was $29.4
million, contributing to 68.2% of total gross profit for the year ended December 31, 2011.  Gross margin for our Corn
Division was 16.5% for the year ended December 31, 2011, down by 560 basis points from 22.1% for the year ended December 31, 2010. The
decrease of gross margin was mainly due to the continuous increase in the purchase price of raw corn and supplemental procurement
from suppliers. The purchase price of raw corn increased by about 12% during the year ended December 31, 2011, but the selling
price did not increase consistently. Due to our rapid growth in corn sales, we supplemented the supply of raw materials from farmers
by purchasing from other corn traders, of which the purchasing price was usually higher and it negatively affected the gross margin
of the Corn Division.
Gross profit in the Grain Division was
$10.1 million, contributing to 23.4% of total gross profit for the year ended December 31, 2011.  Gross margin for the
Grain Division was 24.9% for the year ended December 31, 2011, compared with 56.5% for the year ended December 31, 2010. The
decrease was mainly attributable to our sales expansion strategies that we implemented by lowering the average selling price compared
with the market price in 2011 and increasing sales percentages of certain types of grains with lower margins such as millet and
flour.
Gross profit in the Bulk Trading Division
was $3.6 million, contributing to 8.4% of total gross profit for the year ended December 31, 2011. We began to conduct bulk trading
business in the fourth quarter of 2010 and its gross profit for the year ended December 31, 2010 was immaterial. The gross margin
for the year ended December 31, 2011 was 8.3%, which was relatively lower compared with grain retail business due to its nature
of high turnover rate.
Selling Expenses
Selling expenses increased by $6.9 million,
or 109.5%, for the year ended December 31, 2011 as compared to $6.3 million for the year ended December 31, 2010.  Such
increase was mainly attributable to the increase of freight charges, slotting fees for entering more stores and marketing personnel
expenses due to increased sales volume.
General and Administrative Expenses
General and administrative expenses increased
by $4.6 million to $8.2 million in the year ended December 31, 2011, or 127.8%, compared to $3.6 million for the year ended December
31, 2010. This increase was attributable to increased employee bonuses for good business performance, increased expenses
spent on professional services for us as a U.S. public company and other increased expenses due to our business expansion.
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32
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Interest Expense
Interest expense for the year ended December
31, 2011 was $806,000 compared to interest expense of $341,000 for the year ended December 31, 2010, an increase of $464,000,
or 136%.  This increase was mainly due to the increase in short-term loans for working capital.
Provision for Income Taxes
Under the Enterprise Income Tax ("EIT")
Law of the PRC, the standard EIT rate is 25%.  Our PRC subsidiaries are subject to PRC income taxes on an entity basis on
income arising in or derived from the tax jurisdiction in which they operate.  According to the Tax Pronouncement [2008]
No. 149 issued by the State Administration of Tax of the PRC, the preliminary processing industry of agricultural products is
entitled to EIT exemption starting January 1, 2008.  Three of the Company's wholly-owned subsidiaries located in Shanxi
Province, namely Jinzhong Deyu, Jinzhong Yongcheng and Jinzhong Yuliang, are subject to the EIT exemption.  All of our other
subsidiaries are subject to the 25% EIT rate.
Despite the fact that we earned net income
from continuing operations before income tax of $20.7 million, income tax expenses were $184,000 for the year ended December 31,
2011, because most of the net income before income tax was from Jinzhong Deyu and Jinzhong Yuliang, which are subject to the EIT
exemption. We recorded income tax benefit of $914,000 for the year ended December 31, 2010 mainly derived from net operating losses
carry-forwards for the next five years.
Loss From Discontinued Operations, Net of Income Taxes
Loss from discontinued operations, net
of income taxes was incurred from the VIE Group, which we terminated our control over on December 20, 2011.
Net Income
As a result of the above, we had net income
available to common stockholders of $17.3 million for the year ended December 31, 2011 compared to a net income of $11.5 million
for the year ended December 31, 2010, an increase of $5.8 million, or 50.7%.
Liquidity and Capital Resources
The following summarizes the key components
of our cash flows for the year ended December 31, 2011 and 2010:
For the Years Ended
December 31,
2011
2010
Net cash (used in) provided by operating activities of continuing operations
$
(7,774,378
)
$
3,933,743
Net cash used in investing activities of continuing operations
(4,032,327
)
(12,843,958
)
Net cash provided by financing activities of continuing operations
14,542,773
11,866,345
Net cash (used in) provided by discontinued operations
(415,860
)
432,520
Net increase in cash and cash equivalents
$
2,320,208
$
3,388,650
For the year ended December 31, 2011, net
cash used in operating activities of continuing operations totaled approximately $7.7 million, while net cash provided by operating
activities of continuing operations was $3.9 million for the year ended December 31, 2010. This increase of net cash used in operating
activities was primarily attributable to an increase of cash used in expanding sales by granting credit to customers and purchasing
inventory as a result of the key driver of continuous sales growth of our corn and grain businesses. Our corn and grain business
requires immediate cash payments to farmers and their agents before our accounts receivable can be collected from customers. As
our business continued to grow, our supply of raw material was supplemented by grain traders or wholesalers, some of which require
advanced payments for purchasing, and more cash was used in inventory purchases accordingly. The increase in accounts receivable
was $23.8 million for the year ended December 31, 2011 as compared to $6.6 million in the year ended December 31, 2010 as a result
of growth of our net revenue and credit offered to new retailers and wholesalers. The continuous increase in inventories and advance
to suppliers also contributed to the increase in net cash used in our operating activities of continuing operations, which was
$8.7 million and $8.8 million for the years ended December 31, 2011 and 2010 respectively.
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33
-
For the year ended December 31, 2011, net
cash used in investing activities of continuing operations was approximately $4 million, a decrease of approximately $8.8 million,
or 68.8%, from approximately $12.8 million for the year ended December 31, 2010.  The decrease was the result of the
less payments made in 2011 as prepayments were made primarily in 2010 for acquisition of farmland use rights, for majority construction
cost of the warehouses, office building and cylinder units in Shanxi Province which commenced in 2010 and was completed in 2011.  Cash
used in investing activities of continuing operations in the year ended December 31, 2011 was primarily for purchasing machinery
and equipment, while cash used in investing activities of continuing operations in year ended December 31, 2010 was primarily
for paying for land use rights and construction of warehouses.
Net cash provided by financing activities
of continuing operations for the year ended December 31, 2011 was approximately $14.5 million, an increase of approximately $2.6
million, or 21.8%, from approximately $11.9 million for the year ended December 31, 2010.  This net cash provided by financing
activities of continuing operations for the year ended December 31, 2011 mainly consisted of net proceeds from short term loans
from banks, related parties and bank acceptance notes, while the net cash provided by financing activities of continuing operations
for the year ended December 31, 2010 was mainly consisted of net proceeds from private placement, short term loans from banks
and related parties.
Net cash used by discontinued operations
for the year ended December 31, 2011 was $416,000 and net cash provided by discontinued operations for the year ended December
31, 2010 was $433,000.
We believe that our current levels of cash,
cash flows from operations, and bank, related party and unrelated party borrowings will be sufficient to meet our anticipated
cash needs for at least the next 12 months. However, we may need additional cash resources in the future if we experience changed
business conditions or other developments. We may also need additional cash resources in the future if we find and wish to pursue
opportunities for investment, acquisition, strategic cooperation or other similar actions. If we ever determine that our cash
requirements exceed our amounts of cash and cash equivalents on hand, we may seek to issue debt or equity securities or obtain
a credit facility. Any future issuance of equity securities could cause dilution to our shareholders. Any incurrence of indebtedness
could increase our debt service obligations and cause us to be subject to restrictive operating and financial covenants. It is
possible that, when we need additional cash resources, financing will only be available to us in amounts or on terms that would
not be acceptable to us, if at all.
Summary of Certain Liquidity Events
In connection with an exchange agreement,
on April 27, 2010, we issued an aggregate of 8,736,932 shares of our common stock to the shareholders of City Zone.  We
received in exchange from the City Zone shareholders 100% of the shares of City Zone, which exchange resulted in City Zone becoming
our wholly owned subsidiary.  Immediately after the Exchange, we entered into a Purchase Agreement with certain accredited
Investors for the issuance and sale in a private placement of units, consisting of, 2,455,863 shares of our Series A convertible
preferred stock and Series A warrants to purchase up to 982,362 shares of our common stock, for aggregate gross proceeds of approximately
$10,805,750.
On November 4, 2010, the Company's
Board of Directors approved the Company's 2010 Share Incentive Plan.  Under the Plan, 1,000,000 shares of the
Company's common stock shall be allocated to and authorized for use pursuant to the terms of the Plan.  On November
8, 2010, a total of 931,000 non-qualified incentive stock options were approved by our Board of Directors and granted under the
Plan to executives, key employees, independent directors, and consultants at an exercise price of $4.40 per share and on December
15, 2010, 40,000 non-qualified incentive stock shares were approved by our Board of Directors and granted under the Plan to a
consultant at an exercise price of $4.40 per share, of which shall vest as follows:
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34
-
33 1/3% of the option grants vested one (1) month
after the date of grant;
33 1/3% of the option grants vested twelve (12) months
after the date of grant; and
33 1/3% of the option grants will vest twenty-four
(24) months after the date of grant.
On March 8, 2012, the Company's Board
of Directors allocated to and authorized for use the maximum number of shares allowable pursuant to the terms of the Plan and
granted 420,000 options under the Plan, of which 264,000 were new options and 156,000 were re-granted after such options were
forfeited by employees as a result of their resignations from the Company in accordance with the terms of their option agreements.
All of the newly granted options vest as follows:
50% of the options granted will vest six
(6) months after the date of the grant; and
50% of the options granted will vest twelve
(12) months after the date of the grant.
On November 5, 2010, we filed a Registration
Statement with the SEC on Form S-8 covering up to 1,000,000 shares underlying options which may be granted under the Plan. As
of March 19, 2012, none of the options granted pursuant to the Plan have been exercised.
Contractual Obligations
The following table presents the Company's
material contractual obligations as of December 31, 2011:
Contractual Obligations
Total
Less than
1 year
1-3 years
3-5 years
More than
5 years
Bank Loans
$
14,413,480
$
14,413,480
$
-
$
-
$
-
Notes payable
1,588,840
1,588,840
-
-
-
Operating Lease Obligations
1,389,727
134,402
175,615
170,819
908,892
$
17,392,047
$
16,136,722
$
175,615
$
170,819
$
908,892
Off-Balance Sheet Arrangements
We do not have any off-balance sheet arrangements,
financings, or other relationships with unconsolidated entities or other persons, also known as "special purpose entities"
(SPEs).
Critical Accounting Policies and Estimates
This discussion and analysis of financial
condition and results of operations has been prepared by management based on our consolidated financial statements, which have
been prepared in accordance with U.S. GAAP.  The preparation of these financial statements requires management to make
estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses, and related disclosure
of contingent assets and liabilities. On an ongoing basis, management evaluates our critical accounting policies and estimates,
including those related to revenue recognition, valuation of accounts receivable, property and equipment, long-lived assets, intangible
assets, derivative liabilities and contingencies.  Estimates are based on historical experience and on various assumptions
believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying
values of assets and liabilities that are not readily apparent from other sources. These judgments and estimates affect the reported
amounts of assets and liabilities and the reported amounts of revenue and expenses during the reporting periods. We consider the
following accounting policies important in understanding our operating results and financial condition:
Use of Estimates
The preparation of the consolidated financial
statements in conformity with generally accepted accounting principles 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 period. Management makes its estimates based
on historical experience and various other assumptions and information that are available and believed to be reasonable at the
time the estimates are made. Therefore, actual results could differ from those estimates under different assumptions and conditions.
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35
-
Cash and Cash Equivalents
Cash and cash equivalents consist of cash
on hand, cash in bank and all highly liquid investments with original maturities of three months or less.
As a result of the financings associated
with the Exchange, we had, as of December 31, 2010, $125,560 in a trust account. The use of these funds requires the written approval
of our placement agent and us. The funds in the escrow account were designated for certain expenses, such as investor relations,
accounting/consulting fees, SEC fees, and stock transfer agent fees. This amount was classified as restricted cash under current
assets on our balance sheet as of December 31, 2010, while the restriction was released in 2011.
As of December 31, 2011, $1,588,840 of
cash was restricted as a pledge for $1,588,840 (RMB 10,000,000) of notes payable obtained from Jinzhong City Yuci District Rural
Credit Union Co., Ltd. in August 2011 and $262,159 of cash was restricted as a pledge for $2,121,101 (RMB13,350,000) for a bank
loan obtained from China Merchants Bank (Dongzhimen branch) in November 2011.
Accounts Receivable
Accounts receivable are recorded at net
realizable value consisting of the carrying amount less allowance for doubtful accounts, as needed.  We assess the collectability
of accounts receivable based primarily upon the creditworthiness of the customer as determined by credit checks and analysis,
as well as the customer's payment history.  Management reviews the composition of accounts receivable and analyzes
historical bad debts, customer concentrations, customer credit worthiness, current economic trends, and changes in customer payment
patterns to evaluate the adequacy of these reserves.  As of December 31, 2011 and 2010, there were no customers with
accounts receivable greater than six months past due.
Inventories
The Company's inventories are stated at
lower of cost or market.  Cost is determined on moving-average basis.  Costs of inventories include purchase
and related costs incurred in delivering the products to their present location and condition.  Market value is determined
by reference to selling prices after the balance sheet date or to management's estimates based on prevailing market conditions.  Management
periodically evaluates the composition of its inventories at least quarterly to identify slow-moving and obsolete inventories
to determine if valuation allowance is required.  As of December 31, 2011 and 2010, management did not identify any
slow moving or obsolete inventory. For the years ended December 31, 2011 and 2010, loss on reduction of inventory to the lower
of cost or market was $56,140 and $0, respectively.
Assets Held for Sales
A long-lived asset to be sold shall be
classified as held for sale in the period in which all of the following criteria are met: (a) Management, having the authority
to approve the action, commits to a plan to sell the asset. (b) The asset is available for immediate sale in its present condition
subject only to terms that are usual and customary for sales of such assets. (c) An active program to locate a buyer and other
actions required to complete the plan to sell the asset have been initiated. (d) The sale of the asset is probable, and transfer
of the asset is expected to qualify for recognition as a completed sale, within one year, except as permitted by paragraph ASC
360-10-45-11. The term probable refers to a future sale that is likely to occur. (e) The asset is being actively marketed for
sale at a price that is reasonable in relation to its current fair value. The price at which a long-lived asset is being marketed
is indicative of whether the entity currently has the intent and ability to sell the asset. A market price that is reasonable
in relation to fair value indicates that the asset is available for immediate sale, whereas a market price in excess of fair value
indicates that the asset is not available for immediate sale. (f) Actions required to complete the plan indicate that it is unlikely
that significant changes to the plan will be made or that the plan will be withdrawn.
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36
-
A loss shall be recognized for any initial
or subsequent write-down to fair value less cost to sell. A gain shall be recognized for any subsequent increase in fair value
less cost to sell, but not in excess of the cumulative loss previously recognized (for a write-down to fair value less cost to
sell). The loss or gain shall adjust only the carrying amount of a long-lived asset, whether classified as held for sale individually
or as part of a disposal group.
Property, Plant, and Equipment
Property, plant, and equipment are stated
at cost less accumulated depreciation.  Expenditures for maintenance and repairs are charged to earnings as incurred;
additions, renewals and betterments are capitalized.  When property, plant, and equipment are retired or otherwise disposed
of, the related cost and accumulated depreciation are removed from the respective accounts, and any gain or loss is included in
operations.
Depreciation is computed using the
straight-line method over the estimated useful lives of the assets as follows:
Useful Life
(in years)
Automobiles
5
Buildings
10-30
Office equipment
5
Machinery and equipment
5-10
Furniture & fixtures
5
Construction-In-Progress
Construction-in-progress consists of amounts
expended for warehouse construction.  Construction-in-progress is not depreciated until such time as the assets are
completed and put into service.  Once warehouse construction is completed, the cost accumulated in construction-in-progress
is transferred to property, plant, and equipment.
Long-Lived Assets
The Company applies the provisions of FASB
ASC Topic 360 (ASC 360), "Property, Plant, and Equipment" which addresses financial accounting and reporting for the
impairment or disposal of long-lived assets.  The Company periodically evaluates the carrying value of long-lived assets
to be held and used in accordance with ASC 360, at least on an annual basis.  ASC 360 requires the impairment losses
to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows
estimated to be generated by those assets are less than the assets' carrying amounts.  In that event, a loss is recognized
based on the amount by which the carrying amount exceeds the fair market value of the long-lived assets.  Loss on long-lived
assets to be disposed of is determined in a similar manner, except that fair market values are reduced for the cost of disposal.
Goodwill and Intangible Assets
Good is calculated as the purchase premium
after adjusting for the fair value of net assets acquired.  Goodwill is not amortized but is reviewed for potential
impairment on an annual basis, or when events or circumstances indicate a potential impairment, at the reporting unit level.  A
reporting unit, as defined under applicable accounting guidance, is a business segment or one level below a business segment.  Under
applicable accounting guidance, the goodwill impairment analysis is a two-step test.  The first step of the goodwill
impairment test involves comparing the fair value of each reporting unit with its carrying amount including goodwill.  If
the fair value of the reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired; however,
if the carrying amount of the reporting unit exceeds its fair value, the second step must be performed to measure potential impairment.
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37
-
The second step involves calculating an
implied fair value of goodwill for each reporting unit for which the first step indicated possible impairment.  The
implied fair value of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination,
which is the excess of the fair value of the reporting unit, as determined in the first step, over the aggregate fair values of
the assets, liabilities and identifiable intangibles as if the reporting unit was being acquired in a business combination.  Measurement
of the fair values of the assets and liabilities of a reporting unit is consistent with the requirements of the fair value measurements
accounting guidance, which defines fair value as the price that would be received to sell an asset or paid to transfer a liability
in an orderly transaction between market participants at the measurement date.  The adjustments to measure the assets,
liabilities, and intangibles at fair value are for the purpose of measuring the implied fair value of goodwill and such adjustments
are not reflected in the consolidation balance sheet.  If the implied fair value of goodwill exceeds the goodwill assigned
to the reporting unit, there is no impairment.  If the goodwill assigned to a reporting unit exceeds the implied fair
value of goodwill, an impairment charge is recorded for the excess.  An impairment loss recognized cannot exceed the
amount of goodwill assigned to a reporting unit.  An impairment loss establishes a new basis in the goodwill and subsequent
reversals of goodwill impairment losses are not permitted under applicable accounting guidance.
The goodwill in the balance sheet as of
December 31, 2010 was generated from the acquisition of Haoliangxin by Deyufarm on July 24, 2010. In 2010, goodwill was tested
for impairment and it was determined that goodwill was not impaired as of December 31, 2010. Pursuant to the Termination Agreements
for the VIE Group, the Company deconsolidated the VIE Group and no goodwill was presented on the balance sheet as of December
31, 2011, and either as of December 31, 2010 after reclassification of the assets and liabilities of discontinued operations.
For intangible assets subject to amortization,
an impairment loss is recognized if the carrying amount of the intangible asset is not recoverable and exceeds fair value.  The
carrying amount of the intangible asset is considered not recoverable if it exceeds the sum of the undiscounted cash flows expected
to result from the use of the asset.
Fair Value Measurements
FASB ASC 820, "Fair Value Measurements"
(formerly SFAS No. 157) defines fair value for certain financial and nonfinancial assets and liabilities that are recorded at
fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements.  It
requires that an entity measure its financial instruments to base fair value on exit price and maximize the use of observable
units and minimize the use of unobservable inputs to determine the exit price.  It establishes a hierarchy which prioritizes
the inputs to valuation techniques used to measure fair value.  This hierarchy increases the consistency and comparability
of fair value measurements and related disclosures by maximizing the use of observable inputs and minimizing the use of unobservable
inputs by requiring that observable inputs be used when available.  Observable inputs are inputs that reflect the assumptions
market participants would use in pricing the assets or liabilities based on market data obtained from sources independent of the
Company.  Unobservable inputs are inputs that reflect the Company's own assumptions about the assumptions market
participants would use in pricing the asset or liability developed based on the best information available in the circumstances.  The
hierarchy prioritizes the inputs into three broad levels based on the reliability of the inputs as follows:
·
Level 1 –
                                                                                                               Inputs are quoted
                                                                                                               prices in active
                                                                                                               markets for identical
                                                                                                               assets or liabilities
                                                                                                               that the Company
                                                                                                               has the ability
                                                                                                               to access at the
                                                                                                               measurement date.  Valuation
                                                                                                               of these instruments
                                                                                                               does not require
                                                                                                               a high degree of
                                                                                                               judgment as the
                                                                                                               valuations are
                                                                                                               based on quoted
                                                                                                               prices in active
                                                                                                               markets that are
                                                                                                               readily and regularly
                                                                                                               available.
·
Level 2 –
                                                                                                               Inputs other than
                                                                                                               quoted prices in
                                                                                                               active markets
                                                                                                               that are either
                                                                                                               directly or indirectly
                                                                                                               observable as of
                                                                                                               the measurement
                                                                                                               date, such as quoted
                                                                                                               prices for similar
                                                                                                               assets or liabilities;
                                                                                                               quoted prices in
                                                                                                               markets that are
                                                                                                               not active; or
                                                                                                               other inputs that
                                                                                                               are observable
                                                                                                               or can be corroborated
                                                                                                               by observable market
                                                                                                               data for substantially
                                                                                                               the full term of
                                                                                                               the assets or liabilities.
·
Level 3 –
                                                                                                               Valuations based
                                                                                                               on inputs that
                                                                                                               are unobservable
                                                                                                               and not corroborated
                                                                                                               by market data.  The
                                                                                                               fair value for
                                                                                                               such assets and
                                                                                                               liabilities is
                                                                                                               generally determined
                                                                                                               using pricing models,
                                                                                                               discounted cash
                                                                                                               flow methodologies,
                                                                                                               or similar techniques
                                                                                                               that incorporate
                                                                                                               the assumptions
                                                                                                               a market participant
                                                                                                               would use in pricing
                                                                                                               the asset or liability.
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38
-
This guidance applies to other accounting
pronouncements that require or permit fair value measurements.  On February 12, 2008, the FASB finalized FASB Staff
Position (FSP) No. 157-2, Effective Date of FASB Statement No. 157 (ASC 820).  This Staff Position delays the effective
date of SFAS No. 157 (ASC 820) for nonfinancial assets and liabilities to fiscal years beginning after November 15, 2008 and interim
periods within those fiscal years, except for those items that are recognized or disclosed at fair value in the financial statements
on a recurring basis (at least annually).  The adoption of SFAS No. 157 (ASC 820) had no effect on the Company's financial
position or results of operations.
We also analyze all financial instruments
with features of both liabilities and equity under ASC 480-10 (formerly SFAS 150, "Accounting for Certain Financial Instruments
with Characteristics of Both Liabilities and Equity") and ASC 815-40 (formerly EITF 00-19, "Accounting for Derivative
Financial Instruments Indexed to, and Potentially Settled in, a Company's Own Stock").  We have determined
ASC 480-10 (formerly SFAS 150) and ASC 815-40 (formerly EITF 00-19) has no material effect on our financial position or results
of operations.
Revenue Recognition
The Company's revenue recognition
policies are in compliance with the SEC Staff Accounting Bulletin No. 104 ("SAB 104").  The Company recognizes
product revenue when the following fundamental criteria are met: (i) persuasive evidence of an arrangement exists, (ii) delivery
has occurred, (iii) our price to the customer is fixed or determinable and (iv) collection of the resulting accounts receivable
is reasonably assured.  The Company recognizes revenue for product sales upon transfer of title to the customer.  Customer
purchase orders and/or contracts are generally used to determine the existence of an arrangement.  Shipping documents
and the completion of any customer acceptance requirements, when applicable, are used to verify product delivery or that services
have been rendered.  The Company assesses whether a price is fixed or determinable based upon the payment terms associated
with the transaction and whether the sales price is subject to refund or adjustment.
The Company's revenue is recognized
net of value-added tax (VAT), reductions to revenue for estimated product returns, and sales discounts based on volume achieved
in the same period that the related revenue is recorded.  The estimates are based on historical sales returns, analysis
of credit memo data, and other factors known at the time.  For the years ended December 31, 2011 and 2010, sales discounts
from continuing operations were $70,987 and $0, respectively.  Commencing from year 2010, the Company had terminated
the offering of sales discounts to customers.
We offer a right of exchange on our grain
products sold through our relationship with grocery store networks.  The consumer who purchases the product may exchange
it for the same kind and quantity of product originally purchased.  In accordance with FASB ASC 605-15-25-1 and 605-15-15-2,
these are not considered returns for revenue recognition purposes.  For the years ended December 31, 2011 and 2010,
the returns of our product were not material.
Advertising Costs
The Company expenses the cost of advertising
as incurred or, as appropriate, the first time the advertising takes place.  Advertising costs from continuing operations
for the year ended December 31, 2011 and 2010 were $952,472 and $83,576 respectively.
Research and Development
The Company expenses its research and development
costs as incurred.  Research and development costs from continuing operations for the years ended December 31, 2011
and 2010 were $98,393 and $73,860, respectively.
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39
-
Stock-Based Compensation
In December 2004, the Financial Accounting
Standard Board, or the FASB, issued the Statement of Financial Accounting Standards, or SFAS, No. 123(R), "Share-Based Payment",
which replaces SFAS No. 123 and supersedes APB Opinion No. 25.  SFAS No. 123(R) is now included in the FASB's
ASC Topic 718, "Compensation – Stock Compensation."  Under SFAS No. 123(R), companies are required
to measure the compensation costs of share-based compensation arrangements based on the grant-date fair value and recognize the
costs in the financial statements over the period during which employees or independent contractors are required to provide services.  Share-based
compensation arrangements include stock options and warrants, restricted share plans, performance-based awards, share appreciation
rights and employee share purchase plans.  In March 2005, the SEC issued Staff Accounting Bulletin No. 107, or SAB 107,
which expresses views of the staff regarding the interaction between SFAS No. 123(R) and certain SEC rules and regulations and
provides the staff's views regarding the valuation of share-based payment arrangements for public companies.  SFAS
No. 123(R) permits public companies to adopt its requirements using one of two methods.  On April 14, 2005, the SEC
adopted a new rule amending the compliance dates for SFAS No. 123(R).  Companies may elect to apply this statement either
prospectively, or on a modified version of retrospective application under which financial statements for prior periods are adjusted
on a basis consistent with the pro forma disclosures required for those periods under SFAS No. 123.
The Company has fully adopted the provisions
of FASB ASC 718 and related interpretations as provided by SAB 107.  As such, compensation cost is measured on the date
of grant as the fair value of the share-based payments.  Such compensation amounts, if any, are amortized over the respective
vesting periods of the option grant.
Income Taxes
The Company accounts for income taxes in
accordance with FASB ASC Topic 740, "Income Taxes."  ASC 740 requires a company to use the asset and liability
method of accounting for income taxes, whereby deferred tax assets are recognized for deductible temporary differences, and deferred
tax liabilities are recognized for taxable temporary differences.  Temporary differences are the differences between
the reported amounts of assets and liabilities and their tax bases.  Deferred tax assets are reduced by a valuation
allowance when, in the opinion of management, it is more likely than not that some portion, or all of, the deferred tax assets
will not be realized.  Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates
on the date of enactment.
Under ASC 740, a tax position is recognized
as a benefit only if it is "more likely than not" that the tax position would be sustained in a tax examination, with
a tax examination being presumed to occur.  The amount recognized is the largest amount of tax benefit that is greater
than 50% likely of being realized on examination.  For tax positions not meeting the "more likely than not"
test, no tax benefit is recorded.  The adoption had no effect on the Company's consolidated financial statements.
Foreign Currency Translation and Comprehensive Income
U.S. GAAP requires that recognized revenue,
expenses, gains and losses be included in net income.  Certain statements, however, require entities to report specific
changes in assets and liabilities, such as gain or loss on foreign currency translation, as a separate component of the equity
section of the balance sheet.  Such items, along with net income, are components of comprehensive income.  The
functional currency of the Company is Renminbi ("RMB").  The unit of RMB is in Yuan.  Translation
gains are classified as an item of other comprehensive income in the stockholders' equity section of the consolidated balance
sheet.
Statement of Cash Flows
In accordance with FASB ASC Topic 230,
"Statement of Cash Flows," cash flows from the Company's operations are calculated based upon the local currencies.  As
a result, amounts related to assets and liabilities reported on the consolidated statement of cash flows will not necessarily
agree with changes in the corresponding balances on the consolidated balance sheets.
Discontinued Operations
Certain prior period amounts have been
reclassified in these consolidated financial statements to conform to the 2011 presentation of discontinued operations of the
VIE Group for the deep processed grain business.
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40
-
Reclassifications
Except for the classification for discontinued
operations, certain classifications have been made to the prior year financial statements to conform to the current year presentation.  The
reclassifications have no impact on the Company's 2010 consolidated statement of operations and retained earnings.
Recent Pronouncements
In January 2010, FASB issued an amendment
regarding improving disclosures about fair value measurements. This new guidance requires some new disclosures and clarifies some
existing disclosure requirements about fair value measurement. The new disclosures and clarifications of existing disclosures
are effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases,
sales, issuances and settlements in the roll forward of activity in Level 3 fair value measurements. Those disclosures are effective
for fiscal years beginning after December 15, 2010 and for interim periods within those fiscal years. There was no impact from
the adoption of this guidance to our consolidated financial position or results of operations as the amendment only addresses
disclosures.
In April 2010, FASB issued an amendment
to Stock Compensation. The amendment clarifies that an employee stock-based payment award with an exercise price denominated in
the currency of a market in which a substantial portion of the entity's equity shares trades should not be considered to
contain a condition that is not a market, performance, or service condition. Therefore, an entity would not classify such an award
as a liability if it otherwise qualifies as equity. The amendments are effective for fiscal years, and interim periods within
those fiscal years, beginning on or after December 15, 2010. The adoption of this guidance had no impact on our consolidated financial
position or results of operations since our stock-based payment awards have an exercise price denominated in the same currency
of the market in which our Company shares are traded.
In May 2011, FASB issued an amendment (ASU
No. 2011-04) to Fair Value Measurement (ASC Topic 820). In 2006, the FASB and the International Accounting Standards Board (IASB)
published a Memorandum of Understanding, which has served as the foundation of the Board's efforts to a common set of high
quality global accounting standards. Consistent with the Memorandum of Understanding and the Board's commitment to achieving
the goal, the amendments in this Update are the result of the work by the FASB and the IASB to develop common requirements for
measuring fair value and for disclosing information about fair value measurements in accordance with U.S. GAAP and IFRS. The adoption
of this guidance had no impact on our consolidated financial position or results of operations.
In May 2011, FASB issued an amendment (ASU
No. 2011-05) to Comprehensive Income (ASC Topic 220). The amendment require that all nonowner changes in stockholders' equity
be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In
the two-statement approach, the first statement should present total net income and its components followed consecutively by a
second statement that should present total other comprehensive income, the components of other comprehensive income, and the total
of comprehensive income. The Company had adopted this guidance to our consolidated financial statements as of and for the year
ended December 31, 2011.
In September 2011, FASB issued an amendment
(ASU No. 2011-08) to Intangibles–Goodwill and Other (ASC Topic 350). The amendments in the Update permit an entity to first
assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than
its carrying amount as a basis for determining whether it is necessary to perform the two-step goodwill impairment test described
in Topic 350. If, after assessing the totality of events or circumstances, an entity determines it is not more likely than not
that the fair value of a reporting unit is less than its carrying amount, then performing the two-step impairment test is unnecessary.
However, if an entity concludes otherwise, then it is required to perform the first step of the two-step impairment test by calculating
the fair value of the reporting unit and comparing the fair value with the carrying amount of the reporting unit, as described
in paragraph 350-20-35-4. If the carrying amount of a reporting unit exceeds its fair value, then the entity is required to perform
the second step of the goodwill impairment test to measure the amount of the impairment loss, if any, as described in paragraph
350-20-35-9. The Company had adopted this guidance to our consolidated financial statements as of and for the year ended December
31, 2011.
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41
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In December 2011, FASB issued an Update
(ASU No. 2011-10) to Property, Plant, and Equipment (ASC Topic 360). Under the amendments in this Update, when a parent (reporting
entity) ceases to have a controlling financial interest (as described in Subtopic 810-10) in a subsidiary that is in substance
real estate as a result of default on the subsidiary's nonrecourse debt, the reporting entity should apply the guidance
in Subtopic 360-20 to determine whether it should derecognize the in substance real estate. Generally, a reporting entity would
not satisfy the requirements to derecognize the in substance real estate before the legal transfer of the real estate to the lender
and the extinguishment of the related nonrecourse indebtedness. That is, even if the reporting entity ceases to have a controlling
financial interest under Subtopic 810-10, the reporting entity would continue to include the real estate, debt, and the results
of the subsidiary's operations in its consolidated financial statements until legal title to the real estate is transferred
to legally satisfy the debt. The adoption of this guidance had no impact on our consolidated financial position or results of
operations.
In December 2011, FASB issued an Update
(ASU No. 2011-11) to Balance Sheet (ASC Topic 210) regarding disclosures about offsetting assets and liabilities. Pursuant to
this Update, entities are required to disclose both gross information and net information about both instruments and transactions
eligible for offset in the statement of financial position and instruments and transactions subject to an agreement similar to
a master netting arrangement. This scope would include derivatives, sale and repurchase agreements and reverse sale and repurchase
agreements, and securities borrowing and securities lending arrangements. The adoption of this guidance had no impact on our consolidated
financial position or results of operations.
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BUSINESS
Overview
We are a vertically integrated producer,
processor, marketer and distributor of organic and other agricultural products made from corn and grains operating in Shanxi Province
in the People's Republic of China. The Company has access to over 109,000 acres of farmland in Shanxi Province for breeding, cultivating,
processing, warehousing, and distributing grain and corn products. We have an extensive wholesale network in over 15 provinces
and a retail distribution network of approximately 20,000 supermarkets and convenience stores in 29 provinces across China. We
are equipped with advanced production lines and modern warehouses with production capacity of over 105,000 tons for grain products,
capacity of storage of over 100,000 tons and annual turnover of 700,000 tons for our corn products.
Our farming operations are conducted through
our wholly-owned PRC subsidiaries, Jinzhong Deyu Agriculture Trading Co. Limited ("Jinzhong Deyu"), Jinzhong Yongcheng
Agriculture Trading Co. Limited ("Yongcheng") and Jinzhong Yuliang Agriculture Trading Co. Limited ("Yuliang"). Yongcheng
and Yuliang focus on processing and distributing our corn and corn byproducts. Our grain processing and distribution are conducted
through our wholly-owned PRC subsidiaries, Jinzhong Deyu, Shanxi Taizihu Food Co. Ltd. ("Taizihu"), Shanxi Huichun
Bean Products Co., Ltd. Our other wholly-owned PRC subsidiaries, Detian Yu Biotechnology (Beijing) Co., Ltd. ("Detian Yu")
and Tianjin Guandu Food Co., Ltd. ("Tianjin Guandu"), and our majority-owned PRC subsidiary Hebei Yugu Grain Co., Ltd.
("Hebei Yugu") together with Jinzhong Deyu are engaged in bulk trading of rice, flour, wheat and other agriculture products
and the distribution of our processed grain products.
A brief description of our products is
set forth below, by division:
·
Corn Division
–Yongcheng
                                                                                                         and Yuliang process and
                                                                                                         distribute corn and corn
                                                                                                         byproducts. Yongcheng
                                                                                                         and Yuliang acquire unprocessed
                                                                                                         corn and perform value-added
                                                                                                         processes to the corn
                                                                                                         such as cleaning, drying
                                                                                                         and packaging.  Consumers
                                                                                                         range from livestock
                                                                                                         feed companies to corn
                                                                                                         oil/corn starch manufacturing
                                                                                                         companies and governmental
                                                                                                         procurement agencies
                                                                                                         in China.
·
Grain Division
–Jinzhong
                                                                                                         Deyu acquires unprocessed
                                                                                                         grains including millet,
                                                                                                         green bean, soy bean,
                                                                                                         black rice and many other
                                                                                                         varieties of grains traditionally
                                                                                                         grown and consumed in
                                                                                                         China and performs value-added
                                                                                                         processes to the grains
                                                                                                         such as peeling, cleaning,
                                                                                                         grinding and packaging.
                                                                                                         Taizihu and Huichun mainly
                                                                                                         produce and distribute
                                                                                                         deep processed grain
                                                                                                         products, including bean
                                                                                                         based products, fruit
                                                                                                         vinegars and juices and
                                                                                                         other grain products.
                                                                                                         The finished products
                                                                                                         of this division are
                                                                                                         then sold directly to
                                                                                                         supermarkets and convenience
                                                                                                         stores in China and overseas.
·
Bulk Trading
                                                                                                         Division
–Jinzhong
                                                                                                         Deyu, Detian Yu, Tianjin
                                                                                                         Guandu and Hebei Yugu
                                                                                                         conduct bulk trading
                                                                                                         through procuring and
                                                                                                         wholesaling rice, flour,
                                                                                                         wheat, kidney beans,
                                                                                                         green beans and other
                                                                                                         agricultural products.
                                                                                                         The majority of our customers
                                                                                                         for this division are
                                                                                                         food manufacturers, grain
                                                                                                         trading companies, wholesalers
                                                                                                         and governmental procurement
                                                                                                         agencies in China.
Operating revenue from continuing operations
for the year ended December 31, 2011 was $261,576,666, representing a 207% increase from $85,174,884 for the year ended December
31, 2010. Our net income available to common stockholders for the year ended December 31, 2011 was $17,335,442, representing
a 50.7% increase from $11,502,253 for the year ended December 31, 2010.
Our principal office is located at 8th
Floor, Block 5, Aolinjiatai Building, 1 Kehuiqian Street, Chaoyang District, Beijing, China 100192. Our telephone number in China
is +(8610)-5224 1802 and our fax number is +(8610)-5224 1822. Our telephone number in the United States is (646) 820-8060. Our
corporate website is
www.deyuagri.com
(information on our website is not made a part of prospectus).
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43
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Corporate History
2010 Share Exchange and Preferred Stock Financings
On April 27, 2010, Deyu (then known as
Eco Building International, Inc.) completed the acquisition of City Zone Holdings Limited, an emerging organic and non-organic
agricultural products distributor in Shanxi Province, China, engaged in procuring, processing, marketing and distributing various
grain and corn products ("City Zone"), by means of a share exchange (the "Exchange").  As a
result of the Exchange, City Zone became a wholly-owned subsidiary of Deyu.
Simultaneously with the acquisition, we
completed a private placement offering in the gross amount of $8,211,166 of the sale of securities to accredited investors at
$4.40 per unit, with each "Unit" consisting of one share of our Series A convertible preferred stock and one warrant
to purchase 0.4 shares of our common stock with an exercise price of $5.06 per share. We executed a Securities Purchase Agreement
in connection with the offering, which is referenced as Exhibit 10.1 herein.
On May 10, 2010, we closed on the
second and final round of the private placement offering as disclosed in our Current Report on Form 8-K filed with the SEC on
May 3, 2010 through the sale of 589,689 Units comprised of 589,689 shares of our Series A convertible preferred stock and 235,882
five-year warrants with an exercise price of $5.06 per share, to certain accredited investors for total gross proceeds of $2,594,607.
We raised an aggregate amount of $10,805,750 in the two rounds of offerings.
In connection with the financing transaction,
we entered into (i) a Registration Rights Agreement, (ii) a Lock-Up Agreement and (iii) a Securities Escrow Agreement for a make
good arrangement with our management (together with the Securities Purchase Agreement, these agreements shall be referred to as
the "Financing Documents").
The private placement closed simultaneously
with the signing of the Financing Documents and our issuing of 2,455,863 shares of Series A convertible preferred stock and warrants
exercisable into 982,362 shares of common stock to certain investors (collectively, the "Investors").  Pursuant
to its terms, the Series A convertible preferred stock receive cumulative dividends at a rate of 5% per annum and can be converted
into common stock on a 1:1 basis, subject to applicable adjustments.  Pursuant to its terms, the warrants can be converted
into 982,362 shares of common stock at an exercise price of $5.06 per share (the "Warrants").  The Warrants
will expire on April 27, 2015.
Pursuant to the Registration Rights Agreement,
we agreed to file a registration statement on Form S-1 (or other applicable Form) within 60 days of the close of such financing.  We
filed a Registration Statement on Form S-1 with the SEC on June 15, 2010, and on October 21, 2010, the SEC declared the Form
S-1 effective.
We also entered into a Lock-Up Agreement
with the Investors, pursuant to which the common stock owned by the management of City Zone was locked-up for the six (6) month
period following the effectiveness of the Registration Statement is declared effective. The Lock-Up Agreement expired on April
21, 2011.
Lastly, pursuant to the Securities Escrow
Agreement, our majority shareholder (which is also the selling stockholder in this prospectus, Expert Venture Limited) pledged
2,455,863 shares of common stock of the Company (the "Make Good Shares") to secure the obligation that we reach
certain earnings thresholds for the fiscal years ended 2010 and 2011.  Since the Make Good Shares have already been
issued to Expert Venture Limited, any transfer of the shares pursuant to the terms of the Make Good Agreement will not cause any
dilution to existing shareholders. One half (or 1,227,932 shares) of the Make Good Shares were allocated to the 2010 earnings
requirement and the other half (1,227,931 shares) of the Make Good Shares were allocated to the 2011 earnings requirement. For
the fiscal year 2010, we met our threshold requirement of reporting net income of at least 95% of $11,000,000. If we meet the
threshold in 2011 of reporting net income of at least 95% of $15,000,000 (i.e., at least $14,250,000), the remainder of the Make
Good Shares will be returned to Expert Venture Limited, however if we fail to meet our threshold, then the Make Good Shares will
be released from escrow based on the following terms and conditions:
·
If we achieve net
                                                                                                          income of less than
                                                                                                          50% of $15,000,000 (or
                                                                                                          $7,500,000), then 1,227,931
                                                                                                          shares shall be released
                                                                                                          to the investors on
                                                                                                          a pro rata basis (based
                                                                                                          on the amount of each
                                                                                                          investors investment).
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44
-
·
If we achieve net
                                                                                                          income of between 50%
                                                                                                          and less than 95% of
                                                                                                          $15,000,000, then a
                                                                                                          portion of the 1,227,931
                                                                                                          shares held in escrow
                                                                                                          shall be disbursed to
                                                                                                          the Investors (the remaining
                                                                                                          shares will be returned
                                                                                                          to Expert Venture Limited). 
                                                                                                          The number of shares
                                                                                                          released to the investors
                                                                                                          shall be determined
                                                                                                          by doubling the percentage
                                                                                                          missed between the actual
                                                                                                          net income as compared
                                                                                                          to the make good target
                                                                                                          and then multiplying
                                                                                                          that by the 1,227,931
                                                                                                          escrow shares.
Additionally, as a result of the Exchange,
we changed our fiscal year end to December 31.
On May 19, 2010, we filed with the Secretary
of State for the State of Nevada a Certificate of Amendment to our Articles of Incorporation changing our name from "Eco
Building International, Inc." to "Deyu Agriculture Corp." FINRA declared the name change effective on June 2,
2010.
Deyufarm VIE Control Agreements
On November 16, 2010, Detian Yu entered
into a series of control agreements (collectively, the "Control Agreements") with each of (a) Beijing Jundaqianyuan
Investment Management Co., Ltd. ("Junda"), a PRC company and equity interest holder in Deyufarm Innovation Food (Beijing)
Co., Ltd., a PRC company ("Deyufarm") and (b) Jinzhong Longyue Investment Consultancy Services Co., Ltd. ("Longyue"),
a PRC company and equity interest holder in Deyufarm whereby Detian Yu provided management and consulting services and business
cooperation opportunities services to each of Junda and Longyue in exchange for service fees from each of Junda and Longyue equal
to 100% (in the aggregate) of the net income after tax of each of Junda and Longyue.  Together, Junda and Longyue own
64.2857% of Deyufarm, and each derive 100% of their income from the profits generated by Deyufarm through its wholly-owned subsidiary,
Sichuan Haoliangxin Instant Food Co., Ltd., a PRC company, and Beijing Xinggu Deyufarm Food Co. Ltd., a PRC company (together
with Deyufarm, Junda and Longyue, the "VIE Group"). A complete description of the transaction is set forth in the
Registrant's Current Report on Form 8-K as filed with the SEC on November 17, 2010.
On December 20, 2011, Detian Yu executed
a series of termination agreements whereby Detian Yu terminated its control over the VIE Group (collectively, the "Termination
Agreements"), effective immediately. The Company's Board of Directors and a majority of the preferred shareholders
of the Company approved the disposition of the VIE Group.
Other Recent Developments
On June 16, 2011, Tianjin Guandu (previously
named Tianjin Detianyu Food Co., Ltd. before October 24, 2011), a newly formed wholly-owned subsidiary of Detian Yu with RMB10,000,000
($1,544,497) registered capital entered into a Cooperation Agreement with the Administrative Committee of Sino-Singapore Tianjin
Eco-city (the "Agency"), the representative organization of the Tianjin Municipal Government. The agreement provides
for a cooperative relationship between Tianjin Guandu and the Agency regarding Tianjin Guandu's establishment of its operations
in Tianing's Eco-city, particularly with respect to certain tax arrangements. Tianjin Guandu is in the business of wholesale
distribution of simple-processed and deep-processed packaged food products and staple foods.
On July 25, 2011, we incorporated and registered
Hebei Yugu, a 70%-owned subsidiary of Detian Yu with RMB10,000,000 ($1,563,824) in registered capital, in Gaocheng City of Shijiazhuang,
Hebei Province, China. Hebei Yugu is primarily engaged in wholesale distribution of grains, beans and potatoes.
On February 2, 2012, RedSun Technology
(Shenzhen) Co. Limited ( "Redsun"), a wholly-owned subsidiary of the Company, acquired 100% of the issued and outstanding
registered share capital of Taizihu and its subsidiary, Huichun (together with Taizihu, the "Taizihu Group") in consideration
of RMB34,705,000 ($5,502,181). The Taizihu Group is in the business of producing and selling bean based products, fruit vinegars
and juices and other grain products. The Company will file the audited financial statements of the Taizihu Group and pro forma
financial information required to be filed with the SEC not later than April 19, 2012 in accordance with the rules of the SEC.
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Corporate Structure
The Company's current corporate structure
is set forth below:
Competitive Advantages
Cultivation Base
Our grains are mainly grown in the hilly
area near Taihang Mountain, at an altitude of between 5,000 to 8,000 feet above sea level. This region has a wide temperature
variation between night and day and a long daily exposure to sunlight. These geographic characteristics produce grains that are
rich in nutrients, especially minerals, rutin, cellulose, amino acids, chlorophyll, lecithin and linoleic acid.
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46
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Partnership with Farmers
Agricultural land for large scale farming
of grains is becoming a rarity in China. With the support of our local government, we have adopted the operation mode of "Company
+ Farmers + Base on a large scale". We have the cultivation base of 109,000 acres in Jinzhong in Shanxi Province for the
supply of corn and grain by obtaining the land use rights of 17, 000 acres of farmland with average remaining use life of 38 years
and signing agricultural co-operative agreements with the governments of the counties and villages for the development of 92,000
acres for 20 years. We have established stable partnerships with over 60,000 farmers to grow crops on the farmland. We provide
instruction to the farmers for planting crops and technical support for seeding and cultivation. The scale cultivation ensures
our stable supply of raw material with high quality.
Advanced Production Lines
We have a modern processing center for
corn with five drying cylinders and six warehouses, the construction of which was completed in 2011. Our total capacity of storage
and annual turnover of corn has exceeded 100,000 tons and 700,000 tons, respectively. We are also equipped with fully automatic
and advanced production lines for grain processing with a total production capacity of over 105,000 tons. The advanced production
lines and production technologies help produce grain products with high quality by maintaining the nutritional components of the
products.
Warehousing and Logistics
We operate six self-owned warehouses, one
rental warehouse and some temporary warehouses with total storage capacity of over 100,000 tons of food products and an annual
turnover of 700,000 tons. This capacity helps us to reach economies of scale with low cost of processing and storage. Our production
bases are located in Jinzhong and Quwo in Shanxi Province with convenient transportation. The Jinzhong facilities and warehouses
are in proximity to Shitai Railway and Provincial Road 317. The Quwo facilities are several kilometers away from Houma, a transportation
hub. We have exclusive lease agreements with three railway lines for freight transportation in Jinzhong: (a) Shanxi Cereal &
Oil Group, Mingli Reservation Depot; (b) Shanxi Yuci Cereal Reservation Depot; and (c) Yuci Dongzhao Railway Freight Station.  These
advantageous geographical positions and exclusive agreements help us ensure speedy delivery of our products at a low cost.
Established Sales Network
We have cultivated an extensive wholesale
network for corn and bulk trading with customers including various livestock feed companies, food manufacturers, corn oil/corn
starch manufacturing companies, grain trading companies, wholesalers and governmental procurement agencies in approximately 15
provinces. Meanwhile, our retail sales network for processed grain covers approximately 20,000 supermarkets and convenience stores
with distribution to over 29 provinces in China, including the cities of Beijing, Tianjin, Jinan, Fuzhou, Chengdu and Shijiazhuang,
in some of the world's widely known supermarkets. We believe the rapid development of our sales network has increased our
revenue as well as our brand awareness.
Our Current Products and Product Characteristics
Our products in our Corn Division are simple
processed corn. Our products in our Grain Division include approximately 200 types of products sold for retail distribution in
supermarkets and convenience stores, including: (1) simple processed grain products packaged under our registered trademarks "Deyu"
and "Shitie"; (2) bean based products under the brand name "Huicun" including vegetarian products and
instant noodles made from soybeans, black beans and green beans; and (3) fruit vinegars and juices under the brand "Longquan
Villa". Our products in our Bulk Trading Division include rice, flour, wheat, kidney beans, green beans, chicken and other
agricultural products. The following table lists our major products in our Grain Division:
Category
Product
Weight/Unit
Unit
Packed grains
Millet, soy bean, mung bean, black rice and corn grits, etc.
400 to 800g
Bag
Packed flour
Mung bean flour, corn flour, buckwheat flour and  sorghum flour, etc.
800 to 2,400g
Bag
Grain gift boxes
Millet & grains mix
400 to 425g
Bag
Vacuum-packed grains
Millet, sorghum, sticky rice, black rice, black bean, soy bean, mung bean, black rice, etc.
370 to 440g
Bag
Large-pack beans
Soy bean, mung bean, red bean, kidney bean, black bean, etc.
25kg
Bag
Large-pack rice
Millet, sorghum, coix seed, black rice, sticky rice and buckwheat rice, etc.
25kg
Bag
Large-pack flour
Sorghum flour, corn four, mung bean flour, bulkwheat flour, oat flour, etc.
25kg
Bag
Bean-based products
Vegetarian chicken wings, vegetarian prawns, vegetarian bean mushroom, thick-strip bean-based noodles, thin-strip bean-based
    noodles and various bean-based instant noodles.
60-500g
Bag
Fruit vinegar and juices
Apple vinegar, jujube vinegar, grape vinegar, golden pear juice, kiwi vinegar, strawberry
    juice, etc.
250-400g
Bottle
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Packaged Grains of "Deyu"
Grain Gift Boxes of "Deyu"
Bean-based Products of "Huichun"
Fruit Vinegars & juices of "Longquan Villa"
We also sell unpackaged products of various
kinds of grains at special counters under the brand name "Deyu" in supermarkets where customers can scoop the grains
into plastic bags to determine the volume they want.
Special Counter Selling Unpacked Grains in Supermarket
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Our farmland is located in the center of
Shanxi Province, which has a relatively dry climate and which is ideal for grain cultivation. Grain crop growth relies principally
on the climate and rainfall, and is not dependent on the application of chemical fertilizers or pesticides. Our simple and deep
processing of grains maintain the grain's original nutritional components.  A portion of Jinzhong Deyu's
grain products are certified as "organic" by the Beijing Zhonglu Huaxia Organic Food Certification Centre, the chief
organic food certification organization accredited and approved by the Certification and Accreditation Administration of the PRC
(CNCA).
We provide technological guidance and support
to our farmers regarding seed dissemination, cultivation methods, ecological fertilizer, irrigation, cultivation, weeding and
harvesting. We believe working closely with our farmers helps ensure that we receive high quality raw materials for production.
We also utilize an advanced product control system to help ensure high-quality finished products.
Key Customers
No single customer accounted for greater
than 10% of the Company's consolidated gross revenue or consolidated accounts receivable as of December 31, 2011. For the
year ended December 31, 2010, one customer accounted for 18% of the Company's consolidated gross revenue while no other
single customer accounted for greater than 10%. The same customer accounted for 3% of the Company's consolidated accounts
receivable as of December 31, 2010 while no single customer accounted for greater than 10%.
Our customers are mainly in China, composed
mainly of (1) livestock feed companies, corn oil/corn starch manufacturing companies and governmental procurement agencies in
our Corn Division; (2) distributors, chains of supermarkets and convenience stores in our Grain Division; and (3) grain trading
companies, wholesalers and governmental procurement agencies in our Bulk Trading Division. Our bean-based products are also sold
through our export agencies to Japan, USA, Germany, Canada and other countries in Asia.
For our Corn Division, the portion of revenues
derived from new or small customers has increased and the overall number of customers also increased. For our Grain Division,
our customers are diversified among distributors and chain of supermarkets. For our Bulk Trading Division, a newly-added business
in the fourth quarter of 2010, we have established stable relationships with Tianjin Yimingda Grain Division (a wholesaler), which
is one of our largest customers and accounts for 28.3% of gross sales of Bulk Trading Division. We believe we can continue to
keep stable relationships with existing customers and enlarge our customer base in the future.
Sources of Raw Materials and Key Suppliers
We procure raw materials at our cultivation
base in Jinzhong, Shanxi Province, which produces grains rich in nutrients, especially minerals, rutin, cellulose, amino acids,
chlorophyll, lecithin and linoleic acid. Shanxi 	Province is located on the Loess Plateau in the western part of China. The
city of Jinzhong is located in the center of Shanxi Province. We believe the topography of the region creates optimal conditions
for growing grains. Favorable weather conditions, combined with our geographical conditions lead to high-quality products. There
has been no serious flood or drought in the region in the past 100 years.  The temperature difference between day and
night is greater than 10 degrees Celsius. The weather is dry and cold. There are about 158 days without frost during the year
and the growing period is longer than 135 days. The weather conditions are especially favorable for growing corn and grains. Grains
are highly drought resistant. We rely on natural rainfall, and no irrigation is required throughout the year and no application
of chemical fertilizer or pesticides is needed. Irrigation by underground water is only required under exceptional circumstances.
The growing season for our corn and grain
in the Shanxi Province is 135+ days, which requires only one planting per year of the farmland.  Our warehouses have
storage capacity of 100,000+ tons and a turnover capacity of 700,000+ tons. We believe that our storage capacity, combined with
our ability to expand our network of cooperative farmers and farmer's agents, as well as the ability to expand our purchasing
into other geographical areas in Shanxi Province, reduces our risks which may be attributable to raw material seasonality.
We purchase raw material directly from
farmers, farmer's agents and other various suppliers. We did not have any suppliers who accounted for 10% or more of total
purchases of raw materials or 10% or more of total trade payables during the fiscal years ended December 31, 2011 and 2010.
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Market Opportunity
Corn and Corn Byproducts
Corn is used extensively in feeds, food
for human consumption and highly processed products. According to the United States Department of Agriculture ("USDA"),
the demand for corn in the global and Chinese markets has continued to increase with annual growth for 2009 through 2012 of 3%
and 7%, respectively, and the growth is expected to continue in the next five years. Further, the global demand for corn has substantially
exceeded supply from 2009 through 2012. China is the world's second-leading consumer and producer of corn, second only to
the United States, accounting for over 20% of the world's consumption. The following table shows the statistics of supply
and demand for the global and Chinese markets from 2009 to 2012 (including estimated and forecasted):
Year
Beginning
Balance
Supply
Demand
Gap Between
Supply and Demand
Closing
Balance
Demand
Growth Rate
Global
2009/2010
147,340
819,230
822,500
(3,270
)
144,070
2
%
2010/2011 (estimated)
144,080
827,350
843,370
(16,020
)
128,060
3
%
2011/2012 (forecasted)
128,060
867,520
868,610
(1,090
)
126,970
3
%
China
2009/2010
5,118
16,527
16,515
12 (Note)
5,130
6
%
2010/2011 (estimated)
5,130
17,823
17,611
212 (Note)
5,342
7
%
2011/2012 (forecasted)
5,342
19,475
19,120
355 (Note)
5,697
9
%
Note: The domestic supply is supplemented by imports.
(Units: '000 tons, Source: USDA)
Corn is primarily used as raw feed material
for pigs, cattle, chicken and other livestock. Corn byproducts, including corn stalks, are also used as an important source of
feed. Since 1997, feed production has maintained steady growth. China is now the world's second largest feed producer according
to USDA.
In many developed countries, corn is generally
regarded as a "health food".  In the United States, it is believed that over 10% of health foods are made
with corn or corn byproducts. Corn oil squeezed from corn germ contains over 10 types of fatty acids, more than 50% of which are
acids rich in vitamins A and E. Corn oil is low in cholesterol and is believed to have positive effects on high blood pressure
and heart disease. Corn oil is also widely used in the pharmaceutical and chemical industries. In recent years, demand for corn
for food products in international markets has grown.
Corn is also used as raw material for highly
processed industrial products. Corn can be used to produce ethanol as renewable fuels. Global energy shortages make corn an attractive
alternative energy source.  With the requirement of environmental protection, the demand for corn from ethanol producers
has increased dramatically in recent years.
Grain Products
Grain products contain high levels of vitamin
B1, dietary fiber and trace elements. Coarse grains are believed to be beneficial to people with diabetes or high blood pressure.
The Chinese Nutrition Society, commissioned by the Ministry of Health in 2011 to formulate dietary guidelines, recommends consumption
of 250-400 grams per day of processed grain foods for adults. They also recommended that adults consume 50-100 grams per day of
coarse grains and whole grain foods and consume 30-50 grams per day of bean or bean-based products. Over 70% of adults in China,
amounting to approximately 665 million people, are urban residents. Based on these guidelines, the demand for coarse grain products
and bean-based products by people in urban cities could reach 18.2 million tons and 9.7 million tons per year, respectively.
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As a result of the economic growth and
improved living standards in China, the dietary components of the Chinese population have changed dramatically. In general, the
population pays more attention to diet and nutrition. Management believes that the increased awareness of the value and benefits
of grain products has resulted in an increased demand for our grain products.
Competitive Landscape
In the corn market and grain bulk trading
industry, our current major competitors are smaller and local focus traders such as Jinzhong Dexinchang Trading Co., Ltd., Jinjian
Rice Industry Co., Ltd. and Beijing Guchuang Food Co., Ltd., which are mainly engaged in the corn and grain bulk procurement and
wholesale businesses.
In the grain consumption marketplace, we
primarily compete with smaller grain processers and food manufacturers, which are local in focus, have a single production line,
little brand recognition and limited distribution networks.  The following table lists our competitors with their main
products:
Competitors
Products of Competitors Produced
and /or sold by Competitors
Shanxi Jin Wei Yuan Grains Company Limited
packaged and unpackaged grain
Shanxi Qinzhou Huang Millet Group Limited Company
packaged and unpackaged millet, soybean
Heshun Xinma Grains Development Co., LTD
packaged and unpackaged millet,beans, flour
Hebei Gaopaidian DouDou Food (Group) Co., Ltd.
bean products
Shandong Daogongfang Food Co., Ltd.
bean products
Yantai Yiyuan Beverage Co., Ltd.
fruit vinegars, especially apple vinegars
Zhengzhou Luer Biotechnology Development Co., Ltd.
fruit vinegars and fruit juices
Sales Network
Corn Products and Bulk Trading Products
We have established a diversified customer
base in approximately 15 provinces in China, including Shanxi, Hebei, Henan, Shandong, Anhui, Shaanxi, Sichuan, Hunan, Hubei,
Guangdong, Jiangsu, Liaoning, Beijing, Tianjin and Chongqing, with stable partnerships with various livestock feed companies,
corn oil/corn starch manufacturing companies and food manufacturers, grain trading companies, wholesalers and governmental procurement
agencies.
Grain Products
We have established a marketing center
in Beijing focused on promoting our products throughout China. In addition, we plan to expand our sales network to include offices
in the cities of Shenzhen, Hangzhou, Chengdu, Tianjin and Chongqing. Our main sales channels are as follows:
·
Supermarkets
:
                                                                                                         At present, our
                                                                                                         sales network covers
                                                                                                         approximately 20,000
                                                                                                         supermarkets and convenience
                                                                                                         stores with distribution
                                                                                                         to over 29 provinces
                                                                                                         in China, including the
                                                                                                         cities of Beijing, Tianjin,
                                                                                                         Jinan, Fuzhou, Chengdu
                                                                                                         and Shijiazhuang, in
                                                                                                         some of the world's
                                                                                                         most widely known supermarket
                                                                                                         chains.
·
Sales channels
                                                                                                         of unpackaged products
:  We
                                                                                                         also sell unpackaged
                                                                                                         products of various kinds
                                                                                                         of grains at special
                                                                                                         counters under the brand
                                                                                                         name "Deyu"
                                                                                                         in over 200 supermarkets
                                                                                                         open and loosely in baskets
                                                                                                         where customers can scoop
                                                                                                         the grains into plastic
                                                                                                         bags to determine the
                                                                                                         volume they want, and
                                                                                                         such sales strategy targets
                                                                                                         a large number of consumers.
·
Overseas sales
:
                                                                                                         Our bean-based products
                                                                                                         are also sold through
                                                                                                         our export agencies to
                                                                                                         Japan, USA, Germany,
                                                                                                         Canada and other countries
                                                                                                         in Asia.
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Processing and Warehousing Capacities
General
We maintain facilities in central and southern
Shanxi Province with total site coverage of approximately 1,780,000 square feet (approximately 165,000 square meters) and constructed
area of 482,000 square feet (approximately 45,000 square meters). Our facilities are equipped with advanced crop production, processing
and packaging lines as well as modern equipment.
Corn Production Capacity
Our Corn Division's warehousing,
processing and logistics center is located in Jinzhong with site coverage of 504,000 square feet (approximately 46,000 square
meters) and constructed area of 129,000 square feet (approximately 12,000 square meters). The construction of this processing
center was completed in June 2011 with five drying cylinders and six warehouses for the storage of 70,000 tons. We have a large
rental cave-type warehouse named Shanxi 661 Warehouse with storage capacity of 30,000 tons. We also have contracts for temporary
warehouses near railway stations which supplement our storage capacity. Our total capacity of storage and annual turnover reach
over 100,000 tons and 700,000 tons, respectively.
We process drying and water removal treatments
for corn before the corn is stored in our warehouses. The five drying cylinders are equipped with the most advanced equipment
for corn drying. After the drying process, the corn is packaged in bags and moved into warehouses. Then, the products undergo
insecticide and anti-bacterial treatments. After being sealed and air ventilated, the products are then stored in enclosed warehouses.
Our six newly-constructed warehouses are
equipped with advanced detection and air ventilation devices to ensure cereals are being kept in good condition. Ventilation ducts
are installed on the ground level of the warehouses. Once moisture is detected, air ventilation driven by a blower will help disseminate
the overall heat on the cereals. Infrared temperature sensors and 360-degree high resolution cameras have been installed in each
warehouse to allow the control room to conduct 24-hour monitoring for real-time analysis of water, moisture, mildew and pests
so that we can quickly take corrective measures.
The cave-type warehouse that we rent is
fully enclosed and have thermostatic and moisture proof characteristics. The cave-type warehouse is built with 1.5 meter thick
walls and moisture proof layers. They maintain a temperature of 10 degrees Celsius throughout the year, which is well-suited for
food storage. Since no air conditioning is required, the operating costs of these warehouses are low. These warehouses are also
equipped with infrared sensors that can accurately detect temperature changes and the presence of rodents, insects, and other
pests.
Grain Production Capacity
We are equipped with three fully automatic
production lines for millet, grain and flour at our Jinzhong production base in the center of Shanxi Province, with site coverage
of approximately 199,000 square feet (approximately 18,000 square meters) and a constructed area of 118,000 square feet (approximately
11,000 square meters). These lines include various kinds of rice milling machines, filtering machines, elevators, color selection
machines, exhaust fans, automatic packing machines and other equipment. The production capacity of grain is over 60,000 tons.
Another production base in Quwo, in the
southern part of Shanxi Province, has site coverage of over 1,076,000 square feet (approximately 100,000 square meters) and a
constructed area of 234,000 square feet (approximately 22,000 square meters). This base is equipped with three kinds of advanced
production lines: (1) two production lines for bean-based products with an annual production capacity of 15,000 tons; (2) two
production lines for other grain products with an annual production capacity of over 26,000 tons; and (3) two production lines
for fruit vinegar and fruit juices with an annual production capacity of 4,000 tons. These production lines are comprised of advanced
grain milling, degreasing, automatic drying, packaging, inspection and testing equipment. At present, less than one third of the
land at this production base has been developed. We believe we can develop more production lines for future demand without acquiring
land use rights for more land.
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To ensure high quality, we have installed
fully automated production equipment at our facilities.  Characteristics of our production lines and equipment are as
follows:
·
Production
                                                                                                               equipment for grain
                                                                                                               processing is fully
                                                                                                               automated. We use
                                                                                                               elevators to move
                                                                                                               raw materials through
                                                                                                               the production
                                                                                                               process. The production
                                                                                                               process is fully
                                                                                                               enclosed for protection
                                                                                                               against any pollution
                                                                                                               or contamination.
                                                                                                               We have installed
                                                                                                               equipment with
                                                                                                               advanced color
                                                                                                               selection technology
                                                                                                               for grains. We
                                                                                                               believe the device
                                                                                                               is stable and reliable,
                                                                                                               and it features
                                                                                                               automatic temperature
                                                                                                               control, automatic
                                                                                                               removal of dust
                                                                                                               and impurities,
                                                                                                               automatic air pressure
                                                                                                               detection, self
                                                                                                               injection and light
                                                                                                               testing. We have
                                                                                                               a cooling system
                                                                                                               that helps millet
                                                                                                               maintain its nutritious
                                                                                                               components, color
                                                                                                               and appearance.
                                                                                                               Selective application
                                                                                                               of the polishing
                                                                                                               process helps maintain
                                                                                                               nutritional components.
·
Soybean food
                                                                                                               series production
                                                                                                               uses advanced technology
                                                                                                               of dry heat extrusion
                                                                                                               equipment in oil
                                                                                                               extraction, oil
                                                                                                               purification filling,
                                                                                                               milling, squeezing
                                                                                                               and other equipment
                                                                                                               which undertake
                                                                                                               processes of peeling,
                                                                                                               crushing, oil extraction,
                                                                                                               milling, forming,
                                                                                                               drying, shaping,
                                                                                                               sterilization,
                                                                                                               packaging and other
                                                                                                               processes in the
                                                                                                               production of various
                                                                                                               soybean products
                                                                                                               while retaining
                                                                                                               most of the raw
                                                                                                               nutrients.
·
Production lines for our fruit vinegar and fruit juice
include water treatment equipment, sugar devices, dispensing equipment, homogenization equipment, sterilization equipment and
aseptic filling equipment. We use Ro water treatment equipment and remote infrared automatic filling equipment.  Sterilization
technology adopts aseptic filling and high temperature sterilization processes to ensure high quality of products and advanced,
reliable, automatic and stable quality for the entire production line.
Our modern equipment and technology, combined
with advanced processing techniques, helps to ensure that grain production is high-quality, natural, green and ecological.  Additionally,
a portion of our grains can be categorized as organic by the Beijing Zhonglu Huaxia Organic Food Certification Centre. We believe
the careful management of breeding, cultivation, production, packaging and storage also leads to high quality products.
We implement strict quality control with
each process in purchasing, storage, processing, packaging and distribution. We keep all items that are examined in the course
of quality control inspections for one year in accordance with National Technology Quality Supervision Bureau requirements. We
cooperate fully with the Bureau during their random testing and examination of our products.
Research and Development
We hire a number of agricultural experts
as consultants in sectors including food processing, breeding, cultivation, nutrition and disease prevention. Together with the
Shanxi Agricultural Sciences Institute, Shanxi Agricultural University and their Institute of Seeds and Planting, we have established
a joint laboratory for research breeding and cultivation. This laboratory also provides quality testing of our products and provides
suggestions for the improvement of our products.
Our R&D team and laboratory uses a
hybridization technique for breeding rather than a genetically modified approach. They have special characteristics such as strong
drought resistance and resistance to pests. None of the seeds are cultivated using pesticides or chemical fertilizers. This not
only reduces costs, but also increases the output and, most importantly, allows us to ensure that a portion of our crops are recognized
as "organic".
Research and development expenses were
$98,393 and $73,860 for the years ended December 31, 2011 and 2010, respectively.
Target Market
We focus on promoting the concept of "healthy
and green".  Target customers of our Grain Division include urban city residents who pursue healthy diets. Management
believes health-oriented food products are also important to families in tier 1 and tier 2 cities in China.  Beijing,
Shanghai and Guangzhou are considered tier 1 cities in China because they were the first to be opened up to competitive economic
development and are the most populous, affluent and competitive.  Tier 2 cities, such as Tianjin, Suzhou, Dalian, Qingdao
and Hangzhou, have a smaller population and are not as developed as tier 1 cities.
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Operating Model
We have adopted the operating model of
"Company + Farmers + Base" supplemented by advanced production, strong warehousing capacity and exclusive logistics.
We have access to over 109,000 acres (650,000 mu) of farmland in the center of Shanxi Province as our plantation base and we have
established partnerships with over 60,000 farmers for the cultivation of high quality grains and corn. Based on our supply base,
we have developed the "Deyu" operating chain of breading, cultivating, processing, warehousing and distributing our
products. Our operating model is illustrated by the chart below:
Our Growth Strategy
Our principal growth strategy is to expand
our market share in the corn and grains businesses by pursuing the following key strategies:
Increase our market share by expanding
our sales network and sales promotion
.
We plan to continue to build up our sales and marketing forces to develop
more sales outlets in supermarkets and convenience stores. We also plan to hold more promotional activities to increase sales
in each of our stores and to increase our brand awareness.
Continue to develop bulk trading
business based on our existing resources
.
We have accumulated ample resources and advantages such as extensive
network of supply and sales, strong warehousing capacity and exclusive logistics. In 2011, our newly-added bulk trading business
grew rapidly. We plan to continue to develop our bulk trading business by fully utilizing and diversifying our grain varieties,
especially certain rare grain varieties in China such as kidney beans, green beans and sunflower seeds by anticipating the demand
trend in the market.
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Extend our operating model to other
producing areas.
During the past several years, we have operated our business through a model of "Company
+ Farmers + Base" supplemented by advanced production, strong warehousing capacity and exclusive logistics. Given the strong
momentum of expanding our economies of scale and increasing demand, we need to expand our supply base of raw materials. We have
begun to consider extending our operating model to other producing areas of corn and grain. We have already established subsidiaries
in Hebei and Tianjin, and we plan to form a new subsidiary in Northern China to expand our business.
Enrich our product lines through
new product innovation or business acquisition
.
We plan to continue to update existing product lines according
to consumer diet trends. We are also considering introducing new products through establishing partnerships with other grain producers
or through business acquisitions.
Expand overseas sales network and
export product portfolio.
We plan to expand our overseas sales network primarily established by Huichun as well as to
diversify our export products portfolio. We plan to focus on bean-based products, refined packaged grains and large packaged grains.
Government Regulation
Corn Purchase and Sale Business
We are engaged in the purchase and sale
of raw corn products. The supervising authority for the purchase and sale of raw corn products is the State Administration
of Grain in China. Pursuant to Regulation 6 of the Food Distribution Management Regulations announced by the State Council of
PRC, the State Council Development and Reform Department and the National Food Administration Departments (the commissions of
the National Food Authority) are responsible for the mid and long-term planning of China's overall balance of foods, regulation,
restructuring of important food species and food distribution. The National Food Administration Department is responsible for
food distribution, guidance to the industry, oversight of the food distribution laws, regulations, policies and implementation
of rules and regulations. Pursuant to Regulation 9, food operators must obtain permits and register pursuant to relevant registration
regulations. We have obtained the necessary Food Products Purchase Permit and operate in compliance with the relevant standards
of food quality, storage, logistics and facilities.
Grain Production and Sales Business
Our production, purchases and sales of
grain food products are subject to the following rules and regulations in China:
·
"The Food Safety Law of the People's Republic of China" (the "Food Safety Law")
·
"Regulations on the Implementation of the Food Safety Law of the People's Republic of China" (the "Regulations")
·
"Law of the People's Republic of China on Quality and Safety of Agricultural Products" and the Food Distribution
Management Ordinance.
We are engaged in exporting grain food products in oversea
markets and therefore our production, purchase and sales of grain food products are also subject to the following rules or regulations
as they pertain to the food products exporting business:
·
"Administrative Provisions on the Filing of Export Food Manufacturers)"
·
"Hygiene Requirements for Export Food Manufacturers"
·
"List of Products Requiring HACCP Audit for Filing of Export Food Manufacturers"
·
"List of Products Requiring HACCP Audit for Filing of Export Food Manufacturers"
We are engaged in the sale of packaged
grain products. The supervising authority for such products is the Beijing Bureau of the Industry and Commerce. Pursuant
to Regulation 29 of the Food Safety Laws, entities engaging in food production, food distribution and food service, must obtain
a Food Production Permit, Food Distribution Permit and Food Service Permit. Those entities that have obtained the Food Production
Permit are authorized to operate a food production business and are not required to apply for a Food Distribution Permit. However,
we have also obtained the Food Distribution Permit from the Beijing Bureau of Industry and Commerce.
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We are also engaged in the production and
sale of grain foods. The supervising authority for such production is the Technology Quality Supervision Bureau of Shanxi
Province. Pursuant to Food Safety Laws and ancillary regulations, China's Head Office of the Technology Quality Supervision
Bureau supervises technology quality of enterprises which are engaged in food production. The Bureau issues Food Production Permits,
undertakes mandatory examinations of technology quality for entry into the industry and is responsible for investigation of incidents
regarding food safety. Pursuant to Regulation 29 of the Food Safety Laws, entities engaging in food production, food distribution
and food service, must obtain the Food Production Permit, Food Distribution Permit and Food Service Permit. Those who have obtained
the Food Production Permit are authorized to operate food production businesses and are not required to apply for a Food Distribution
Permit. Deyu has also obtained the nation's Industrial Production Permit from the Technology Quality Supervision Bureau
(Cereals: QS140701040051 and Flour: QS140701016210). Our food labeling complies with the Interim Measures for Labeling of Food
Products of Enterprises in Shanxi Province and GB7718-1994 Standards for Food Products Labeling and has obtained the relevant
registration certificate (Record number SB/1407000-009-01).
Intellectual Property
With the exception of our registered trademarks
"Deyu", "Shitie", "Huichun", "LongQhan Villa" and "Fushite", we do
not own any patents, trademarks, licenses or franchises on our products or processes. We produce processed foods and therefore
patents, trademarks and licenses are not necessary for our business operations.  We also own the rights to the domain
name
www.deyuagri.com
, which is currently in good standing.
Employees
We currently have approximately 690 full
time employees and various numbers of part-time employees working on a seasonal basis.
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DESCRIPTION OF OUR PROPERTIES
Our production facilities are located in
Jinzhong and Quwo of Shanxi Province with total site coverage of approximately 1,780,000 square feet (approximately 165,000 square
meters) and constructed area of 482,000 square feet (approximately 45,000 square meters). We owned a modern processing center
with five drying cylinders for corn and the six warehouses for storage of 70,000 tons and have a large rental warehouse named
the Shanxi 661 Warehouse with a storage capacity of 30,000 tons, of which the total capacity of annual turnover may reach more
than 700,000 tons. We have eight production lines for grain processing with total production capacity of over 105,000 tons. Our
facilities are equipped with advanced crop production, processing and packaging lines as well as modern equipment.
According to government regulations of
the PRC, the PRC Government owns all land.  We own the following land use rights for farmland and/or industrial lands: (1)
land use rights of farmland in Jinzhong Shanxi consisting of 17,000 acres (approximately 70,000,000 square meters) for the remaining
average of 38 years; (2) land use right of the industrial land in Quwo, Shanxi consisting of 1,076,000 square feet (approximately
100,000 square meters) for the remaining 45 years, which belongs to the Taizihu Group acquired by the Company on February 2, 2012;
(3) land use right of the industrial land in Yuci District of Jinzhong, Shanxi consisting of 504,000 square feet (approximately
47,000 square meters) for the remaining 49 years; (4) land use right of the industrial land in Shanzhuangtou, Jinzhong Deyu of
125,000 square feet (approximately 12,000 square meters), for which the term was terminated on March 14, 2011; however according
to the Certification issued by the Jinzhong Municipal Bureau of Land and Resources on March 30, 2011, the Company holds the legal
title of the land use rights during the period of the renewal process; (5) land use right of the industrial land in Shanzhuangtou,
Jinzhong Deyu of 73,000 square feet (approximately 6,800 square meters) for estimated 50 years, which we obtained on March 19,
2012.
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LEGAL PROCEEDINGS
From time to time, we may become involved
in various lawsuits and legal proceedings which arise in the ordinary course of business. However, litigation is subject to inherent
uncertainties, and an adverse result in these or other matters may arise from time to time that may harm our business. We are
currently not aware of any such legal proceedings or claims that we believe will have, individually or in the aggregate, a material
adverse effect on our business, financial condition or operating results.
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MANAGEMENT
Directors and Executive Officers
Provided below is a list of the names,
ages and positions of all our directors and executive officers as of the date of this prospectus:
Name
Age
Position
Jianming Hao
37
Chairman of the Board of Directors, President and Chief Executive Officer
Amy He
33
Acting Chief Financial Officer
Jianbin Zhou
43
Chief Operating Officer
Michael Han
41
Corporate Secretary
Al Carmona
53
Independent Director and member of Audit Committee
Longjiang Yuan
48
Independent Director and member of Audit Committee
Timothy Stevens
60
Independent Director and Chairman of Audit Committee
Hong Wang
37
Director
Provided below is a list of the names,
ages and positions of certain of our significant employees as of the date of this prospectus:
Name
Age
Position
Junde Zhang
40
Vice President for the Grain Division
Yongqing Ren
30
Vice President for the Corn Division
Yunlin Ding
39
Vice President
Family Relationships
There is no family relationship between
any of the officers, directors and significant employees of the Company.
Election of Directors and Officers
All directors hold office until the next
annual meeting of shareholders and until their successors have been duly elected and qualified. Officers are elected by and serve
at the discretion of the Board.
Our directors are reimbursed for expenses
incurred by them in connection with attending Board meetings, but they do not receive any other compensation for serving on the
Board.
Biographies of Officers and Directors
Mr. Jianming Hao, 37, Chief Executive Officer and Chairman
of the Board of Directors
Mr. Hao is our CEO and Chairman. Between
December 2001 and May 2004, Mr. Hao served as the Finance Manager of China Merchants Dichain (Asia) Ltd., a Hong Kong listed
company. Between May 2004 and November 2007, Mr. Hao served as a director and Vice President of Shenzhen Litong Investments
Ltd.  Since November 2007, he has been a director of Jinzhong Deyu Agriculture Trading Co. Limited, which is now a subsidiary
of Deyu Agriculture Corp.  Mr. Hao received a Master's degree in Finance from Nankai University. He is also
a certified public accountant in China.
Ms. Amy He, 33, Acting Chief Financial Officer
Effective February 3, 2012, the Company
appointed Ms. Amy He to serve as the Company's Acting Chief Financial Officer.  Ms. He, who is resident in the
Company's headquarters in Beijing, has served as the Company's Financial Controller since October 2011. Prior to that,
Ms. He served as an audit manager for Deloitte Touche Tohmatsu CPA Ltd. in China from July 2005 through September, 2011, where
she served multinational corporations and Chinese corporate clients, including private companies and public listed companies in
the United States. Ms. He earned a Master's Degree in Management from the Chinese Academy of Sciences and a Bachelor's
Degree in Accounting from Tsinghua University in China.
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Mr. Jianbin Zhou, 43, Chief Operating Officer
Mr. Zhou is our Chief Operating Officer.
Between January 2005 and December 2006, Mr. Zhou served as the General Manager of Beijing Kangqiaoshidai Education Development
Co., Ltd. Between January 2007 and October 2008, he was the General Manager of Antai Global (Beijing) Risk Management Co., Ltd.
Mr. Zhou also served as the Vice President of Dongsheng International (Beijing) Investment Co., Ltd. between October 2008
and August 2009. Mr. Zhou has been a director of Detian Yu since August 2009.  Mr. Zhou is the holder of an
undergraduate degree.
Mr. Michael Han, 41, Corporate Secretary
Effective January 10, 2011, the Company
appointed Mr. Michael Han to serve as the Company's Corporate Secretary. From April 2009 through January 2011, Mr. Han
served as Vice President for Beijing Jinhuanya Management Consulting Co., Ltd., a PRC company. From April 2006 through March 2009,
Mr. Han previously served as Vice President and Manager of the Administration Department of General Circuits (Beijing) Ltd.,
a PRC company, where he was in charge of Administration, Finance, Marketing and International Sales and Business Development.
From April 2001 through March 2006, Mr. Han served as Senior Key Account Manager of Shougang NEC Electronics Co., Ltd., a
PRC electronics company. Mr. Han earned his Bachelors of Science degree in Metal Forming & Metal Materials from the College
of Beijing Iron & Steel Technology and his Master's in Business Administration degree from Tsinghua University. There
is no family relationship between Mr. Han and any of the other officers and directors of the Company.
Mr. Al Carmona, 53, Independent Director and Member
of Audit Committee
Mr. Carmona is an independent director
of the Company.  During the last 25 years, Mr. Carmona has been with Mars & Co, a high end international strategy
consulting firm, during which he served as Executive Vice President and Senior Advisor and has coordinated their Global Business
Development Council. With the assistance of Mr. Carmona, Mars & Co. grew to over 250 professionals worldwide. Mr. Carmona
has deep experience in a wide variety of areas including cost and supply chain optimization, brand strategy, pricing and demand
building optimization, competitive analysis, portfolio optimization, business unit turnarounds, as well as acquisition and divestiture
analysis.  Mr. Carmona has a Bachelor of Science degree in Chemical Engineering from Princeton University and a
MBA degree from the Wharton Business School, University of Pennsylvania.
Mr. Longjiangg Yuan, 48, Independent Director and Member
of Audit Committee
Mr. Yuan is an independent director
of the Company. He is an acknowledged expert in agricultural technology and has been serving as the vice director of the Science
and Technology Bureau of the Chinese Academy of Agricultural Sciences, the largest and highest agriculture institute in China
("CAAS"). Prior to joining the Company, Mr. Yuan spent 17 years in the Institute of Crop Science of the CAAS,
where he was also the senior director of the R&D team for paddy rice genetic breeding technologies as well as a scientist
in the science commission. He is the director of the Crop Science Society of China and an expert for the National Crop Variety
Approval Committee. From 2002 to 2004, Mr. Yuan was an independent director of the board of Shanxi Tunyu Seed Industry Co.,
Ltd.  Over the years, Mr. Yuan has participated in and led 13 national R&D programs and has developed 17 new
crop breeds. He has published more than 20 academic thesis and 5 books on agricultural sciences. Mr. Yuan was also granted
2 scientific and technological progress awards by the Ministry of Agriculture of China.  Mr. Longjiangg Yuan holds
a master's degree in Plant Genetic Breeding from the Graduate School of the Chinese Academy of Agricultural Sciences and
a bachelor's degree in Agriculture from Wan Nan Agriculture University.
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Mr. Timothy C. Stevens, 60, Independent Director and
Chairman of Audit Committee
Mr. Stevens is an independent director
of the Company. Mr. Stevens has over 30 years of executive leadership, management, and client service experience with the
world's leading law, public accounting, and management consulting firms. Since January 2011, Mr. Stevens has served as Chief
Operating Officer of an international law firm in Hong Kong. Prior to that since 2004, Mr. Stevens served as the Executive
Director of Saul Ewing LLP, a Philadelphia law firm where he oversaw all aspects of its day to day business operations with a
focus on improving the bottom line and supporting the Firm's growth strategy and other key objectives. From 1999 to 2003,
he served as the Chief Operating Officer and a member of the Management Committee in the Hong Kong and China offices of the international
law firm Baker & McKenzie where he was responsible for all operations (other than client service) for Baker & McKenzie's
large Hong Kong and China practice. From 1995 to 1998, Mr. Stevens served in the Chairman's office as the Finance and
Administrative Partner of PricewaterhouseCoopers China, the world's largest auditing firm, where he supervised the business
plans, office openings and expansions as well as the financial management of the firm.  Mr. Stevens graduated from
Clifton College and Bristol University in the United Kingdom. He received the ACA qualification from the UK Chartered Accountants'
Qualification Program in 1974. Mr. Stevens is a licensed CPA in Massachusetts as well as being a Hong Kong FCPA.
Mr. Hong Wang, 37, Director
Mr. Wang was appointed to serve as a director
of the Company effective April 30, 2012. Mr. Wang has served as Vice President of Detian Yu since October 2009. Prior to that,
Mr. Wang served as General Manager of Shanxi Dongsheng Guarantee Company Limited from February 2009 through October 2009. Prior
to that, Mr. Wang worked for the Labaor Bureau of Jinzhong in Shanxi Province from July 1996 through January 2009. Mr. Wang received
his bachelor's degree from the Chinese Agriculture University in 1996.
Mr. Junde Zhang, 40, Vice President of the Grain Division
Mr. Zhang is our Vice President responsible
for the operation of the Grain Division. Since April 2004, he has been the Production Director and the General Manager of our
Cereal Crops Division. Mr. Zhang is a successful entrepreneur and was appointed as a member of the Yuci People's Congress.
He was awarded the honorable title of Industrial Restructuring Leader by the Yuci Municipal Government. Mr. Zhang is the
holder of an undergraduate degree and has over 10 years of experience in grain breeding, cultivation, processing, marketing and
management.
Mr. Yongqing Ren, 30, Vice President of the Corn Division
Mr. Ren has been the Vice President
and General Manager of our Corn Division since April 2004. He was conferred the honorable title of Industrial Restructuring Leader
for two consecutive years and the prize of Top Ten Youth Career Development Contributor by the Yuci Municipal Government. Mr. Ren
is the holder of an undergraduate degree. He is well experienced in corn breeding, cultivation, processing, marketing and management.
Mr. Yunlin Ding, 39, Vice President
Effective February, 3, 2012, the Company
appointed Mr. Yunlin Ding to serve as Vice President of Company. Immediately prior to Mr. Ding's appointment as the Company's
Vice President, he served as Vice President of Detian Yu since July 2009. Mr. Ding also served as vice general manager of the
investment department of Beida Qingniao Group, a company organized under the laws of China and the holding company for three companies
listed in China and two companies listed in Hong Kong, from February 2002 to July 2009. Mr. Ding earned a Bachelor's Degree
and a Master's Degree in Economics from Nankai University in 1996 and 1999, respectively.
Director Qualifications and Experience
The Board considers various characteristics,
such as experience, qualifications, attributes and skills, in making its decision to appoint and nominate directors to the Board.
Mr. Hao has the experience, qualifications,
attributes and skills to qualify him to serve as a director.  His experience running the Company and its subsidiaries
has contributed to his knowledge of the business and his understanding of the grain and corn products industry.  Because
of this experience, we expect that he will act in the best interest of the Company.
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Mr. Carmona has the experience, qualifications,
attributes and skills to qualify him to serve as a director.  His past work experience working with companies to optimize
their operations and maximize profits gives us the confidence that he will be an asset to our Board of Directors.  Because
of this experience, we expect that he will act in the best interest of the Company.
Mr. Yuan has the experience, qualifications,
attributes and skills to qualify him to serve as a director.  His past work experience and research experience in the
genetic breeding field will be an asset to us as we strive to maximize our grain and corn production and manufacturing. Because
of this experience, we expect that he will act in the best interest of the Company.
Mr. Stevens has the experience, qualifications,
attributes and skills to qualify him to serve as a director.  His past work experience overseeing the world's
leading law, public accounting and management consulting firms will be an asset to us and he will be in a strong position to oversee
our operations and corporate governance.  Mr. Stevens has financial management expertise, he is a certified public accountant
(Massachusetts) and he is a chartered accountant (England and Wales). Because of this experience, we expect that he will act in
the best interest of the Company.
Mr. Wang has the experience, qualifications,
attributes and skills to qualify him to serve as a director.  His experience running the Company and its subsidiaries
has contributed to his knowledge of the business and his understanding of the grain and corn products industry.  Because
of this experience, we expect that he will act in the best interest of the Company.
Legal Proceedings
Unless otherwise indicated, to the knowledge
of the Company after reasonable inquiry, no current director or executive officer of the Company during the past ten years, has
(i) been convicted in a criminal proceeding (excluding traffic violations or other minor offenses), (ii) been a party
to any judicial or administrative proceeding (except for any matters that were dismissed without sanction or settlement) that
resulted in a judgment, decree or final order enjoining the person from future violations of, or prohibiting activities subject
to, U.S. federal or state securities laws, or a finding of any violation of U.S. federal or state securities laws, (iii) filed
a petition under federal bankruptcy laws or any state insolvency laws or has had a receiver appointed for the person's property
or (iv) been subject to any judgment, decree or final order enjoining, suspending or otherwise limiting for more than 60 days,
the person from engaging in any type of business practice , acting as a futures commission merchant, introducing broker, commodity
trading advisor, commodity pool operator, floor broker, leverage transaction merchant, any other person regulated by the Commodity
Futures Trading Commission, or an associated person of any of the foregoing, or as an investment adviser, underwriter, broker
or dealer in securities, or as an affiliated person, director or employee of any investment company, bank, savings and loan association
or insurance company, or engaging in or continuing any conduct or practice in connection with such activity or engaging in any
activity in connection with the purchase or sale of any security or commodity or in connection with any violation of Federal or
State securities laws or Federal commodities laws, (v) been found by a court of competent jurisdiction in a civil action
or by the Commission to have violated any Federal or State securities law, and the judgment in such civil action or finding by
the Commission has not been subsequently reversed, suspended, or vacated, (vi) been found by a court of competent jurisdiction
in a civil action or by the Commodity Futures Trading Commission to have violated any Federal commodities law, and the judgment
in such civil action or finding by the Commodity Futures Trading Commission has not been subsequently reversed, suspended or vacated,
(vii) been the subject of, or a party to, any Federal or State judicial or administrative order, judgment, decree, or finding,
not subsequently reversed, suspended or vacated, relating to an alleged violation of: (a) any Federal or State securities
or commodities law or regulation, (b) any law or regulation respecting financial institutions or insurance companies including,
but not limited to, a temporary or permanent injunction, order of disgorgement or restitution, civil money penalty or temporary
or permanent cease-and-desist order, or removal or prohibition order, or (c) any law or regulation prohibiting mail or wire
fraud or fraud in connection with any business entity, or (viii) been the subject of, or a party to, any sanction or order,
not subsequently reversed, suspended or vacated, of any self-regulatory organization (as defined in Section 3(a)(26) of the
Exchange Act (15 U.S.C. 78c(a)(26))), any registered entity (as defined in Section 1(a)(29) of the Commodity Exchange Act
(7 U.S.C. 1(a)(29))), or any equivalent exchange, association, entity or organization that has disciplinary authority over its
members or persons associated with a member.
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There are no material pending legal proceedings
to which any of the individuals listed above is party adverse to us or any of our subsidiaries or has a material interest adverse
to us or any of our subsidiaries.
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CORPORATE GOVERNANCE
Director Independence and Board Committees
Director Independence
Our stock is currently quoted on the OTC
Markets-OTC Pink. The OTC Markets-OTC Pink does not have rules regarding director independence. Accordingly, although our audit
committee charter states that each member shall meet the independence requirements set out by the applicable listing standards
of the securities exchange, securities association, SRO, or stock market on which the Company's securities are quoted or
listed for trading, we determined that the NASDAQ Marketplace independence requirements were an appropriate standard to determine
independence because these requirements are stricter than the current OTC Markets-OTC Pink requirements. Additionally, we adopted
these stricter standards to strengthen our corporate governance and improve internal controls.
Subject to certain exceptions, under the
listing standards of the NASDAQ Marketplace, a listed company's board of directors must consist of a majority of independent
directors. Currently, our board of directors has determined that each of the non-management directors, Al Carmona, Longjiang Yuan
and Timothy Stevens, are "independent" directors as defined by the listing standards of NASDAQ currently in effect
and approved by the U.S. Securities and Exchange Commission and all applicable rules and regulations. All members of the Audit
Committee satisfy the "independence" standards applicable to members of such committee. The board of directors made
this affirmative determination regarding these directors' independence based on discussions with the directors and on its
review of the directors' responses to a standard questionnaire regarding employment and compensation history; affiliations,
family and other relationships; and transactions with the Company. The board of directors considered relationships and transactions
between each director or any member of his immediate family and the Company and its subsidiaries and affiliates. The purpose of
the board of director's review with respect to each director was to determine whether any such relationships or transactions
were inconsistent with a determination that the director is independent under the NASDAQ rules.
Audit Committee
On August 19, 2010, we established our
Audit Committee. The Audit Committee consists of Timothy Stevens, Al Carmona and Longjiang Yuan, each of whom is an independent
director. Timothy Stevens, Chairman of the Audit Committee, is an "audit committee financial expert" as defined under
Item 407(d) of Regulation S-K. The purpose of the Audit Committee is to represent and assist our board of directors in its general
oversight of our accounting and financial reporting processes, audits of the financial statements and internal control and audit
functions. The Audit Committee's responsibilities include:
·
The appointment,
                                                                                                              replacement, compensation,
                                                                                                              and oversight of
                                                                                                              work of the independent
                                                                                                              auditor, including
                                                                                                              resolution of disagreements
                                                                                                              between management
                                                                                                              and the independent
                                                                                                              auditor regarding
                                                                                                              financial reporting,
                                                                                                              for the purpose
                                                                                                              of preparing or
                                                                                                              issuing an audit
                                                                                                              report or performing
                                                                                                              other audit, review
                                                                                                              or attest services;
                                                                                                              and
·
Reviewing and
                                                                                                              discussing with
                                                                                                              management and the
                                                                                                              independent auditor
                                                                                                              various topics and
                                                                                                              events that may
                                                                                                              have significant
                                                                                                              financial impact
                                                                                                              on our company or
                                                                                                              that are the subject
                                                                                                              of discussions between
                                                                                                              management and the
                                                                                                              independent auditors.
The board of directors has adopted a written
charter for the Audit Committee.  During the fiscal year ended December 31, 2011, the Audit Committee met six times.
Procedures for Determining Executive Compensation
On August 19, 2010, our Board of Directors
approved the adoption of the independent director oversight of executive officer compensation.  Pursuant to NASDAQ Rule
5605(d), all matters regarding executive officer compensation shall be submitted for approval or recommendation by a majority
of the independent directors.
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Procedures for Selection of Director Nominees
On August 19, 2010, the Board of Directors
of the Company approved the adoption of the procedures for the selection of director nominees.  Pursuant to NASDAQ Rule
5605(e)(1), a majority of the independent directors shall recommend and select the director nominees.
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Exchange Act requires
our officers and directors, and persons who own more than 10% of a registered class of our equity securities, to file reports
of ownership and changes in ownership with the SEC.  Officers, directors and greater than ten percent shareholders are
required by SEC regulation to furnish us with copies of all Section 16(a) forms they file.
To the Company's knowledge, based
solely on a review of the copies of such reports furnished to the Company, all reports under Section 16(a) required to be filed
by its officers and directors and greater than 10% beneficial owners were filed as of the date of this filing, except that Charlie
Lin failed to file a Form 3 in connection with his appointment as Chief Financial Officer of the Company on January 10, 2011.
Code of Ethics
On August 19, 2010, our Board of Directors
adopted a Code of Conduct applicable to all directors, officers and employees. Pursuant to NASDAQ Rule 5610, the Code of Conduct
complies with the definition of a "code of ethics" set out in Section 406(c) of the Sarbanes-Oxley Act of 2002.
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EXECUTIVE COMPENSATION
The following table sets forth all cash
compensation paid by us, as well as certain other compensation paid or accrued, in 2010 and 2011, to each of the following named
executive officers:
Stock and Option
All Other
Fiscal
Salary
Bonus
Awards
Compensation
Total
Name and Principal Position
Year
($)
($)
number
($)
($)
Jianming Hao
2010
26,435
-
150,000
63,444
89,879
(President and Chief Executive Officer) (5)
2011
16,695
-
-
64,985
81,680
Wenjun Tian (4)
2010
26,435
-
150,000
63,444
89,879
(Former President)
2011
19,171
-
-
64,985
84,156
Amy He (2)
2010
-
-
-
-
-
(Acting Chief Financial Officer)
2011
3,864
-
-
14,854
18,718
David Lethem
2010
64,334
-
25,000
-
64,334
(Former Chief Financial Officer)
2011
-
-
-
-
-
Charlie Lin (2)
2010
-
-
-
-
-
(Former Chief Financial Officer)
2011
125,333
-
-
23,333
148,667
Jianbin Zhou
2010
43,807
-
40,000
15,106
58,913
(Chief Operating Officer)
2011
56,305
77,363
-
-
133,669
Michael Han
2010
13,595
-
-
-
13,595
Corporate Secretary
2011
37,541
-
-
-
37,541
Junde Zhang (1)
2010
5,287
-
40,000
37,009
42,296
(Vice President of the Grain Division)
2011
-
108,309
-
54,154
162,463
Yongqing Ren (1)
2010
5,287
-
40,000
37,009
42,296
(Vice President of the Corn Division)
2011
-
123,782
-
54,154
177,936
Yunling Ding (1)(3)
2010
26,304
-
15,000
-
-
(Vice President)
2011
37,738
-
-
-
37,738
Li Ren (1)(3)
2010
30,967
-
30,000
15,106
46,073
(Vice President of Branding and Marketing)
2011
56,305
-
-
-
56,305
Weizhong Cai(3)
2010
1,133
-
-
-
1,133
(Chief Scientist)
2011
-
-
-
-
-
(1) Based on the compensation received by Mr. Junde Zhang,
Mr. Yongqing Ren and Mr. Li Ren, they are qualified as executive officers for purposes of this table.
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(2) Effective February 3, 2012, Ms. Amy He was promoted to
Acting Chief Financial Officer of the Company. Ms. He replaced Mr. Charlie Lin, whose employment and employment agreement with
the Company officially terminated on March 5, 2012 in accordance with the notification procedures set forth in his employment
agreement.
(3) Effective February 3, 2012, Mr. Li Ren resigned as the
Company's Vice President - Brand and Marketing and Mr. Weizhong Cai resigned as the Company's Chief Scientist, and
Mr. Yunlin Ding was appointed the Vice President of Company.
(4) Effective April 30, 2012, Mr. Tian resigned as the Company's
President and as a member of the Board of Directors.
(5) Effective April 30, 2012, Mr. Hao was appointed to serve
as President of the Company.
Outstanding Equity Awards at the End of the Fiscal Year
The following table summarizes the number
of securities underlying outstanding plan awards for each named executive officer as of December 31, 2011:
Option Awards
Stock Awards
Number of
Securities
Underlying
Unexercised
Options (#)
Number of
Securities
Underlying
Unexercised
Options (#)
Equity Incentive
Plan
Awards:Number of
Securities
Underlying
Unearned Options
(#)
Option
Exercise
Price ($)
Option
Expiration
Date
Number of
Shares or
Units of Stock
That Have Not
Vested (#)
Market
Value of
Shares or
Units of
Stock That
Have Not
Vested ($)
Equity
Incentive Plan
Awards:
Number of
Unearned
Shares, Units or
Other Rights
That Have Not
Vested (#)
Equity
Incentive Plan
Awards: Market
or Payout Value
of Unearned
Shares, Units or
Other
Rights That
Have Not
Vested ($)
Name
Exercisable
Unexercisable
—
—
—
—
—
—
—
Jianming Hao
100,000
50,000
-
4.4
5-Nov-20
-
—
-
-
Wenjun Tian (1)
100,000
50,000
-
4.4
5-Nov-20
-
-
-
-
Amy He
-
-
-
-
-
-
-
-
-
Charlie Lin
-
-
-
-
-
-
-
-
-
Jianbin Zhou
26,666
13,334
-
4.4
5-Nov-20
-
-
-
-
Michael Han
-
-
-
-
5-Nov-20
-
-
-
-
Junde Zhang
26,666
13,334
-
4.4
5-Nov-20
-
-
-
-
Yongqing Ren
26,666
13,334
-
4.4
5-Nov-20
-
-
-
-
Yunling Ding
10,000
5,000
-
4.4
5-Nov-20
-
-
-
-
Li Ren (2)
20,000
10,000
-
4.4
5-Nov-20
-
-
-
-
Weizhong Cai
-
-
-
-
-
-
-
-
-
(1) Effective April 30, 2012, Mr. Tian resigned as the Company's
President and as a member of the Board of Directors.
(2) As a result of the termination of employment (the "Termination")
of Mr. Li Ren as the Vice President effective February, 3, 2012, and pursuant to the terms of the Plan, the unexercised options
will expire and be forfeited three months after the Termination.
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-
Option Exercises and Stock Vested
None.
Director Compensation
Our directors are reimbursed for expenses
incurred by them in connection with attending Board of Directors' meetings.  The following table presents compensation
distributed to our independent directors during the years ended December 31, 2011 and December 31, 2010 for serving on the Board
of Directors:
Fees Earned
or Paid in
Cash
Option
Awards (1)
All Other
Total
($)
($)
Compensation ($)
($)
2011
Timothy Stevens
$
43,810
$
-
$
-
$
43,810
Al Carmona
31,000
-
-
31,000
Longjiang Yuan
7,736
-
-
7,736
$
82,546
$
-
$
-
$
82,546
2010
Timothy Stevens
$
12,375
$
35,997
$
-
$
48,372
Al Carmona
6,000
26,998
-
32,998
Longjiang Yuan
-
8,999
-
8,999
$
18,375
$
71,994
$
-
$
90,369
(1) The numbers for 2010 represents the aggregated fair value
to option awards granted to the directors as at the grant date of the options granted in November 18, 2010, which is determined
in accordance with ASC Topic 718.  For information regarding the fair value of option awards as at the grant date of the
options, please refer to Note 15 of the Consolidated Financial Statements – Share-Based Compensation.
Bonuses and Deferred Compensation
We do not have any bonus, deferred compensation
or retirement plan.
All decisions regarding compensation are determined by our Board of Directors.
Options and Stock Appreciation Rights
On November 4, 2010, the Company's
Board of Directors approved the Company's 2010 Share Incentive Plan.  Under the Plan, 1,000,000 shares of the
Company's common stock shall be allocated to and authorized for use pursuant to the terms of the Plan.  On November
8, 2010, a total of 931,000 non-qualified incentive stock options were approved by our Board of Directors and granted under the
Plan to executives, key employees, independent directors, and consultants at an exercise price of $4.40 per share and on December
15, 2010, 40,000 non-qualified incentive stock shares were approved by our Board of Directors and granted under the Plan to a
consultant at an exercise price of $4.40 per share, of which shall vest as follows:
33 1/3% of the option grants vested one (1) month
after the date of grant;
33 1/3% of the option grants vested twelve (12) months
after the date of grant; and
33 1/3% of the option grants will vest twenty-four
(24) months after the date of grant.
On March 8, 2012, the Company's Board
of Directors allocated to and authorized for use the maximum number of shares allowable pursuant to the terms of the Plan and
granted 420,000 options under the Plan, of which 264,000 were new options and 156,000 were re-granted after such options were
forfeited by employees as a result of their resignations from the Company in accordance with the terms of their option agreements.
All of the newly granted options vest as follows:
50% of the options granted will vest six
(6) months after the date of the grant; and
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-
50% of the options granted will vest twelve
(12) months after the date of the grant.
On November 5, 2010, we filed a Registration
Statement with the SEC on Form S-8 covering up to 1,000,000 shares underlying options which may be granted under the Plan. As
of March 19, 2012, none of the options granted pursuant to the Plan have been exercised.
Employment Agreement
On January 10, 2011, we entered into an
employment agreement with Charlie Lin pursuant to which Mr. Lin was hired as our Chief Financial Officer. Effective March 5, 2012,
Mr. Lin's employment and his employment agreement were terminated.
Payment of Post-Termination Compensation
We do not have change-in-control agreements
with any of our directors or executive officers, and we are not obligated to pay severance or other enhanced benefits to executive
officers upon termination of their employment.
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CERTAIN RELATIONSHIPS AND RELATED PARTY
TRANSACTIONS
Sales Transactions
The Company (a) sold grain products in
the aggregate amount of $3.3 million to Beijing Yilian Gifts Tech Development Co., Ltd. ("BYGT"), the Executive Director
of which is Jianming Hao, the Company's Chief Executive Officer and (b) sold corn in the aggregate amount of $1.1 million to Tieling
Zhongnong Agriculture Technology Development Co., Ltd. ("TZAT"), the legal representative of which is Yongqin Ren, the
Company's Vice President of the Corn Division, during the fiscal year ended December 31, 2011.  The Company also purchased
a batch of sunflower seed for $2.6 million from TZAT in June 2011 and returned the goods at original cost for quality rejection. The
prices in the transactions with such related parties were determined according to market price at the time of purchase and sale.
Due from Related Parties
The Company sold grain products to BYGT
for $3.3 million in the year 2011 and the amounts due from/ to BYGT as of December 31, 2011 and March 28, 2012 were $468,976 and
$285,210 under this transaction, respectively.
The Company paid social insurance and office
rental for Deyufarm Innovation Food (Beijing) Co., Ltd. ("Deyufarm"), a former variable interest entity of the Company,
for $89,929 in December 2011. The amounts due from Deyufarm as of December 31, 2011 and March 28, 2012 under this transaction
were $89,929 and $0, respectively.
The Company sold grain products to Beijing
Doukounianhua Biotechnology Co., Ltd., the legal representative of which is Jianbin Zhou, the Company's Chief Operating Officer,
for total $24,666 in December 2011.  As of December 31, 2011 $24,666 was due under this transaction and remained outstanding
as of March 28, 2012.
The Company sold grain products to Jinshang
International Finance Leasing Co., Ltd., a shareholder and the Executive Director of which is Wenjun Tian, the Company's
former President and a Director, for $3,537 in September 2011.  As of December 31, 2011, $3,537 was due under this transaction
and remained outstanding as of March 28, 2012. Effective April 30, 2012, Mr. Tian resigned as the Company's President and
as a member of the Board of Directors.
Due to Related Parties
Dongsheng International Investment Co.,
Ltd., the President and Executive Director of which is Wenjun Tian, the Company's President and a Director, loaned the Company
in the aggregate amount of $2.9 million in the year ended December 31, 2011.  Such loan is unsecured, bears no interest and
no due date is specified.  As of December 31, 2011 and March 28, 2012, $2.9 million and $2.5 million were due under this
loan, respectively.
Wenjun Tian, the Company's former President
and a Director, loaned the Company in the aggregate amount of $2.5 million in the year ended December 31, 2011.  Such loan
is unsecured, bears no interest and no due date is specified.  As of December 31, 2011, $2.5 million was due under this advance
and remained outstanding as of March 28, 2012.
Deyufarm paid the miscellaneous expenses
for the Company for $3,338 in the year of 2011.  As of December 31, 2011 and March 28, 2012, $3,338 and $0 was due under
this transaction, respectively.
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Guarantee Transactions
On May 10, 2011, Wenjun Tian, Jianming
Hao and an unrelated third party provided a one year guarantee on a $7.9 million short-term bank loan payable to Bank of Communications
by Detian Yu, bearing interest at a floating rate of prime rate plus 30% of prime rate, of which prime rate was based on the one-year
loan interest rate released by The People's Bank of China.  The actual interest rate as of December 31, 2011 was 8.5280%. 
The maturity date is May 9, 2012. Detian Yu paid $0 towards principal and $408,296 towards interest on the loan during the
fiscal year ended December 31, 2011. $7.9 million was outstanding under the loan as of December 31, 2011 and March 28, 2012.
On August 9, 2011, Yuci Jinmao Food Processing
Factory, the legal representative of which is Junlian Zheng, the wife of Junde Zhang, the Vice President of the Company, provided
a two-year guarantee on a $1.4 million short-term bank loan payable to Jinzhong City Yuci District Rural Credit Union Co., Ltd.
by Jinzhong Yongcheng, bearing interest at a floating rate of prime rate plus 130% of prime rate, of which prime rate was based
on the six-month to one-year loan interest rate released by The People's Bank of China.  The actual interest rate as of December
31, 2011 was 15.084%.  The maturity date is August 7, 2012.  Jinzhong Yongcheng paid $0 towards principal and $73,291
towards interest on the loan during the fiscal year ended December 31, 2011. $1.4 million was outstanding under the loan as of
December 31, 2011 and March 28, 2012,
On August 9, 2011, Yuci Jinmao Food Processing
Factory, the legal representative of which is Junlian Zheng, the wife of Junde Zhang, the Vice President of the Company, provided
a two-year guarantee on a $1.4 million short-term bank loan payable to Jinzhong City Yuci District Rural Credit Union Co., Ltd.
by Jinzhong Yuliang, bearing interest at a floating rate of prime rate plus 130% of prime rate, of which prime rate was based
on the six-month to one-year loan interest rate released by The People's Bank of China.  The actual interest rate as of December
31, 2011 was 15.084%.  The maturity date is August 7, 2012.  Jinzhong Yuliang paid $0 towards principal and $73,291
towards interest on the loan during the fiscal year ended December 31, 2011. $1.4 million was outstanding under the loan as of
December 31, 2011 and March 28, 2012.
On January 13, 2010, Jinzhong Deyu provided
a two year guarantee on a $1.3 million short-term bank loan payable to Jinzhong Economic Development District Rural Credit Union
by Jingzhong Yuliang, bearing interest at a floating rate of prime rate plus 129.83% of prime rate, of which prime rate was based
on the six-month to one-year loan interest rate released by The People's Bank of China.  The loan was originally due March
8, 2011.  In January 2011, the Company entered into an agreement with the bank for an extension and the new term was from
February 1, 2011 to October 1, 2011.  The adjustable interest rate was a rate per annum equal to the prime rate plus 117.23%
of prime rate.  The prime rate was based on the one to three year loan interest rate released by The People's Bank of China. 
The loan was fully paid off on May 11, 2011, with Jingzhong Yuliang paying the principal amount of $1.3 million plus $8,865 in
accrued interest.
On January 13, 2010, Jinzhong Deyu and
Jinzhuong Yuliang provided a two-year guarantee on a $1.3 million short-term bank loan payable to Shanxi Province Rural Credit
Union by Jingzhong Yongcheng, bearing interest at a floating rate of prime rate plus 107% of prime rate, of which prime rate was
based on the six-month to one-year loan interest rate released by The People's Bank of China.  The loan was originally due
January 13, 2011.  In January 2011, the Company entered into an agreement with the bank for an extension and the new term
was from January 14, 2011 to June 11, 2011.  The adjustable interest rate was a rate per annum equal to the prime rate plus
107% of prime rate.  The prime rate was based on the one to three year loan interest rate released by The People's Bank of
China.  The loan was fully paid off on May 11, 2011, with Jingzhong Yongcheng paying the principal amount of $1.3 million
plus $6,750 in accrued interest.
Promoters and Certain Control Persons
None.
Conflicts of Interest
We have certain potential conflicts of
interest that are inherent in the relationships between our officers and directors.
From time to time, one or more of our affiliates
may form or hold an ownership interest in and/or manage other businesses both related and unrelated to the type of business that
we own and operate. These persons expect to continue to form, hold an ownership interest in and/or manage additional other businesses
which may compete with ours with respect to operations, including financing and marketing, management time and services and potential
customers. These activities may give rise to conflicts between or among the interests of us and other businesses with which our
affiliates are associated. Our affiliates are in no way prohibited from undertaking such activities, and neither we nor our shareholders
will have any right to require participation in such other activities.
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Further, because we intend to transact
business with some of our officers, directors and affiliates, as well as with firms in which some of our officers, directors or
affiliates have a material interest, potential conflicts may arise between the respective interests of us and these related persons
or entities. We believe that such transactions will be effected on terms at least as favorable to us as those available from unrelated
third parties.
With respect to transactions involving
real or apparent conflicts of interest, we have adopted policies and procedures which require that: (a) the fact of the relationship
or interest giving rise to the potential conflict be disclosed or known to the directors who authorize or approve the transaction
prior to such authorization or approval, (b) the transaction be approved by a majority of our disinterested outside directors
and (c) the transaction be fair and reasonable to us at the time it is authorized or approved by our directors.
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PRINCIPAL SHAREHOLDERS
The following table sets forth certain
information regarding beneficial ownership of our common stock as of, April 27, 2012: (i) by each of our directors, (ii) by each
of the named executive officers, (iii) by all of our executive officers and directors as a group, and (iv) by each person or entity
known by us to beneficially own more than 5% of any class of our outstanding shares. As of April 27, 2012, there were 10,566,766
shares of our common stock outstanding:
Amount and
Fully Diluted
Nature of
Beneficial
Percentage of
Outstanding
Title of Class
Name and Address of
Beneficial Owner (1)(2)
Ownership
(number of shares)
Shares of Common
Stock (3)
Certain Beneficial Owners - Over 5% Ownership
Common Stock
Expert Venture Limited (4)(5)
5,534,513
38.81
%
Common Stock
Sure Glory Holdings Limited (6)
748,636
5.25
%
Common Stock
Charming Action Management Limited (7)
616,364
4.32
%
Directors and Executive Officers
    and Significant Employees
Common Stock
Jianming Hao (10)
658,986
4.62
%
Common Stock
Wenjun Tian (11)
1,760,354
12.34
%
Common Stock
Charlie Lin (21)
0
0
%
Common Stock
Amy He (20)
0
0
%
Common Stock
Jianbin Zhou (12)
26,666
*
Common Stock
Michael Han
0
0
%
Common Stock
Yongqing Ren (13)
1,133,570
7.95
%
Common Stock
Junde Zhang (14)
1,133,570
7.95
%
Common Stock
Yunlin Ding (15)
10,000
*
Common Stock
Li, Ren (16)
20,000
*
Common Stock
Al Carmona (17)
83,733
*
Common Stock
Longjiang Yuan (18)
3,333
*
Common Stock
Timothy Stevens (19)
13,333
*
Common Stock
Hong Wang (8)(9)
664,142
4.66
%
Officers and Significant Employees and Directors as a Group
5,507,687
38.62
%
* Less than 1%.
(1)
Pursuant to Rule 13d-3 under the Exchange Act, a person has beneficial ownership of any securities as to which such person,
directly or indirectly, through any contract, arrangement, undertaking, relationship or otherwise has or shares voting power and/or
investment power or as to which such person has the right to acquire such voting and/or investment power within 60 days.
(2)
Unless otherwise stated, each beneficial owner has sole power to vote and dispose of the shares.
(3)
Applicable percentage of ownership is based on
10,566,766
shares of common stock
outstanding as of April 27, 2012, together with 1,995,475 shares of common stock issuable upon the conversion of convertible preferred
stock, 1,154,272 shares of common stock issuance upon the exercise of warrants, and 543,333 shares of common stock issuance upon
the exercise of exercisable stock options within sixty (60) days as of the date hereof for beneficial owner.
(4)
The registered address of Expert Venture Limited is P.O. Box 957, Offshore Incorporation Centre, Road Town, Tortola, British
Virgin Islands.
(5)
Mr. Yam Sheung Kwok is the sole and controlling person of Expert Venture Limited, owning all 1,000 shares of Expert Venture
Limited (subject to the share transfer agreements discussed below).
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(6)
The registered address of Sure Glory Holdings Limited is P.O. Box 957, Offshore incorporation Centre, Road Town, Tortola, British
Virgin Islands.  Mr. Dai Ai Wei is the sole and controlling person of Sure Glory Holdings Limited, owning the sole
share of Sure Glory Holdings Limited.
(7)
The registered address of Charming Action Management Limited is Portcullis TrustNet Chambers, P.O. Box 3444, Road Town, Tortola,
British Virgin Islands.  Miss Jin Juan Dai is the sole and controlling person of Charming Action Management Limited,
owning the sole share of Charming Action Management Limited.
(8)
Effective April 30, 2012, Mr. Wang was appointed to serve as a Director of the Company. The registered address of Hong Wang
is 7/F, B Tower, Jinshangguoji Building, Jinzhong, China.
(9)
Pursuant to a share transfer agreement, Mr. Hong Wang has the option, subject to certain performance targets (discussed
in more detail below), to purchase from Mr. Yam Sheung Kwok, the current sole shareholder of Expert Venture Limited, up to
120 shares of Expert Venture Limited. Accordingly, upon exercise of such option, Mr. Wang will indirectly (through his ownership
of Expert Venture Limited) own and control 664,142 shares, which equal 4.66% of the fully-diluted percentage of outstanding shares.
Since the performance targets set forth in the share transfer agreement have been met, the option has vested and become exercisable
to Mr. Wang. As a result, the number of shares of beneficial ownership has included 664,142 shares of common stock that have become
transferrable to Mr. Wang after adjusting proportionally to the reduction of total number of shares held by Expert Venture Limited
since April 2010.
(10)
Pursuant to a share transfer agreement, Mr. Jianming Hao, our Chairman and Chief Executive Officer, has the option, subject
to certain performance targets, to purchase from Mr. Yam Sheung Kwok, the current sole shareholder of Expert Venture Limited,
up to 101 shares of Expert Venture Limited. Accordingly, upon exercise of such option, Mr. Hao will indirectly (through his
ownership of Expert Venture Limited own and control 558,986 shares, which equal 3.92% of the fully-diluted percentage
of outstanding shares. Since the performance targets set forth in the share transfer agreement have been met, the option has vested
and become exercisable to Mr. Hao. As a result, the number of shares of beneficial ownership has included 558,986 shares of common
stock that have become transferrable to Mr. Hao after adjusting proportionally to the reduction of total number of shares held
by Expert Venture Limited since April 2010. In addition, the Company has granted to Mr. Hao options to purchase 250,000 shares
of our common stock under the Plan, 100,000 of which have vested.
(11)
Pursuant to a share transfer agreement, Mr. Wenjun Tian, our Executive Director, will have an option, subject to certain
performance targets (discussed in more detail below), to purchase from Mr. Yam Sheung Kwok, the current sole shareholder of
Expert Venture Limited, up to 300 shares of Expert Venture Limited, which constitutes 30% of Expert Venture Limited. Accordingly,
upon exercise of such option, Mr. Tian will indirectly (through his ownership of Expert Venture Limited) own and control 1,660,354
shares, which equal 11.64% of the fully-diluted percentage of outstanding shares. Since the performance targets set forth in the
share transfer agreement have been met, the option has vested and become exercisable to Mr. Tian. As a result, the number of shares
of beneficial ownership has included 1,660,354 shares of common stock that have become transferrable to Mr. Tian after adjusting
proportionally to the reduction of total number of shares held by Expert Venture Limited since April 2010. In addition, the Company
has granted to Mr. Tian options to purchase 150,000 shares of our common stock under the Plan, 100,000 of which have vested. 
Effective April 30, 2012, Mr. Tian resigned as the Company's President and as a member of the Board of Directors.
(12)
The Company has granted to Mr. Zhou options to purchase 40,000 shares of common stock under the Company's share option
plan, 26,667 of which have vested.
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(13)
Pursuant to a share transfer agreement, Mr. Yongqing Ren will have an option, subject to certain performance targets (discussed
in more detail below), to purchase from Mr. Yam Sheung Kwok, the current sole shareholder of Expert Venture Limited, up to
200 shares of Expert Venture Limited. Accordingly, upon exercise of such option, Mr. Ren will indirectly (through his ownership
of Expert Venture Limited) own and control 1,106,903 shares, which equal 7.76% of the fully-diluted percentage of outstanding shares.
Since the performance targets set forth in the share transfer agreement have been met, the option has vested and become exercisable
to Mr. Ren. As a result, the number of shares of beneficial ownership has included 1,106,903 shares of common stock that have become
transferrable to Mr. Ren after adjusting proportionally to the reduction of total number of shares held by Expert Venture Limited
since April 2010. In addition, the Company has granted to Mr. Ren options to purchase 40,000 shares of our common stock under the
Plan, 26,667 of which have vested.
(14)
Pursuant to a share transfer agreement, Mr. Junde Zhang will have an option, subject to certain performance targets (discussed
in more detail below), to purchase from Mr. Yam Sheung Kwok, the current sole shareholder of Expert Venture Limited, up to
200 shares of Expert Venture Limited. Accordingly, upon exercise of such option, Mr. Zhang will indirectly (through his ownership
of Expert Venture Limited) own and control 1,106,903 shares, which equal 7.76% of the fully-diluted percentage of outstanding shares
of common stock. Since the performance targets set forth in the share transfer agreement have been met, the option has vested and
become exercisable to Mr. Zhang. As a result, the number of shares of beneficial ownership has included 1,106,903 shares of common
stock that have become transferrable to Mr. Zhang after adjusting proportionally to the reduction of total number of shares held
by Expert Venture Limited since April 2010. In addition, the Company has granted to Mr. Zhang options to purchase 40,000 shares
of our common stock under the Plan, 26,667 of which have vested.
(15)
The Company has granted to Mr. Yunling Ding options to purchase 55,000 shares of our common stock under the Plan, 10,000 of
which have vested.
(16)
The Company has granted to Mr. Li Ren options to purchase 30,000 shares of our common stock under the Plan, 20,000 of which
have vested. As a result of the termination of employment of Mr. Li Ren effective February, 3, 2012, such options shall expire
three months after termination such employee in accordance with the terms of the Plan unless exercised by Mr. Li Ren prior to such
time.
(17)
Al Carmona was an investor in the financing that closed immediately following the Share Exchange.  As of March 27,
2012, Mr. Al Carmona owned 46,547 shares of Series A Convertible Preferred Shares, 9,186 shares of common stock and a warrant
exercisable into 18,000 shares of common stock at an exercise price of $5.06. In addition, the Company has granted to Mr. Carmona
options to purchase 75,000 shares of our common stock under the Plan, 10,000 of which have vested.
(18)
The Company has granted to Mr. Longjiang Yuan options to purchase 5,000 shares of our common stock under the Plan, 3,333 of
which have vested.
(19)
The Company has granted to Mr. Stevens options to purchase 80,000 shares of our common stock under the Plan, 13,333 of which
have vested.
(20)
The Company has granted to Ms. Amy He options to purchase 60,000 shares of our common stock under the Plan, none of which have
vested.
(21)
Mr. Lin's employment as Chief Financial Officer terminated on March 5, 2012.
Change in Control Arrangements
We are not aware of any arrangements that
could result in a change of control.
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SELLING STOCKHOLDER
We are registering the shares of common
stock in order to permit Expert Venture Limited to offer the shares for resale from time to time. Expert Venture Limited is not
a licensed broker-dealer or an affiliate of a licensed broker-dealer.
We do not know when or in what amounts
Expert Venture Limited may offer shares for sale. Expert Venture Limited may elect not to sell any or all of the shares offered
by this prospectus. Because Expert Venture Limited may offer all or some of the shares, and because there are currently no agreements,
arrangements or understandings with respect to the sale of any of the shares, we cannot estimate the number of the shares that
will be held by Expert Venture Limited after completion of the offering. However, for purposes of this table, we have assumed
that, after completion of the offering, all of the shares covered by this prospectus will be sold by Expert V Venture Limited.
The following table presents information
regarding Expert Venture Limited. The information concerning beneficial ownership has been taken from our stock transfer records
and information provided by Expert Venture Limited and is dated as of April 27, 2012. Beneficial ownership has been calculated
in accordance with the rules of the SEC, which generally attribute beneficial ownership of securities to persons who possess sole
or shared voting power or investment power with respect to those securities and include shares of common stock issuable pursuant
to the exercise of stock options or warrants that are either immediately exercisable or exercisable within 60 days of April
27, 2012.
Selling Stockholder
Shares
Beneficially
Owned Before
Offering
Fully Diluted
Percentage of
Outstanding Shares
Beneficially Owned
Before Offering (2)
Shares to be
Sold
in the Offering
Assuming the
Selling
Stockholder
Sells Maximum
Number of
Shares in the
Offering
Fully Diluted
Percentage of
Outstanding Shares
Beneficially Owned
After Offering (2)
Expert Venture Limited (1)
5,534,513
38.81
%
250,000
37.06
%
(1)  The registered address of Expert Venture Limited
is P.O. Box 957, Offshore Incorporation Centre, Road Town, Tortola, British Virgin Islands. Mr. Yam Sheung Kwok is the sole
and controlling person of Expert Venture Limited, owning all 1,000 shares of Expert Venture Limited (subject to the share transfer
agreements discussed below in the subsection entitled "Share Transfer Agreements"). Mr. Kwok has sole voting and disposition
power over the shares being offered under this prospectus.
(2) Applicable percentage of ownership is based on 10,566,766
shares of common stock outstanding as of April 27, 2012, together with 1,995,475 shares of common stock issuable upon the conversion
of convertible preferred stock, 1,154,272 shares of common stock issuance upon the exercise of warrants, and 543,333 shares of
common stock issuance upon the exercise of exercisable stock options within sixty (60) days as of the date hereof for beneficial
owner.
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2010 Share Exchange
On April 27, 2010, we entered into a Share
Exchange Agreement ("Exchange Agreement") by and among (i) City Zone Holdings Limited, an emerging organic and non-organic
agricultural products distributor in Shanxi Province, China, engaged in procuring, processing, marketing and distributing various
grain and corn products ("City Zone"), (ii) City Zone's shareholders, including, without limitation, Expert
Venture Limited, a company organized under the laws of the British Virgin Islands and the selling stockholder hereunder and (iii)
certain of our principal shareholders, whereby Expert Venture Limited and the other City Zone shareholders transferred to us all
of the shares of City Zone in exchange for the issuance of an aggregate 8,736,932 shares of our common stock, of which 6,238,205
were issued to Expert Venture Limited. As a result of the Exchange Agreement, Expert Venture Limited and other minority shareholders
of City Zone owned a majority of our outstanding shares, City Zone became our wholly-owned subsidiary and we acquired 100% of
the processing and production operations of City Zone and its subsidiaries, the business and operations of which now constitutes
the primary business and operations of the Company.   The 250,000 shares of our common stock being registered hereunder
were part of the issuance by us to Expert Venture Limited pursuant to the Exchange Agreement.
2010 Private Placement
Simultaneously with the acquisition of
City Zone, we completed a private placement offering in the gross amount of $8,211,166 of the sale of securities to accredited
investors at $4.40 per unit, with each "Unit" consisting of one share of our Series A convertible preferred stock
and one warrant to purchase 0.4 shares of our common stock with an exercise price of $5.06 per share. On May 10, 2010, we closed
on the second and final round of the private placement offering as disclosed in our Current Report on Form 8-K filed with the
SEC on May 3, 2010 through the sale of 589,689 Units comprised of 589,689 shares of our Series A convertible preferred stock and
235,882 five-year warrants with an exercise price of $5.06 per share, to certain accredited investors for total gross proceeds
of $2,594,607. We raised an aggregate amount of $10,805,750 in the two rounds of offerings.
In connection with the financing transaction,
we entered into (i) a Securities Purchase Agreement, (ii) a Registration Rights Agreement, (iii) a Lock-Up Agreement and (iv)
a Securities Escrow Agreement for a make good arrangement with our management (collectively, the "Financing Documents").
The private placement closed simultaneously
with the signing of the Financing Documents and our issuing of 2,455,863 shares of Series A convertible preferred stock and warrants
exercisable into 982,362 shares of common stock to certain investors (collectively, the "Investors").  Pursuant
to its terms, the Series A convertible preferred stock receive cumulative dividends at a rate of 5% per annum and can be converted
into common stock on a 1:1 basis, subject to applicable adjustments.  Pursuant to its terms, the warrants can be converted
into 982,362 shares of common stock at an exercise price of $5.06 per share (the "Warrants").  The Warrants
will expire on April 27, 2015.
Pursuant to the Registration Rights Agreement,
we agreed to file a registration statement on Form S-1 (or other applicable Form) within 60 days of the close of such financing.  We
filed a Registration Statement on Form S-1 with the SEC on June 15, 2010 (, and on October 21, 2010, the SEC declared the
Form S-1 effective.
We also entered into a Lock-Up Agreement
with the Investors, pursuant to which the common stock owned by the management of City Zone was locked-up for the six (6) month
period following the effectiveness of the Registration Statement is declared effective. The Lock-Up Agreement expired on April
21, 2011.
Lastly, pursuant to the Securities Escrow
Agreement, Expert Venture Limited pledged 2,455,863 shares of common stock of the Company (the "Make Good Shares")
to secure the obligation that we reach certain earnings thresholds for the fiscal years ended 2010 and 2011. One half (or 1,227,932
shares) of the Make Good Shares were allocated to the 2010 earnings requirement and the other half (1,227,931 shares) of the Make
Good Shares were allocated to the 2011 earnings requirement. For the fiscal year 2010, we met our threshold requirement of reporting
net income of at least 95% of $11,000,000. If we meet the threshold in 2011 of reporting net income of at least 95% of $15,000,000
(i.e., at least $14,250,000), the remainder of the Make Good Shares will be returned to Expert Venture Limited, however if we
fail to meet our threshold, then the Make Good Shares will be released from escrow based on the following terms and conditions:
·
If we achieve net
                                                                                                          income of less than
                                                                                                          50% of $15,000,000 (or
                                                                                                          $7,500,000), then 1,227,931
                                                                                                          shares shall be released
                                                                                                          to the investors on
                                                                                                          a pro rata basis (based
                                                                                                          on the amount of each
                                                                                                          investors investment).
·
If we achieve net
                                                                                                          income of between 50%
                                                                                                          and less than 95% of
                                                                                                          $15,000,000, then a
                                                                                                          portion of the 1,227,931
                                                                                                          shares held in escrow
                                                                                                          shall be disbursed to
                                                                                                          the Investors (the remaining
                                                                                                          shares will be returned
                                                                                                          to Expert Venture Limited). 
                                                                                                          The number of shares
                                                                                                          released to the investors
                                                                                                          shall be determined
                                                                                                          by doubling the percentage
                                                                                                          missed between the actual
                                                                                                          net income as compared
                                                                                                          to the make good target
                                                                                                          and then multiplying
                                                                                                          that by the 1,227,931
                                                                                                          escrow shares.
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The 250,000 shares being registered hereunder
are not part of the 2,455,863 shares pledged by Expert Venture Limited pursuant to the Securities Escrow Agreement.
Share Transfer Agreements
Pursuant to a share transfer agreement
dated April 26, 2010, Mr. Hong Wang, a Director of the Company, has the option, subject to certain performance targets (discussed
in more detail below), to purchase from Mr. Yam Sheung Kwok, the current sole shareholder of Expert Venture Limited, up to
120 shares of Expert Venture Limited. Accordingly, upon exercise of such option, Mr. Wang will indirectly (through his ownership
of Expert Venture Limited) own and control 664,142 shares, which equal 4.66% of the fully-diluted percentage of outstanding shares
as of the date of this prospectus. Since the performance targets set forth in the share transfer agreement have been met, the
option has vested and become exercisable to Mr. Wang. As a result, the number of shares of beneficial ownership has included 664,142
shares of common stock that have become transferrable to Mr. Wang after adjusting proportionally to the reduction of total number
of shares held by Expert Venture Limited since April 2010.
Pursuant to a share transfer agreement
dated April 26, 2010, Mr. Jianming Hao, the Chairman of the Board and the President and Chief Executive Officer of the Company,
has the option, subject to certain performance targets, to purchase from Mr. Yam Sheung Kwok, the current sole shareholder
of Expert Venture Limited, up to 101 shares of Expert Venture Limited. Accordingly, upon exercise of such option, Mr. Hao
will indirectly (through his ownership of Expert Venture Limited) own and control 558,986 shares, which equal 3.92%
of the fully-diluted percentage of outstanding shares as of the date of this prospectus. Since the performance targets set forth
in the share transfer agreement have been met, the option has vested and become exercisable to Mr. Hao. As a result, the number
of shares of beneficial ownership has included 558,986 shares of common stock that have become transferrable to Mr. Hao after
adjusting proportionally to the reduction of total number of shares held by Expert Venture Limited since April 2010. In addition,
the Company has granted to Mr. Hao options to purchase 250,000 shares of our common stock under the Plan, 100,000 of which have
vested.
Pursuant to a share transfer agreement
dated April 26, 2010, Mr. Wenjun Tian, a former Director and former President of the Company, will have an option, subject
to certain performance targets (discussed in more detail below), to purchase from Mr. Yam Sheung Kwok, the current sole shareholder
of Expert Venture Limited, up to 300 shares of Expert Venture Limited, which constitutes 30% of Expert Venture Limited. Accordingly,
upon exercise of such option, Mr. Tian will indirectly (through his ownership of Expert Venture Limited) own and control
1,660,354 shares, which equal 11.64% of the fully-diluted percentage of outstanding shares as of the date of this prospectus.
Since the performance targets set forth in the share transfer agreement have been met, the option has vested and become exercisable
to Mr. Tian. As a result, the number of shares of beneficial ownership has included 1,660,354 shares of common stock that have
become transferrable to Mr. Tian after adjusting proportionally to the reduction of total number of shares held by Expert Venture
Limited since April 2010. In addition, the Company has granted to Mr. Tian options to purchase 150,000 shares of our common stock
under the Plan, 100,000 of which have vested. Effective April 30, 2012, Mr. Tian resigned as the Company's President and
as a member of the Board of Directors.
Pursuant to a share transfer agreement
dated April 26, 2010, Mr. Yongqing Ren, Vice President of the Corn Division of the Company, will have an option, subject
to certain performance targets (discussed in more detail below), to purchase from Mr. Yam Sheung Kwok, the current sole shareholder
of Expert Venture Limited, up to 200 shares of Expert Venture Limited. Accordingly, upon exercise of such option, Mr. Ren
will indirectly (through his ownership of Expert Venture Limited) own and control 1,106,903 shares, which equal 7.76% of the fully-diluted
percentage of outstanding shares as of the date of this prospectus. Since the performance targets set forth in the share transfer
agreement have been met, the option has vested and become exercisable to Mr. Ren. As a result, the number of shares of beneficial
ownership has included 1,106,903 shares of common stock that have become transferrable to Mr. Ren after adjusting proportionally
to the reduction of total number of shares held by Expert Venture Limited since April 2010. In addition, the Company has granted
to Mr. Ren options to purchase 40,000 shares of our common stock under the Plan, 26,667 of which have vested.
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Pursuant to a share transfer agreement
dated April 26, 2010, Mr. Junde Zhang, Vice President of the Grain Division of the Company, will have an option, subject
to certain performance targets (discussed in more detail below), to purchase from Mr. Yam Sheung Kwok, the current sole shareholder
of Expert Venture Limited, up to 200 shares of Expert Venture Limited. Accordingly, upon exercise of such option, Mr. Zhang
will indirectly (through his ownership of Expert Venture Limited) own and control 1,106,903 shares, which equal 7.76% of the fully-diluted
percentage of outstanding shares of common stock. Since the performance targets set forth in the share transfer agreement have
been met, the option has vested and become exercisable to Mr. Zhang. As a result, the number of shares of beneficial ownership
has included 1,106,903 shares of common stock that have become transferrable to Mr. Zhang after adjusting proportionally to the
reduction of total number of shares held by Expert Venture Limited since April 2010. In addition, the Company has granted to Mr.
Zhang options to purchase 40,000 shares of our common stock under the Plan, 26,667 of which have vested.
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DESCRIPTION OF
SECURITIES
Authorized Capital Stock
Our authorized stock consists of 85,000,000
shares, of which 75,000,000 are authorized shares of common stock, par value $0.001 per share and of which 10,000,000 are authorized
shares of preferred stock, par value $0.001 per share.
Common Stock
Holders of common stock are entitled to
cast one vote for each share on all matters submitted to a vote of shareholders, including the election of directors. The holders
of common stock are entitled to receive ratably such dividends, if any, as may be declared by the Board of Directors of the Company
out of funds legally available therefore. Such holders do not have any preemptive or other rights to subscribe for additional
shares. All holders of our common stock are entitled to share ratably in any assets for distribution to shareholders upon the
liquidation, dissolution or winding up. There are no conversion, redemption or sinking fund provisions applicable to the common
stock. All outstanding shares of common stock are fully paid and non-assessable. Our Board of Directors is not classified.
Also, holders of common stock do not have
preemption rights, liability for further calls or to assessment by the Company, any restriction on alienability of the securities
to be registered, or any provision discriminating against any existing or prospective holder of such securities. The rights of
the shareholders may not be modified other than by a vote of a majority of the shares outstanding, voting as a class.
Series A Convertible Preferred Stock
In connection with our private placement
in May 2010, we executed a Securities Purchase Agreement whereby we issued shares of Series A convertible preferred stock to investors.  The
holders of Series A Preferred are entitled to receive cumulative dividends in preference to the holders of common stock at an
annual rate of 5% of the applicable per Series A Preferred original purchase price (the "
Dividend Preference
"
and the "
Dividends
").  If, after the Dividend Preference has been fully paid or declared and set
apart, the Company shall make any additional distributions, then the holders of Series A Preferred shall participate with the
holders of common stock on an as-converted basis with respect to such distributions.  Dividends shall be payable in
cash or stock, at the Company's option.
Upon any liquidation, dissolution or winding
up of the Company, the holders of Series A Preferred will be entitled to receive, out of the assets of the Company available for
distribution to its stockholders, an amount equal to $4.40 per share (the amount, the "
Liquidation Preference Amount
"),
before any payment shall be made or any assets distributed to the holders of the common stock (the "
Liquidation Preference
").
Each holder of Series A Preferred has the
right, at the option of the holder at any time on or after the issuance of the Series A Preferred, without the payment of additional
consideration, to convert Series A Preferred into a number of fully paid and nonassessable shares of common stock equal to: (i)
the Liquidation Preference Amount of such share divided by (ii) the Conversion Price in effect as of the date of the conversion.
For a period of two (2) years following
the issuance of the Series A Preferred, the conversion price of Series A Preferred will be subject to adjustment for issuances
of common stock (or securities convertible or exchangeable into shares of common stock) at a purchase price less than the conversion
price of the Series A Preferred.   The Series A Preferred Stock does not contain any repurchase or redemption rights.
The Series A Warrants
In connection with our private placement
in May 2010, we also issued Series A Warrants to investors and the placement agent which are exercisable into shares of common
stock. Each Series A Warrant:
(a)
entitles the holder to purchase one (1) share of common
                                                                 stock;
-
80
-
(b)
Is exercisable at any time after consummation of the transactions
                                                                 contemplated by the SPA and shall expire on the date that is
                                                                 five (5) years following the original issuance date of the Series
                                                                 A Warrants;
(c)
is exercisable, in whole or in part, at an exercise price
                                                                 of $5.06 per share of common stock for the investors and $4.84
                                                                 for the placement agent and
(d)
is exercisable only for cash (except that there will be a
                                                                 cashless exercise option if, after twelve months from the Issue
                                                                 Date, (i) the Per Share Market Value of one share of common stock
                                                                 is greater than the Warrant Price (at the date of calculation)
                                                                 and (ii) a registration statement under the Securities Act of
                                                                 1933 providing for the resale of the common stock issuable upon
                                                                 exercise of Warrant Shares is not in effect, in lieu of exercising
                                                                 the Series A Warrant by payment of cash).
Capitalized terms in the section herein
above not otherwise defined herein have the meanings set forth in the Series A Warrants.
Dividend Policy
We have not paid cash dividends on any
class of common equity since formation and we do not anticipate paying any dividends on our outstanding common stock in the foreseeable
future. We plan to retain any earnings to finance the development of the business and for general corporate purposes.
Nevada Anti-Takeover Laws and our Corporate Policy
Nevada Revised Statutes sections 78.378
to 78.379 provide state regulation over the acquisition of a controlling interest in certain Nevada corporations unless the articles
of incorporation or bylaws of the corporation provide that the provisions of these sections do not apply. Our articles of incorporation
and bylaws do not state that these provisions do not apply. The statute creates a number of restrictions on the ability of a person
or entity to acquire control of a Nevada corporation by setting down certain rules of conduct and voting restrictions in any acquisition
attempt, among other things. The statute is limited to corporations that are organized in the state of Nevada and that have 200
or more stockholders, at least 100 of whom are stockholders of record and residents of the State of Nevada; and does business
in the State of Nevada directly or through an affiliated corporation. Because of these conditions, the statute currently does
not apply to us.
The anti-takeover provisions of Sections
78.411 through 78.445 of the Nevada Corporation Law apply to our Company. Section 78.438 of the Nevada law prohibits companies
from merging with or selling more than 5% of its assets or stock to any shareholder who owns or owned more than 10% of any stock
or any entity related to a 10% shareholder for three years after the date on which the shareholder acquired the shares, unless
the transaction is approved by the our Board. The provisions also prohibit companies from completing any of the transactions described
in the preceding sentence with a 10% shareholder who has held the shares more than three years and its related entities unless
the transaction is approved by our Board or a majority of our shares, other than shares owned by that 10% shareholder or any related
entity. These provisions could delay, defer or prevent a change in control of our Company.
Indemnification and Limitation of Liability
Under the terms of our articles of incorporation
and bylaws, we will indemnify our officers, directors, employees, and agents against all liabilities and expenses actually and
reasonably incurred in connection with service for or on behalf of the corporation to the fullest extent allowed by Chapter 78
of the Nevada Revised Statutes, unless it is ultimately determined by a court of competent jurisdiction that (i) they failed to
act in a manner they believed in good faith to be in, or not opposed to, the best interests of the corporation, and (ii) with
respect to any criminal proceeding, had reasonable cause to believe their conduct was lawful. In addition, the applicable provisions
mandate that we indemnify our officers and directors who have been successful on the merits or otherwise in the defense of any
such action, suit, or proceeding against expenses (including attorneys' fees) actually and reasonably incurred by them in connection
with such defense. The Articles also eliminate, to the fullest extent permitted by Nevada law, the liability of directors and
officers to the corporation or our stockholders for monetary or other damages for breach of fiduciary duties as a director or
officer.
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81
-
Transfer Agent and Registrar
West Coast Stock Transfer
is currently the transfer agent and registrar for our common stock. Its address is 2010 Hancock Street, Suite A, San Diego, CA
92110. Its phone number is (619) 664-4780.
-
82
-
PLAN OF DISTRIBUTION
We are registering the shares of common
stock previously issued to permit the resale of these shares of common stock by the selling stockholder of the common stock from
time to time after the date of this prospectus.  We will not receive any of the proceeds from the sale by the selling
stockholder of the shares of common stock.  We will bear all fees and expenses incident to the registration of the shares
of common stock.
The selling stockholder may sell all or
a portion of the shares of common stock held by it and offered hereby from time to time directly or through one or more underwriters,
broker-dealers or agents. If the shares of common stock are sold through underwriters or broker-dealers, the selling stockholder
will be responsible for underwriting discounts or commissions or agent's commissions. The shares of common stock may be
sold in one or more transactions at fixed prices, at prevailing market prices at the time of the sale, at varying prices determined
at the time of sale or at negotiated prices. These sales may be effected in transactions, which may involve crosses or block transactions,
pursuant to one or more of the following methods:
·
on any national
                                                                                                               securities exchange
                                                                                                               or quotation service
                                                                                                               on which the securities
                                                                                                               may be listed or
                                                                                                               quoted at the time
                                                                                                               of sale;
·
in the over-the-counter
                                                                                                               market;
·
in transactions
                                                                                                               otherwise than
                                                                                                               on these exchanges
                                                                                                               or systems or in
                                                                                                               the over-the-counter
                                                                                                               market;
·
through the
                                                                                                               writing or settlement
                                                                                                               of options, whether
                                                                                                               such options are
                                                                                                               listed on an options
                                                                                                               exchange or otherwise;
·
ordinary brokerage
                                                                                                               transactions and
                                                                                                               transactions in
                                                                                                               which the broker-dealer
                                                                                                               solicits purchasers;
·
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;
·
purchases by
                                                                                                               a broker-dealer
                                                                                                               as principal and
                                                                                                               resale by the broker-dealer
                                                                                                               for its account;
·
an exchange
                                                                                                               distribution in
                                                                                                               accordance with
                                                                                                               the rules of the
                                                                                                               applicable exchange;
·
privately negotiated
                                                                                                               transactions;
·
settlement
                                                                                                               of short sales
                                                                                                               entered into after
                                                                                                               the effective date
                                                                                                               of the registration
                                                                                                               statement of which
                                                                                                               this prospectus
                                                                                                               is a part;
·
in transactions
                                                                                                               through broker-dealers
                                                                                                               that agree with
                                                                                                               the Selling stockholders
                                                                                                               to sell a specified
                                                                                                               number of such
                                                                                                               shares at a stipulated
                                                                                                               price per share;
·
through the
                                                                                                               writing or settlement
                                                                                                               of options or other
                                                                                                               hedging transactions,
                                                                                                               whether through
                                                                                                               an options exchange
                                                                                                               or otherwise;
·
a combination
                                                                                                               of any such methods
                                                                                                               of sale; or
·
any other method
                                                                                                               permitted pursuant
                                                                                                               to applicable law.
The selling stockholder may also sell shares
under Rule 144 under the Securities Act of 1933, as amended (the "
Securities Act
"), if available, rather than
under this prospectus.
In addition, the selling stockholder may
transfer the shares of common stock by other means not described in this prospectus. If the selling stockholder effects such transactions
by selling shares of common stock to or through underwriters, broker-dealers or agents, such underwriters, broker-dealers or agents
may receive commissions in the form of discounts, concessions or commissions from the selling stockholder or commissions from purchasers
of the shares of common stock for whom they may act as agent or to whom they may sell as principal (which discounts, concessions
or commissions as to particular underwriters, broker-dealers or agents may be in excess of those customary in the types of transactions
involved). In connection with sales of the shares of common stock or otherwise, the selling stockholder may enter into hedging
transactions with broker-dealers, which may in turn engage in short sales of the shares of common stock in the course of hedging
in positions they assume. The selling stockholder may also sell shares of common stock short and deliver shares of common stock
covered by this prospectus to close out short positions and to return borrowed shares in connection with such short sales. The
selling stockholder may also loan or pledge shares of common stock to broker-dealers that in turn may sell such shares.
-
83
-
The selling stockholder may pledge or grant
a security interest in some or all of the shares of common stock owned by them and, if they default in the performance of their
secured obligations, the pledgees or secured parties may offer and sell the shares of common stock from time to time pursuant
to this prospectus or any amendment to this prospectus under Rule 424(b)(3) or other applicable provision of the Securities Act
amending, if necessary, the list of selling stockholder(s) to include the pledgee, transferee or other successors in interest
as selling stockholder under this prospectus. The selling stockholder also may transfer and donate the shares of common stock
in other circumstances in which case the transferees, donees, pledgees or other successors in interest will be the selling beneficial
owners for purposes of this prospectus.
To the extent required by the Securities
Act and the rules and regulations thereunder, the selling stockholder and any broker-dealer participating in the distribution
of the shares of common stock may be deemed to be "underwriters" within the meaning of the Securities Act, and any
commission paid, or any discounts or concessions allowed to, any such broker-dealer may be deemed to be underwriting commissions
or discounts under the Securities Act. At the time a particular offering of the shares of common stock is made, a prospectus supplement,
if required, will be distributed, which will set forth the aggregate amount of shares of common stock being offered and the terms
of the offering, including the name or names of any broker-dealers or agents, any discounts, commissions and other terms constituting
compensation from the selling stockholder and any discounts, commissions or concessions allowed or re-allowed or paid to broker-dealers.
No underwriter or person has been engaged
to facilitate the sale of shares of common stock in this offering.
Under the securities laws of some states,
the shares of common stock may be sold in such states only through registered or licensed brokers or dealers. In addition, in
some states the shares of common stock may not be sold unless such shares have been registered or qualified for sale in such state
or an exemption from registration or qualification is available and is complied with.
There can be no assurance that the selling
stockholder will sell any or all of the shares of common stock registered pursuant to the registration statement, of which this
prospectus forms a part.
The selling stockholder and any other person
participating in such distribution will be subject to applicable provisions of the Securities Exchange Act of 1934, as amended,
and the rules and regulations thereunder, including, without limitation, to the extent applicable, Regulation M of the Exchange
Act, which may limit the timing of purchases and sales of any of the shares of common stock by the selling stockholder and any
other participating person. To the extent applicable, Regulation M may also restrict the ability of any person engaged in the
distribution of the shares of common stock to engage in market-making activities with respect to the shares of common stock. All
of the foregoing may affect the marketability of the shares of common stock and the ability of any person or entity to engage
in market-making activities with respect to the shares of common stock.
We will pay all expenses of the registration
of the shares of common stock pursuant to the registration rights agreement, estimated to be approximately $25,000 in total, including,
without limitation, Securities and Exchange Commission filing fees and expenses of compliance with state securities or "blue
sky" laws; provided, however, the selling stockholder will pay all underwriting discounts and selling commissions, if any.
Once sold under the registration statement,
of which this prospectus forms a part, the shares of common stock will be freely tradable in the hands of persons other than our
affiliates.
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84
-
LEGAL MATTERS
The validity of the securities being offered
by this prospectus has been passed upon for us by Burton Bartlett & Glogovac, Reno, Nevada.
EXPERTS
KCCW Accountancy Corp., Certified Public
Accountants, an independent registered public accounting firm, has audited, as set forth in its report thereon appearing elsewhere
herein, our financial statements at December 31, 2011 and 2010 and for the years then ended that appear in the prospectus. The
financial statements referred to above are included in this prospectus in reliance upon the independent registered public accounting
firm's report on their given authority as experts in accounting and auditing.
WHERE YOU CAN FIND ADDITIONAL INFORMATION
We filed with the Securities
and Exchange Commission a registration statement under the Securities Act of 1933 for the shares of common stock in this offering.
This prospectus does not contain all of the information in the registration statement and the exhibits and schedule that were
filed with the registration statement. For further information with respect to us and our common stock, we refer you to the registration
statement and the exhibits and schedule that were filed with the registration statement. Statements contained in this prospectus
about the contents of any contract or any other document that is filed as an exhibit to the registration statement are not necessarily
complete, and we refer you to the full text of the contract or other document filed as an exhibit to the registration statement.
A copy of the registration statement and the exhibits and schedules that were filed with the registration statement may be inspected
without charge at the Public Reference Room maintained by the Securities and Exchange Commission at 100 F Street, N.E. Washington,
DC 20549, and copies of all or any part of the registration statement may be obtained from the Securities and Exchange Commission
upon payment of the prescribed fee. Information regarding the operation of the Public Reference Room may be obtained by calling
the Securities and Exchange Commission at 1-800-SEC-0330. The Securities and Exchange Commission maintains a website that contains
reports, proxy and information statements, and other information regarding registrants that file electronically with the SEC.
The address of the website is
www.sec.gov
.
We file periodic reports under the Securities
Exchange Act of 1934, including annual, quarterly and special reports, and other information with the Securities and Exchange
Commission. These periodic reports and other information are available for inspection and copying at the regional offices, public
reference facilities and website of the Securities and Exchange Commission referred to above.
-
85
-
DISCLOSURE OF COMMISSION POSITION ON
INDEMNIFICATION FOR
SECURITIES ACT LIABILITY
Insofar as indemnification for liabilities
arising under the Securities Act may be permitted to directors, officers or persons controlling the registrant pursuant to the
foregoing provisions, the registrant has been informed that in the opinion of the SEC such indemnification is against public policy
as expressed in the Securities Act and is, therefore, unenforceable.
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86
-
DEYU AGRICULTURE CORP AND SUBSIDIARIES
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2011
Report of Independent Registered Public Accounting Firm
F-1
Consolidated Financial Statements:
Consolidated Balance Sheets
F-2
Consolidated Statements of Income and Comprehensive Income
F-3
Consolidated Statements of Stockholders' Equity
F-4
Consolidated Statements of Cash Flows
F-5
Notes to Consolidated Financial Statements
F-6
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87
-
A
udit
• T
ax
•
        C
onsulting
•  F
inancial
A
dvisory
Registered with Public Company Accounting Oversight
Board (PCAOB)
REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
To the Board of Directors and Stockholders of:
Deyu Agriculture Corp.
We have audited the accompanying consolidated balance sheets
of Deyu Agriculture Corp. (the "Company") as of December 31, 2011 and 2010, and the related consolidated statements
of income and comprehensive income, stockholders' equity, and cash flows for the years then ended.  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 audit in accordance with standards of the
Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audits
to obtain reasonable assurance about whether the 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
audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's
internal control over financial reporting.  Accordingly, we express no such opinion.  An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements.  An audit
also includes 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 consolidated financial position of Deyu Agriculture Corp. as of December
31, 2011 and 2010 and the consolidated results of their operations and their cash flows for the years then ended in conformity
with accounting principles generally accepted in the United States of America.
/s/ KCCW Accountancy Corp.
Diamond Bar, California
March 27, 2012
KCCW Accountancy Corp.
22632 Golden Springs Dr. #230, Diamond Bar,
CA 91765, USA
Tel: +1 909 348 7228 • Fax: +1 626
529 1580 • info@kccwcpa.com
F-
1
DEYU AGRICULTURE CORP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December
31,
2011
December
31,
2010
Assets
Current Assets
Cash and cash equivalents
$
8,741,703
$
5,665,858
Restricted cash
1,850,999
125,560
Accounts receivable, net
36,167,136
11,160,959
Due from related parties
587,108
-
Inventory
20,314,090
16,541,999
Advance to supplier
7,233,371
1,178,532
Prepaid expenses
391,537
1,324,251
Assets held for sale
1,634,274
-
Other current assets
2,204,934
669,134
Current assets of discontinued operations
-
5,806,884
Total Current Assets
79,125,152
42,473,177
Property, plant, and equipment, net
12,355,946
4,287,372
Construction-in-progress
-
6,732,189
Other assets
727,535
10,394,246
Intangible assets, net
10,651,844
-
Non-current assets of discontinued operations
-
2,042,168
Total Assets
$
102,860,477
$
65,929,152
Liabilities and Equity
Current Liabilities
Short-term loan
$
14,413,480
$
2,631,364
Accounts payable
1,833,190
197,012
Note payables
1,588,840
-
Advance from customers
8,488,272
6,451,782
Accrued expenses
1,149,205
1,291,227
Preferred stock dividends payable
219,721
238,620
Due to related parties
5,445,115
-
Other current liabilities
583,196
23,779
Current liabilities of discontinued operations
-
11,654,915
Total Current Liabilities
33,721,019
22,488,699
Equity
Series A convertible preferred stock, $.001 par value, 10,000,000 shares authorized,  1,997,467 and 2,106,088 shares outstanding, respectively
1,997
2,106
Common stock, $.001 par value; 75,000,000 shares authorized, 10,564,774 and 10,349,774 shares issued and outstanding, respectively
10,565
10,350
Additional paid-in capital
20,367,138
18,770,230
Other comprehensive income
4,831,353
2,272,633
Retained earnings
43,491,465
22,385,134
Total Stockholders' Equity
68,702,518
43,440,453
Noncontrolling Interests
436,940
-
Total Equity
69,139,458
43,440,453
Total Liabilities and Equity
$
102,860,477
$
65,929,152
The accompanying notes are an integral
part of these consolidated financial statements.
F-
2
DEYU AGRICULTURE CORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For The Years Ended
December 31,
2011
2010
Net revenue
$
261,576,666
$
85,174,884
Cost of goods sold
(218,480,009
)
(63,250,363
)
Gross Profit
43,096,657
21,924,521
Selling expenses
(13,231,094
)
(6,281,768
)
General and administrative expenses
(8,222,182
)
(3,627,860
)
Total Operating Expense
(21,453,276
)
(9,909,628
)
Operating income
21,643,381
12,014,893
Interest income
42,159
17,505
Interest expense
(805,601
)
(341,555
)
Non-operating income
(180,294
)
(18,174
)
Total Other Expense
(943,736
)
(342,224
)
Income from continuing operations before income taxes
20,699,645
11,672,669
Income taxes
(184,384
)
913,785
Income from continuing operations
20,515,261
12,586,454
Loss from discontinued operations, net of income taxes
(3,891,830
)
(756,480
)
Net income
16,623,431
11,829,974
Net loss attributable to noncontrolling interests:
Net loss from continuing operations
38,673
-
Net loss from discontinued operations
1,101,255
-
Total net loss attributable to noncontrolling interests
1,139,928
-
Net income attributable to Deyu Agriculture Corp.
17,763,359
11,829,974
Preferred stock dividends
(427,917
)
(327,721
)
Net income available to common stockholders
17,335,442
11,502,253
Foreign currency translation gain
2,751,687
1,363,322
Comprehensive income
20,087,129
12,865,575
Less: Other comprehensive income attributable to noncontrolling interests
(130,653
)
-
Comprehensive income attributable to Deyu Agriculture Corp.
$
19,956,475
$
12,865,575
Amounts attributable to common stockholders:
Net income from continuing operations, net of income taxes
$
20,126,017
$
12,258,733
Discontinued operations, net of income taxes
(2,790,575
)
(756,480
)
Net income attributable to common stockholders
$
17,335,442
$
11,502,253
Net income attributable to common stockholders per share - basic:
Income from continuing operations
$
1.91
$
1.45
Loss from discontinuing operations
(0.27
)
(0.09
)
Net income attributable to common stockholders
$
1.64
$
1.36
Net income attributable to common stockholders per share - diluted:
Income from continuing operations
$
1.64
$
1.23
Loss from discontinuing operations
(0.22
)
(0.07
)
Net income attributable to common stockholders
$
1.42
$
1.16
Weighted average number of common shares outstanding - basic
10,522,432
8,445,880
Weighted average number of common shares outstanding - diluted
12,497,164
10,249,041
The accompanying notes are an integral
part of these consolidated financial statements.
F-
3
DEYU AGRICULTURE CORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS'
EQUITY
Series A
Convertible
Preferred Stock
Common Stock
Additional
Paid-in
Other
Comprehensive
Retained
Noncontrolling
Shares
Amount
Shares
Amount
Capital
Income
Earnings
Interest
Total
Balance at December 31, 2009
-
$
-
4,930,000
$
4,930
$
8,978,527
$
909,311
$
11,805,468
$
-
$
21,698,236
Common stocks cancelled prior to reverse acquisition
-
-
(3,666,933
)
(3,667
)
3,667
-
-
-
-
Common stocks issued for reverse acquisition
-
-
8,736,932
8,737
(8,737
)
-
-
-
-
Convertible preferred stocks issued for cash in private placement
2,455,863
2,456
-
-
8,226,221
-
-
-
8,228,677
Warrants issued to investors with issuance of convertible preferred
    stocks
-
-
-
-
851,342
-
-
-
851,342
Warrants issued to placement agent on issuance of convertible preferred
    stocks
-
-
-
-
170,104
-
-
-
170,104
Conversion of convertible preferred stocks to common stocks
(349,775
)
(350
)
349,775
350
-
-
-
-
-
Share-based compensation
-
-
-
-
549,106
-
-
-
549,106
Net carrying amounts of the VIE Group at initial recognition
-
(922,587
)
-
(922,587
)
Net changes in foreign currency translation adjustment
-
-
-
-
-
1,363,322
-
-
1,363,322
Net earnings for the year ended December 31,
    2010
-
-
-
-
-
-
11,502,253
-
11,502,253
Balance at December 31, 2010
2,106,088
2,106
10,349,774
10,350
18,770,230
2,272,633
22,385,134
-
43,440,453
Subsidiary equity interest acquired by noncontrolling interest
-
-
-
-
877,892
(62,314
)
-
2,989,303
3,804,882
Subsidiary capital injected by noncontrolling interest
-
-
-
-
-
-
-
469,147
469,147
Conversion of convertible preferred stocks to common stocks
(175,000
)
(175
)
175,000
175
-
-
-
-
-
Convertible preferred stocks issued for payment of preferred stock
    dividends
66,379
66
-
-
212,354
-
-
-
212,420
Share-based compensation
-
-
-
-
428,702
-
-
-
428,702
Common stocks issued for services
-
-
40,000
40
77,960
-
-
-
78,000
Net changes in foreign currency translation adjustment
-
-
-
-
-
2,621,034
-
130,653
2,751,687
Deconsolidation of the VIE Group
3,770,889
(2,012,236
)
1,758,653
Net earnings for the year ended December 31,
    2011
-
-
-
-
-
-
17,335,442
(1,139,928
)
16,195,514
Balance at December 31, 2011
1,997,467
$
1,997
10,564,774
$
10,565
$
20,367,138
$
4,831,353
$
43,491,465
$
436,940
$
69,139,458
The accompanying notes are an integral
part of these consolidated financial statements.
F-
4
DEYU AGRICULTURE CORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For The Years Ended
December 31,
2011
2010
CASH FLOWS FROM OPERATING ACTIVITIES
Net income available to common stockholders
$
17,335,442
$
11,502,253
Loss from discontinued operations attributable to Deyu Agriculture Corp.
2,790,575
756,480
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation & amortization
979,297
489,379
Share-based compensation
428,702
549,106
Preferred stock dividends accrued
219,721
232,642
Dividends paid with Series A preferred stock
212,420
-
Common stocks issued for services
78,000
-
Deferred income tax expense (benefit)
184,384
(913,785
)
Noncontrolling interests
(38,673
)
-
Loss on disposal of fixed assets
-
7,573
Decrease (increase) in current assets:
Accounts receivable
(23,824,017
)
(6,645,744
)
Related-parties trade receivable
(494,752
)
-
Inventories
(2,873,705
)
(7,816,702
)
Advance to suppliers
(5,840,601
)
(947,913
)
Prepaid expense and other current assets
(539,339
)
(853,455
)
Increase (decrease) in liabilities:
Accounts payable
1,584,038
192,077
Advance from customers
1,677,638
6,284,419
Accrued expense and other liabilities
346,492
1,097,413
Net cash (used in) provided by operating activities of continuing operations
(7,774,378
)
3,933,743
Net cash used in operating activities of discontinued operations
(3,858,325
)
(3,727,140
)
Net cash (used in) provided by operating activities
(11,632,703
)
206,603
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of machinery and equipment
(3,759,859
)
(1,987,716
)
Construction and remodeling of factory and warehouses
(109,856
)
(3,281,762
)
Purchase of software and other assets
(8,902
)
(960,175
)
Advances to related parties
(76,995
)
-
Prepayments for acquisition of land use rights
(76,715
)
(6,889,032
)
Proceeds from disposal of fixed assets
-
274,727
Net cash used in investing activities of continuing operations
(4,032,327
)
(12,843,958
)
Net cash used in investing activities of discontinued operations
(2,476,523
)
(117,583
)
Net cash used in investing activities
(6,508,850
)
(12,961,541
)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from capital contributions
464,180
1,831,718
Net proceeds from short-term loans from related parties
3,101,839
3,101,989
Cash restricted for credit line of bank acceptance notes
(1,802,568
)
-
Release of cash restricted held at a trust account
125,560
-
Payment of preferred dividends
(243,678
)
-
Net proceeds from short-term loans from bank
11,349,219
-
Net proceeds from short-term bank acceptance notes
1,547,269
-
Net proceeds from short-term loan from others
952
(1,079,701
)
Net repayments of short-term loans from related parties
-
(1,113,632
)
Proceeds from private placement, net of restricted cash held in escrow
-
8,827,123
Release of restricted cash related to private placement
-
298,848
Net cash provided by financing activities of continuing operations
14,542,773
11,866,345
Net cash used in financing activities of discontinued operations
5,918,988
4,277,243
Net cash used in financing activities
20,461,761
16,143,588
EFFECT OF EXCHANGE RATE CHANGE ON CASH AND CASH EQUIVALENTS
352,429
204,593
NET INCREASE IN CASH & CASH EQUIVALENTS
2,672,637
3,593,243
NET INCREASE IN CASH & CASH EQUIVALENTS FROM DISCONTINUED OPERATIONS
(403,208
)
489,886
NET INCREASE IN CASH & CASH EQUIVALENTS FROM CONTINUING OPERATIONS
3,075,845
3,103,357
CASH & CASH EQUIVALENTS, BEGINNING BALANCE
5,665,858
2,562,501
CASH & CASH EQUIVALENTS, ENDING BALANCE
$
8,741,703
$
5,665,858
SUPPLEMENTAL DISCLOSURES:
Income tax paid
$
62
$
-
Interest paid
$
809,448
$
323,829
NONCASH INVESTING AND FINANCING ACTIVITIES:
Construction completed and transferred to property, plant, and equipment
$
5,914,602
$
-
Construction completed and transferred to land use rights
$
2,320,904
$
-
Obtained certificates of farmland use rights
$
8,221,569
$
-
The accompanying notes are an integral
part of these consolidated financial statements.
F-
5
DEYU AGRICULTURE CORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1.
NATURE OF BUSINESS AND BASIS OF FINANCIAL STATEMENT PREPARATION
Deyu Agriculture Corp. (the "Company"), formerly
known as Eco Building International, Inc., was incorporated under the laws of the State of Nevada on December 23, 2008.  We
completed the acquisition of City Zone Holdings Limited ("City Zone"), an agricultural products distributor in the
Shanxi Province of the People's Republic of China (the "PRC") engaged in procuring, processing, marketing, and
distributing various grain and corn products, by means of a share exchange, effective April 27, 2010.  As a result of
the share exchange, City Zone became our wholly-owned subsidiary.  We currently conduct our business primarily through
the operating PRC subsidiaries, including Jinzhong Deyu Agriculture Trading Co., Ltd. ("Jinzhong Deyu"), Jinzhong
Yuliang Agriculture Trading Co., Ltd. ("Jinzhong Yuliang"), Jinzhong Yongcheng Agriculture Trading Co., Ltd. ("Jinzhong
Yongcheng"), Shanxi Taizihu Food Co., Ltd. ("Taizihu") and Shanxi HuiChun Bean Products Co., Ltd. ("Huichun"
and together with Taizihu, the "Taizihu Group", see Note 20) and Betian Yu Biotechnology (Beijing) Co., Ltd. ("Detian
Yu") and its subsidiaries.
On May 11, 2010, our Board of Directors adopted a resolution
to change our name to "Deyu Agriculture Corp."  FINRA declared the name change effective on June 2, 2010.
Reverse Acquisition
On April 27, 2010, we entered into a Share Exchange Agreement
("Share Exchange") under which we issued 8,736,932 shares of common stock, par value $0.001 per share, to Expert Venture
Limited ("Expert Venture"), a company organized under the laws of the British Virgin Islands, and the other shareholders
of City Zone ("the "City Zone Shareholders").  As a result of the Share Exchange, City Zone became
our wholly-owned subsidiary and City Zone Shareholders acquired a majority of our issued and outstanding common stocks.  Concurrent
with the Share Exchange, Mr. Jianming Hao ("Mr. Hao"), the managing director of City Zone and all of its operating
subsidiaries, was appointed our Chief Executive Officer.
As a result, the Share Exchange has been accounted for as a
reverse acquisition using the purchase method of accounting, whereby City Zone is deemed to be the accounting acquirer (legal
acquiree) and we are to be the accounting acquiree (legal acquirer).  The financial statements before the date of the
Share Exchange are those of City Zone with our results being consolidated from the date of the Share exchange.  The
equity section and earnings per share have been retroactively restated to reflect the reverse acquisition and no goodwill has
been recorded.
City Zone was incorporated in the British Virgin Islands on
July 27, 2009 under the BVI Business Companies Act, 2004.  In November 2009, pursuant to a restructuring plan set out
below, City Zone has become the holding company of a group of companies comprising Most Smart, Shenzhen Redsun, Shenzhen JiRuHai,
Beijing Detian Yu, Jinzhong Deyu, Jinzhong Yongcheng, and Jinzhong Yuliang.
Restructuring
In November 2009, pursuant to a restructuring plan ("Restructuring")
intended to ensure compliance with the PRC rules and regulations, City Zone, through a series of acquisitions and wholly-owned
subsidiaries, acquired 100% equity interests in Jinzhong Deyu, Jinzheng Yuliang, and Jinzhong Yongcheng.  The former
shareholders and key management of Jinzhong Deyu, Jinzhong Yongcheng, and Jinzhong Yuliang became the ultimate controlling parties
and key management of City Zone.  This restructuring exercise has been accounted for as a recapitalization of Jinzhong
Deyu, Jinzhong Yongcheng, and Jinzhong Yuliang with no adjustment to the historical basis of the assets and liabilities of these
companies, while the historical financial positions and results of operations are consolidated as if the restructuring occurred
as of the beginning of the earliest period presented in the accompanying consolidated financial statements.  For the
purpose of consistent and comparable presentation, the consolidated financial statements have been prepared as if City Zone had
been in existence since the beginning of the earliest and throughout the whole periods covered by these consolidated financial
statements.
F-
6
Variable Interest Entities
On November 16, 2010, Detian Yu entered into a series of contractual
arrangements (the "Contractual Arrangements") with each of Beijing Jundaqianyuan Investment Management Co., Ltd. ("Junda"),
Jinzhong Longyue Investment Consultancy Services Co., Ltd. ("Longyue"), and their shareholders, pursuant to which
Detian Yu effectively took over management of the business activities of Junda and Longyue.
Junda is a limited liability company incorporated in the PRC
on June 13, 2010 with registered capital of $14,637 (or RMB 100,000) by Jianming Hao, Chairman and Chief Executive Officer of
the Company, and Wenjun Tian, President and Executive Director of the Company.  As of December 31, 2010, Junda's
equity interest was 100% held by several executives and managers of the Company, including (a) Jianming Hao, owning 33% of Junda,
(b) Wenjun Tian, owning 34% of Junda, (c) Jianbin Zhou, the Chief Operating Officer of the Company, owning 10% of Junda, (d) Li
Ren, Vice President of Branding and Marketing of the Company, owning 5% of Junda, (e) Yongqing Ren, Vice President of the Corn
Division of the Company, owning 3% of Junda and (f) Junde Zhang, Vice President of the Grain Division of the Company, owning 3%
of Junda.  As a result, the execution of the Contractual Arrangements with Junda is considered a related party transaction.
The Contractual Arrangements are comprised of a series of agreements
with a term of ten (10) years, including:
·
Exclusive Management
                                                                                                               and Consulting
                                                                                                               Service Agreements,
                                                                                                               through which Detian
                                                                                                               Yu shall provide
                                                                                                               to each of Junda
                                                                                                               and Longyue management
                                                                                                               consulting services
                                                                                                               in relation to
                                                                                                               the business of
                                                                                                               Junda and Longyue
                                                                                                               in exchange for
                                                                                                               35% of the net
                                                                                                               income after taxes
                                                                                                               of Junda and Longyue
                                                                                                               every fiscal year.
·
Business Cooperation
                                                                                                               Agreements, through
                                                                                                               which Detian Yu
                                                                                                               shall provide business
                                                                                                               cooperation opportunities
                                                                                                               and services including
                                                                                                               clients, cooperation
                                                                                                               partners and market
                                                                                                               information in
                                                                                                               the fields of grain
                                                                                                               processing, sales
                                                                                                               and financing to
                                                                                                               each of Junda and
                                                                                                               Longyue in exchange
                                                                                                               for cooperation
                                                                                                               fees and commissions
                                                                                                               from each of Junda
                                                                                                               and Longyue equal
                                                                                                               to 65% of the net
                                                                                                               income after tax
                                                                                                               of each of Junda
                                                                                                               and Longyue in
                                                                                                               every fiscal year.
·
Business Operations
                                                                                                               Agreements, through
                                                                                                               which Detian Yu
                                                                                                               has exclusive authority
                                                                                                               of all decision-making
                                                                                                               of ongoing operations,
                                                                                                               including establishing
                                                                                                               compensation levels
                                                                                                               and hiring and
                                                                                                               firing of key personnel.  In
                                                                                                               order to ensure
                                                                                                               normal operation
                                                                                                               of Junda and Longyue,
                                                                                                               Detian Yu agrees
                                                                                                               to act as the guarantor
                                                                                                               and provide guarantee
                                                                                                               on the performance
                                                                                                               of the obligations
                                                                                                               of Junda and Longyue
                                                                                                               under all contracts
                                                                                                               executed by Junda
                                                                                                               and Longyue.
·
Share Pledge
                                                                                                               Agreements, through
                                                                                                               which the shareholders
                                                                                                               of Junda and Longyue
                                                                                                               have agreed to
                                                                                                               pledge all of their
                                                                                                               respective equity
                                                                                                               interests in Junda
                                                                                                               or Longyue (as
                                                                                                               the case may be)
                                                                                                               as security for
                                                                                                               the performance
                                                                                                               of all of the obligations
                                                                                                               or debts under
                                                                                                               the Exclusive Management
                                                                                                               and Consulting
                                                                                                               Service Agreements
                                                                                                               and Business Cooperation
                                                                                                               Agreements assumed
                                                                                                               by Junda and Longyue,
                                                                                                               and under a counter-guarantee
                                                                                                               to all the payments
                                                                                                               made by Detian
                                                                                                               Yu for the performance
                                                                                                               of the guarantees
                                                                                                               assumed by Detian
                                                                                                               Yu under the Business
                                                                                                               Operation Agreements.
·
Power of Attorney,
                                                                                                               signed by each
                                                                                                               of the shareholders
                                                                                                               of Junda and Longyue,
                                                                                                               authorizes a designee
                                                                                                               appointed by Detian
                                                                                                               Yu to exercise
                                                                                                               all of their respective
                                                                                                               voting rights as
                                                                                                               a shareholder.
·
Equity Acquisition
                                                                                                               Option Agreements,
                                                                                                               through which the
                                                                                                               shareholders of
                                                                                                               Junda and Longyue
                                                                                                               granted Detian
                                                                                                               Yu an irrevocable
                                                                                                               and unconditional
                                                                                                               right to purchase,
                                                                                                               or cause a designated
                                                                                                               party of Detian
                                                                                                               Yu to purchase,
                                                                                                               part or all of
                                                                                                               the equity interests
                                                                                                               in Junda and Longyue
                                                                                                               from such shareholders,
                                                                                                               when and to the
                                                                                                               extent that, applicable
                                                                                                               PRC laws permit.  The
                                                                                                               consideration for
                                                                                                               the equity acquisition
                                                                                                               option for Junda
                                                                                                               is RMB 80,000,000
                                                                                                               and the consideration
                                                                                                               for the equity
                                                                                                               option for Longyue
                                                                                                               is RMB 120,000,000.
F-
7
On February 21, 2011, Deyufarm received capital injection of
$3,800,505 (RMB 24,971,218) from SBCVC Fund III Company Limited ("SBCVC"), a company organized under the laws of Hong
Kong, in exchange for 35.69% of Deyufarm's equity interest pursuant to the two Investment and Relevant Issues Agreements entered
into by each of Junda and Longyue with Deyufarm and SBCVC on September 15, 2010. According to the Investment and Relevant Issues
Agreements, SBCVC shall invest an equivalent of RMB 25,000,000 of US dollars to Deyufarm. Before or in the meantime that SBCVC
completes such investment to Deyufarm, Longyue shall have invested RMB 35,000,000 to Deyufarm through a capital increase and obtained
the relevant capital verification report. Any time within 2 years after completing an investment to Deyufarm, SBCVC has the right
to require Deyufarm to repurchase in advance, or Junda or Longyue to purchase part of or all the equity interests of Deyufarm
owned by SBCVC. The board of directors of Deyufarm shall be comprised of 3 directors, and Junda, Longyue and SBCVC shall each
nominate one director. The board of directors shall nominate a financial administrator agreed to by SBCVC. Forty-eight (48) months
after SBCVC completes its investment in Deyufarm, the parties shall consummate a qualified IPO of Deyufarm.
On February 25, 2011, Deyufarm received an additional capital
injection of $4,495 (RMB 28,782) from SBCVC for 0.02% of Deyufarm's equity interest.
After the above two capital injections, SBCVC, Junda and Longyue
currently own 35.71%, 14.29% and 50% of the equity interests in Deyufarm, respectively. The total registered capital of Deyufarm
increased from $6,688,635 (RMB45,000,000) to $10,493,516 (RMB 70,000,000). SBCVC's 35.71% equity interest in Deyufarm.
On December 20, 2011, Detian Yu entered into a series of termination
agreements (collectively, the "Termination Agreements") with each of Junda, Longyue and their shareholders, pursuant
to which Detian Yu gave up the control management of the business activities of Junda and Longyue. According to the Termination
Agreements, each side agreed to terminate the Contractual Arrangements entered into on November 16, 2010.
Consolidation Scope:
Details of our subsidiaries subject to consolidation are as
follows:
Domicile and
Percentage
Date of
Registered
of
Name of Subsidiary
Incorporation
Capital
Ownership
Principal Activities
City Zone Holdings Limited ("City Zone")
British Virgin Islands, July 27, 2009
$
20,283,581
100
%
Holding company of Most Smart
Most Smart International Limited ("Most Smart")
Hong Kong,March 11, 2009
$
1
100
%
Holding company of Shenzhen Redsun
Redsun Technology (Shenzhen) Co., Ltd. ("Shenzhen Redsun")
The PRC, August 20, 2009
$
30,000
100
%
Holding company of Shenzhen JiRuHai, Taizhihu and Huichun
Shenzhen JiRuHai Technology Co., Ltd.("Shenzhen JiRuHai")
The PRC, August 20, 2009
$
14,638
100
%
Holding company of Beijing Detian Yu
Detian Yu Biotechnology (Beijing) Co., Ltd. ("Detian Yu")
The PRC, November 30, 2006
$
7,637,723
100
%
Wholesale distribution of simple-processed and deep-processed packaged food products and staple food.  Holding company of the following first five entities
Jinzhong Deyu Agriculture Trading Co., Ltd. ("Jinzhong Deyu")
The PRC, April 22, 2004
$
1,492,622
100
%
Organic grains preliminary processing and wholesale distribution
Jinzhong Yongcheng Agriculture Trading Co., Ltd. ("Jinzhong Yongcheng")
The PRC, May 30, 2006
$
1,025,787
100
%
Corns preliminary processing and wholesale
F-
8
Jinzhong Yuliang Agriculture Trading Co., Ltd. ("Jinzhong Yuliang")
The PRC, March 17, 2008
$
1,019,516
100
%
Corns preliminary processing and wholesale distribution
Tianjin Guandu Food Co., Ltd. ("Tianjin Guandu") (1)
The PRC, June 21, 2011
$
1,544,497
100
%
Wholesale distribution of simple-processed and deep-processed packaged food products and staple food
Hebei Yugu Grain Co., Ltd. ("Hebei Yugu")
The PRC, July 25, 2011
$
1,563,824
70
%
Wholesale distribution of grain products and operating or acting as an agent of import & export business for grain products
Beijing Jundaqianyuan Investment Management Co., Ltd. ("Junda")(2)
The PRC, June 13, 2010
$
14,637
Variable interest
Shareholding of Deyufarm (14.29%)
Jinzhong Longyue Investment Consultancy Services Co., Ltd. ("Longyue")(2)
The PRC, June 2, 2010
$
4,393
Variable interest
Shareholding of Deyufarm (50%)
Deyufarm Innovation Food (Beijing) Co., Ltd. ("Deyufarm")(2)
The PRC, June 13, 2010
$
10,493,516
Variable interest
Wholesale distribution of packaged food products and instant millet beverage. Holding company of the following two companies
Sichuan HaoLiangXin Instant Food Co., Ltd. ("HaoLiangXin")(2)
The PRC, April 25, 2008
$
1,202,460
Variable interest
Manufacturing and wholesale distribution of instant grain vermicelli and buckwheat tea products
Beijing Xinggu Deyufarm Food Co., Ltd. ("Xinggu Deyufarm")(2)
The PRC, November 25, 2010
$
1,515,152
Variable interest
Manufacturing of instant grain vermicelli products
Shanxi Taizihu Food Co., Ltd. ("Taizihu") (3)
The PRC, July 27, 2003
$
1,208,233
100
%
producing and selling fruit beverages and soybean products
Shanxi HuiChun Bean Products Co., Ltd. ("Huichun")(3)
The PRC, September 2, 2007
$
2,636,192
100
%
producing and selling fruit beverages and soybean products
(1) Tianjing Guandu Food Co., Ltd, ("Tianjing Guandu"),
previously was Tianjing Detianyu Food Co., Ltd. changed its company name and completed the name change registration on October
24, 2011.
(2) Detian Yu terminated its control over the Junda, Longyue,
Deyufarm, Haoliangxin, Xinggu Deyufarm, (collectively, the "VIE Group") on December 20, 2011. The operation results
of the VIE Group are included in the consolidated financial statements from January 1 to December 20, 2011
(3) Taizihu and Huichun became the wholly-owned subsidiaries
of the Company on February 2, 2012 through a business acquisition (see Note 20), but they are not within the consolidation scope
as of December 31, 2011
F-
9
NOTE 2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation
The accompanying consolidated financial statements include
the financial statements of Deyu Agriculture Corp., its subsidiaries, and those variable interest entities where the Company is
the primary beneficiary.  All significant intercompany account balances and transactions have been eliminated in consolidation.  Results
of operations of companies purchased are included from the dates of acquisition.
These consolidated financial statements have been prepared
in accordance with accounting principles generally accepted in the United States of America.  The Company's function
currency is the Chinese Yuan, or Renminbi ("RMB"); however, the accompanying consolidated financial statements have
been translated and presented in United States Dollars ("USD").
On April 27, 2010, as a result of the consummation of the Share
Exchange, we changed our fiscal year end from May 31 to December 31 to conform to the fiscal year end of City Zone.
Use of estimates
The preparation of the consolidated financial statements in
conformity with generally accepted  accounting  principles 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 period.  Management makes its estimates based on historical
experience and various other assumptions and information that are available and believed to be reasonable at the time the estimates
are made.  Therefore, actual results could differ from those estimates under different assumptions and conditions.
Cash and cash equivalents
Cash and cash equivalents consist of cash on hand, cash in
bank and all highly liquid investments with original maturities of three months or less.
As a result of the financings associated with the reverse merger,
we had, as of December 31, 2010, $125,560 in a trust account. The use of these funds requires the written approval of our placement
agent and us. The funds in the escrow account were designated for certain expenses, such as investor relations, accounting/consulting
fees, SEC fees, and stock transfer agent fees. This amount was classified as restricted cash under current assets on our balance
sheet as of December 31, 2010, while the restriction has been released in 2011.
As of December 31, 2011, $1,588,840 of cash was restricted
as a pledge for $1,588,840 (RMB 10,000,000) of notes payable obtained from Jinzhong City Yuci District Rural Credit Union Co.,
Ltd. in August 2011 and $262,159 of cash was restricted as a pledge for $ 2,121,101 (RMB 13,350,000) of bank loan obtained from
China Merchants Bank at Dongzhimen branch in November 2011.
Accounts receivable
Accounts receivable are recorded at net realizable value consisting
of the carrying amount less allowance for doubtful accounts, as needed.  We assess the collectability of accounts receivable
based primarily upon the creditworthiness of the customer as determined by credit checks and analysis, as well as the customer's
payment history.  Management reviews the composition of accounts receivable and analyzes historical bad debts, customer
concentrations, customer credit worthiness, current economic trends, and changes in customer payment patterns to evaluate the
adequacy of these reserves.  As of December 31, 2011 and 2010, there were no customers with accounts receivable greater
than six months past due.
F-
10
Inventories
The Company's inventories are stated at lower of cost or market.  Cost
is determined on moving-average basis.  Costs of inventories include purchase and related costs incurred in delivering
the products to their present location and condition.  Market value is determined by reference to selling prices after
the balance sheet date or to management's estimates based on prevailing market conditions.  Management periodically
evaluates the composition of its inventories at least quarterly to identify slow-moving and obsolete inventories to determine
if valuation allowance is required.  As of December 31, 2011 and 2010, management had identified no slow moving or obsolete
inventory. For the years ended December 31, 2011 and 2010, loss on reduction of inventory to the lower of cost or market was $56,140
and $0, respectively.
Assets held for sales
A long-lived asset to be sold shall be classified as held for
sale in the period in which all of the following criteria are met: (a) Management, having the authority to approve the action,
commits to a plan to sell the asset. (b) The asset is available for immediate sale in its present condition subject only to terms
that are usual and customary for sales of such assets. (c) An active program to locate a buyer and other actions required to complete
the plan to sell the asset have been initiated. (d) The sale of the asset is probable, and transfer of the asset is expected to
qualify for recognition as a completed sale, within one year, except as permitted by paragraph ASC 360-10-45-11. The term probable
refers to a future sale that is likely to occur. (e) The asset is being actively marketed for sale at a price that is reasonable
in relation to its current fair value. The price at which a long-lived asset is being marketed is indicative of whether the entity
currently has the intent and ability to sell the asset. A market price that is reasonable in relation to fair value indicates
that the asset is available for immediate sale, whereas a market price in excess of fair value indicates that the asset is not
available for immediate sale. (f) Actions required to complete the plan indicate that it is unlikely that significant changes
to the plan will be made or that the plan will be withdrawn.
A loss shall be recognized for any initial or subsequent write-down
to fair value less cost to sell. A gain shall be recognized for any subsequent increase in fair value less cost to sell, but not
in excess of the cumulative loss previously recognized (for a write-down to fair value less cost to sell). The loss or gain shall
adjust only the carrying amount of a long-lived asset, whether classified as held for sale individually or as part of a disposal
group.
Property, plant, and equipment
Property, plant, and equipment are stated at cost less accumulated
depreciation.  Expenditures for maintenance and repairs are charged to earnings as incurred; additions, renewals and
betterments are capitalized.  When property, plant, and equipment are retired or otherwise disposed of, the related
cost and accumulated depreciation are removed from the respective accounts, and any gain or loss is included in operations.
Depreciation is computed using the straight-line method
over the estimated useful lives of the assets as follows:
Useful Life
(in years)
Automobiles
5
Buildings
10-30
Office equipment
5
Machinery and equipment
5-10
Furniture & fixtures
5
Construction-in-progress
Construction-in-progress consists of amounts expended for warehouse
construction.  Construction-in-progress is not depreciated until such time as the assets are completed and put into
service.  Once warehouse construction is completed, the cost accumulated in construction-in-progress is transferred
to property, plant, and equipment.
Long-lived assets
The Company applies the provisions of FASB ASC Topic 360 (ASC
360), "Property, Plant, and Equipment" which addresses financial accounting and reporting for the impairment or disposal
of long-lived assets.  The Company periodically evaluates the carrying value of long-lived assets to be held and used
in accordance with ASC 360, at least on an annual basis.  ASC 360 requires the impairment losses to be recorded on long-lived
assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated
by those assets are less than the assets' carrying amounts. In that event, a loss is recognized based on the amount by which the
carrying amount exceeds the fair market value of the long-lived assets.  Loss on long-lived assets to be disposed of
is determined in a similar manner, except that fair market values are reduced for the cost of disposal.
F-
11
Goodwill and intangible assets
Good is calculated as the purchase premium after adjusting
for the fair value of net assets acquired.  Goodwill is not amortized but is reviewed for potential impairment on an
annual basis, or when events or circumstances indicate a potential impairment, at the reporting unit level.  A reporting
unit, as defined under applicable accounting guidance, is a business segment or one level below a business segment.  Under
applicable accounting guidance, the goodwill impairment analysis is a two-step test.  The first step of the goodwill
impairment test involves comparing the fair value of each reporting unit with its carrying amount including goodwill.  If
the fair value of the reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired; however,
if the carrying amount of the reporting unit exceeds its fair value, the second step must be performed to measure potential impairment.
The second step involves calculating an implied fair value
of goodwill for each reporting unit for which the first step indicated possible impairment.  The implied fair value
of goodwill is determined in the same manner as the amount of goodwill recognized in a business combination, which is the excess
of the fair value of the reporting unit, as determined in the first step, over the aggregate fair values of the assets, liabilities
and identifiable intangibles as if the reporting unit was being acquired in a business combination.  Measurement of
the fair values of the assets and liabilities of a reporting unit is consistent with the requirements of the fair value measurements
accounting guidance, which defines fair value as the price that would be received to sell an asset or paid to transfer a liability
in an orderly transaction between market participants at the measurement date.  The adjustments to measure the assets,
liabilities, and intangibles at fair value are for the purpose of measuring the implied fair value of goodwill and such adjustments
are not reflected in the consolidation balance sheet.  If the implied fair value of goodwill exceeds the goodwill assigned
to the reporting unit, there is no impairment.  If the goodwill assigned to a reporting unit exceeds the implied fair
value of goodwill, an impairment charge is recorded for the excess.  An impairment loss recognized cannot exceed the
amount of goodwill assigned to a reporting unit.  An impairment loss establishes a new basis in the goodwill and subsequent
reversals of goodwill impairment losses are not permitted under applicable accounting guidance.
The goodwill in the amount of $1,103,309 recorded in the consolidated
balance sheet of the VIE Group as of December 31, 2010 (see Note 3) was generated from the acquisition of Haoliangxin by Deyufarm
on July 24, 2010. In 2010, goodwill was tested for impairment and it was determined that goodwill was not impaired as of December
31, 2010. Pursuant to the Termination Agreements for the VIE Group, the Company deconsolidated the VIE Group and no goodwill was
presented on the consolidated balance sheets as of December 31, 2011 and 2010 of the Company after reclassification of the assets
and liabilities of discontinued operations.
For intangible assets subject to amortization, an impairment
loss is recognized if the carrying amount of the intangible asset is not recoverable and exceeds fair value.  The carrying
amount of the intangible asset is considered not recoverable if it exceeds the sum of the undiscounted cash flows expected to
result from the use of the asset.
Fair value measurements
FASB ASC 820, "Fair Value Measurements" (formerly
SFAS No. 157) defines fair value for certain financial and nonfinancial assets and liabilities that are recorded at fair value,
establishes a framework for measuring fair value, and expands disclosures about fair value measurements.  It requires
that an entity measure its financial instruments to base fair value on exit price and maximize the use of observable units and
minimize the use of unobservable inputs to determine the exit price.  It establishes a hierarchy which prioritizes the
inputs to valuation techniques used to measure fair value.  This hierarchy increases the consistency and comparability
of fair value measurements and related disclosures by maximizing the use of observable inputs and minimizing the use of unobservable
inputs by requiring that observable inputs be used when available.  Observable inputs are inputs that reflect the assumptions
market participants would use in pricing the assets or liabilities based on market data obtained from sources independent of the
Company.  Unobservable inputs are inputs that reflect the Company's own assumptions about the assumptions market
participants would use in pricing the asset or liability developed based on the best information available in the circumstances.  The
hierarchy prioritizes the inputs into three broad levels based on the reliability of the inputs as follows:
F-
12
·
Level 1 –
                                                                                                               Inputs are quoted
                                                                                                               prices in active
                                                                                                               markets for identical
                                                                                                               assets or liabilities
                                                                                                               that the Company
                                                                                                               has the ability
                                                                                                               to access at the
                                                                                                               measurement date.  Valuation
                                                                                                               of these instruments
                                                                                                               does not require
                                                                                                               a high degree of
                                                                                                               judgment as the
                                                                                                               valuations are
                                                                                                               based on quoted
                                                                                                               prices in active
                                                                                                               markets that are
                                                                                                               readily and regularly
                                                                                                               available.
·
Level 2 –
                                                                                                               Inputs other than
                                                                                                               quoted prices in
                                                                                                               active markets
                                                                                                               that are either
                                                                                                               directly or indirectly
                                                                                                               observable as of
                                                                                                               the measurement
                                                                                                               date, such as quoted
                                                                                                               prices for similar
                                                                                                               assets or liabilities;
                                                                                                               quoted prices in
                                                                                                               markets that are
                                                                                                               not active; or
                                                                                                               other inputs that
                                                                                                               are observable
                                                                                                               or can be corroborated
                                                                                                               by observable market
                                                                                                               data for substantially
                                                                                                               the full term of
                                                                                                               the assets or liabilities.
·
Level 3 –
                                                                                                               Valuations based
                                                                                                               on inputs that
                                                                                                               are unobservable
                                                                                                               and not corroborated
                                                                                                               by market data.  The
                                                                                                               fair value for
                                                                                                               such assets and
                                                                                                               liabilities is
                                                                                                               generally determined
                                                                                                               using pricing models,
                                                                                                               discounted cash
                                                                                                               flow methodologies,
                                                                                                               or similar techniques
                                                                                                               that incorporate
                                                                                                               the assumptions
                                                                                                               a market participant
                                                                                                               would use in pricing
                                                                                                               the asset or liability.
This guidance applies to other accounting pronouncements that
require or permit fair value measurements.  On February 12, 2008, the FASB finalized FASB Staff Position (FSP) No. 157-2,
Effective Date of FASB Statement No. 157 (ASC 820).  This Staff Position delays the effective date of SFAS No. 157 (ASC
820) for nonfinancial assets and liabilities to fiscal years beginning after November 15, 2008 and interim periods within those
fiscal years, except for those items that are recognized or disclosed at fair value in the financial statements on a recurring
basis (at least annually).  The adoption of SFAS No. 157 (ASC 820) had no effect on the Company's financial position
or results of operations.
We also analyze all financial instruments with features
of both liabilities and equity under ASC 480-10 (formerly SFAS 150, "Accounting for Certain Financial Instruments with Characteristics
of Both Liabilities and Equity") and ASC 815-40 (formerly EITF 00-19, "Accounting for Derivative Financial Instruments
Indexed to, and Potentially Settled in, a Company's Own Stock").  We have determined ASC 480-10 (formerly
SFAS 150) and ASC 815-40 (formerly EITF 00-19) has no material effect on our financial position or results of operations.
Revenue recognition
The Company's revenue recognition policies are in compliance
with the SEC Staff Accounting Bulletin No. 104 ("SAB 104").  The Company recognizes product revenue when
the following fundamental criteria are met: (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred, (iii)
our price to the customer is fixed or determinable and (iv) collection of the resulting accounts receivable is reasonably assured.  The
Company recognizes revenue for product sales upon transfer of title to the customer.  Customer purchase orders and/or
contracts are generally used to determine the existence of an arrangement.  Shipping documents and the completion of
any customer acceptance requirements, when applicable, are used to verify product delivery or that services have been rendered.  The
Company assesses whether a price is fixed or determinable based upon the payment terms associated with the transaction and whether
the sales price is subject to refund or adjustment.
The Company's revenue is recognized net of value-added
tax (VAT), reductions to revenue for estimated product returns, and sales discounts based on volume achieved in the same period
that the related revenue is recorded.  The estimates are based on historical sales returns, analysis of credit memo
data, and other factors known at the time.  For the years ended December 31, 2011 and 2010, sales discounts from continuing
operations were $70,987 and $0, respectively.
We offer a right of exchange on our grain products sold through
our relationship with grocery store networks.  The consumer who purchases the product may exchange it for the same kind
and quantity of product originally purchased.  In accordance with FASB ASC 605-15-25-1 and 605-15-15-2, these are not
considered returns for revenue recognition purposes.  For the years ended December 31, 2011 and 2010, the returns of
our product were not material.
F-
13
Advertising costs
The Company expenses the cost of advertising as incurred or,
as appropriate, the first time the advertising takes place.  Advertising costs from continuing operations for the year
ended December 31, 2011 and 2010 were $952,472 and $83,576 respectively.
Research and development
The Company expenses its research and development costs as
incurred.  Research and development costs from continuing operations for the years ended December 31, 2011 and 2010
were $98,393 and $73,860, respectively.
Stock-based compensation
In December 2004, the Financial Accounting Standard Board,
or the FASB, issued the Statement of Financial Accounting Standards, or SFAS, No. 123(R), "Share-Based Payment", which
replaces SFAS No. 123 and supersedes APB Opinion No. 25.  SFAS No. 123(R) is now included in the FASB's ASC Topic
718, "Compensation – Stock Compensation."  Under SFAS No. 123(R), companies are required to measure
the compensation costs of share-based compensation arrangements based on the grant-date fair value and recognize the costs in
the financial statements over the period during which employees or independent contractors are required to provide services.  Share-based
compensation arrangements include stock options and warrants, restricted share plans, performance-based awards, share appreciation
rights and employee share purchase plans.  In March 2005, the SEC issued Staff Accounting Bulletin No. 107, or SAB 107,
which expresses views of the staff regarding the interaction between SFAS No. 123(R) and certain SEC rules and regulations and
provides the staff's views regarding the valuation of share-based payment arrangements for public companies.  SFAS
No. 123(R) permits public companies to adopt its requirements using one of two methods.  On April 14, 2005, the SEC
adopted a new rule amending the compliance dates for SFAS No. 123(R).  Companies may elect to apply this statement either
prospectively, or on a modified version of retrospective application under which financial statements for prior periods are adjusted
on a basis consistent with the pro forma disclosures required for those periods under SFAS No. 123.
The Company has fully adopted the provisions of FASB
ASC 718 and related interpretations as provided by SAB 107.  As such, compensation cost is measured on the date of grant
as the fair value of the share-based payments.  Such compensation amounts, if any, are amortized over the respective
vesting periods of the option grant.
Income taxes
The Company accounts for income taxes in accordance with FASB
ASC Topic 740, "Income Taxes."  ASC 740 requires a company to use the asset and liability method of accounting
for income taxes, whereby deferred tax assets are recognized for deductible temporary differences, and deferred tax liabilities
are recognized for taxable temporary differences.  Temporary differences are the differences between the reported amounts
of assets and liabilities and their tax bases.  Deferred tax assets are reduced by a valuation allowance when, in the
opinion of management, it is more likely than not that some portion, or all of, the deferred tax assets will not be realized.  Deferred
tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.
Under ASC 740, a tax position is recognized as a benefit only
if it is "more likely than not" that the tax position would be sustained in a tax examination, with a tax examination
being presumed to occur.  The amount recognized is the largest amount of tax benefit that is greater than 50% likely
of being realized on examination.  For tax positions not meeting the "more likely than not" test, no tax
benefit is recorded.  The adoption had no effect on the Company's consolidated financial statements.
F-
14
Foreign currency translation and comprehensive income
U.S. GAAP requires that recognized revenue, expenses, gains
and losses be included in net income.  Certain statements, however, require entities to report specific changes in assets
and liabilities, such as gain or loss on foreign currency translation, as a separate component of the equity section of the balance
sheet.  Such items, along with net income, are components of comprehensive income.  The functional currency
of the Company is Renminbi ("RMB").  The unit of RMB is in Yuan.  Translation gains are classified
as an item of other comprehensive income in the stockholders' equity section of the consolidated balance sheet.
Statement of cash flows
In accordance with FASB ASC Topic 230, "Statement of
Cash Flows," cash flows from the Company's operations are calculated based upon the local currencies.  As
a result, amounts related to assets and liabilities reported on the consolidated statement of cash flows will not necessarily
agree with changes in the corresponding balances on the consolidated balance sheets.
Discontinued operations
Certain prior period amounts have been reclassified in these
consolidated financial statements to conform to the 2011 presentation of discontinued operations of the VIE Group for the deep
processed grain business. See Note 1 and 3 for additional information.
Reclassifications
Except for the classification for discontinued operations,
certain classifications have been made to the prior year financial statements to conform to the current year presentation.  The
reclassifications have no impact on the Company's 2010 consolidated statement of operations and retained earnings.
Recent pronouncements
In January 2010, FASB issued an amendment regarding improving
disclosures about fair value measurements. This new guidance requires some new disclosures and clarifies some existing disclosure
requirements about fair value measurement. The new disclosures and clarifications of existing disclosures are effective for interim
and annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances and
settlements in the roll forward of activity in Level 3 fair value measurements. Those disclosures are effective for fiscal years
beginning after December 15, 2010 and for interim periods within those fiscal years. There was no impact from the adoption of
this guidance to our consolidated financial position or results of operations as the amendment only addresses disclosures.
In April 2010, FASB issued an amendment to Stock Compensation.
The amendment clarifies that an employee stock-based payment award with an exercise price denominated in the currency of a market
in which a substantial portion of the entity's equity shares trades should not be considered to contain a condition that
is not a market, performance, or service condition. Therefore, an entity would not classify such an award as a liability if it
otherwise qualifies as equity. The amendments are effective for fiscal years, and interim periods within those fiscal years, beginning
on or after December 15, 2010. The adoption of this guidance had no impact on our consolidated financial position or results of
operations since our stock-based payment awards have an exercise price denominated in the same currency of the market in which
our Company shares are traded.
In May 2011, FASB issued an amendment (ASU No. 2011-04) to
Fair Value Measurement (ASC Topic 820). In 2006, the FASB and the International Accounting Standards Board (IASB) published a
Memorandum of Understanding, which has served as the foundation of the Board's efforts to a common set of high quality global
accounting standards. Consistent with the Memorandum of Understanding and the Board's commitment to achieving the goal,
the amendments in this Update are the result of the work by the FASB and the IASB to develop common requirements for measuring
fair value and for disclosing information about fair value measurements in accordance with U.S. GAAP and IFRS. The adoption of
this guidance had no impact on our consolidated financial position or results of operations.
In May 2011, FASB issued an amendment (ASU No. 2011-05) to
Comprehensive Income (ASC Topic 220). The amendment require that all nonowner changes in stockholders' equity be presented
either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In the two-statement
approach, the first statement should present total net income and its components followed consecutively by a second statement
that should present total other comprehensive income, the components of other comprehensive income, and the total of comprehensive
income. The Company had adopted this guidance to our consolidated financial statements as of and for the year ended December 31,
2011.
F-
15
In September 2011, FASB issued an amendment (ASU No. 2011-08)
to Intangibles–Goodwill and Other (ASC Topic 350). The amendments in the Update permit an entity to first assess qualitative
factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount
as a basis for determining whether it is necessary to perform the two-step goodwill impairment test described in Topic 350. If,
after assessing the totality of events or circumstances, an entity determines it is not more likely than not that the fair value
of a reporting unit is less than its carrying amount, then performing the two-step impairment test is unnecessary. However, if
an entity concludes otherwise, then it is required to perform the first step of the two-step impairment test by calculating the
fair value of the reporting unit and comparing the fair value with the carrying amount of the reporting unit, as described in
paragraph 350-20-35-4. If the carrying amount of a reporting unit exceeds its fair value, then the entity is required to perform
the second step of the goodwill impairment test to measure the amount of the impairment loss, if any, as described in paragraph
350-20-35-9. The Company had adopted this guidance to our consolidated financial statements as of and for the year ended December
31, 2011.
In December 2011, FASB issued an Update (ASU No. 2011-10) to
Property, Plant, and Equipment (ASC Topic 360). Under the amendments in this Update, when a parent (reporting entity) ceases to
have a controlling financial interest (as described in Subtopic 810-10) in a subsidiary that is in substance real estate as a
result of default on the subsidiary's nonrecourse debt, the reporting entity should apply the guidance in Subtopic 360-20
to determine whether it should derecognize the in substance real estate. Generally, a reporting entity would not satisfy the requirements
to derecognize the in substance real estate before the legal transfer of the real estate to the lender and the extinguishment
of the related nonrecourse indebtedness. That is, even if the reporting entity ceases to have a controlling financial interest
under Subtopic 810-10, the reporting entity would continue to include the real estate, debt, and the results of the subsidiary's
operations in its consolidated financial statements until legal title to the real estate is transferred to legally satisfy the
debt. The adoption of this guidance had no impact on our consolidated financial position or results of operations.
In December 2011, FASB issued an Update (ASU No. 2011-11) to
Balance Sheet (ASC Topic 210) regarding disclosures about offsetting assets and liabilities. Pursuant to this Update, entities
are required to disclose both gross information and net information about both instruments and transactions eligible for offset
in the statement of financial position and instruments and transactions subject to an agreement similar to a master netting arrangement.
This scope would include derivatives, sale and repurchase agreements and reverse sale and repurchase agreements, and securities
borrowing and securities lending arrangements. The adoption of this guidance had no impact on our consolidated financial position
or results of operations.
NOTE 3.
DISCONTINUED OPERATIONS
On December 20, 2011, Detian Yu terminated its control over
the VIE Group (see Note 2). The results of the VIE Group have been presented as a discontinued operation in the consolidated statements
of operations. Selected operating results for the discontinued business are presented in the following tables:
For The Years Ended
December 31,
2011
2010
Net revenue
$
15,276,475
$
4,000,749
Cost of goods sold
(12,256,832
)
(3,671,177
)
Selling, general, and administrative expenses
(8,251,364
)
(1,341,563
)
Interest (expense) income, net
5,478
65
Other income, net
37,371
5,770
Loss before income taxes
(5,188,872
)
(1,006,156
)
Income taxes benefits
1,297,042
249,676
Net loss
$
(3,891,830
)
$
(756,480
)
F-
16
The net assets distributed as of December 20, 2011 were as
follows:
December
20, 2011
Cash & cash equivalents
$
86,678
Inventory, net
606,300
Accounts receivable, net
4,001,821
Advance to suppliers
157,650
Prepaid expenses
664,081
All other current assets
4,858,057
Current assets
10,374,587
Property, plant, and equipment, net
3,094,778
Goodwill
1,103,309
All other assets
766,947
Non-current assets
4,965,034
Accounts payable
773,141
Advance from customer
2,499,636
Accrued expenses
724,918
Other payables
4,510,067
Due to Related Party
8,319,191
All other current liabilities
271,321
Current liabilities
$
17,098,274
NOTE 4.
ACCOUNTS RECEIVABLE
Accounts receivable consisted of the following:
December
31,
December
31,
2011
2010
Accounts receivable
$
36,167,136
$
11,160,959
Less: Allowance for doubtful accounts
-
-
Accounts receivable, net
$
36,167,136
$
11,160,959
NOTE 5.
INVENTORY
Inventory consisted of the following:
December
31,
December
31,
2011
2010
Raw materials
$
8,108,503
$
784,825
Work in process
1,971
383,960
Finished goods
12,109,353
15,316,045
Supplies
94,263
57,169
Total Inventory
$
20,314,090
$
16,541,999
F-
17
NOTE 6.
PREPAID EXPENSES
Prepaid expenses consisted of the following:
December
31,
December
31,
2011
2010
Deductible value-added taxes (VAT)
$
92,531
$
1,250,205
Prepaid rent
88,889
52,904
Prepaid bank loan guarantee fee
83,899
-
Prepaid other expenses
79,842
18,112
Prepaid advertisement
46,376
3,030
Total
$
391,537
$
1,324,251
NOTE 7.
ASSETS HELD FOR SALE
Assets held for sale represent the cost of timber, timberland
and farmland (collectively the "timberland) amounted to RMB 10.3 million ($1.6 million), which management assessed approximating
its fair value. The company exchanged the timberland for an office building with paying cash consideration of RMB 7.2 million
($1.1 million) for the variance between the fair values of the office building and the timberland on March 19, 2012. The cost
of the timberland was reclassified from other assets to assets held for sale in the consolidated balance sheets as of December
31, 2011.
According to government regulations of the PRC, the PRC Government
owned the timber land as of December 31, 2011. The Company leased and obtained a certificate of right to use farmland of approximately
1,605 acres (or 10,032 mu) for the period from August 2005 to December 2031. For the same farmland, the Company obtained a certificate
of the right to timber and 896 acres (or 5,600 mu) of timberland for the period from August 2006 to August 2028. Timber mainly
includes pine trees and poplar trees. These timber, timberland and farmland were not for operating use or intended for sale as
merchandise. Based on management's assessment, there was no impairment as of and for the years ended December 31, 2011 and
2010, or as of the date of exchange.
NOTE 8.
PROPERTY, PLANT, AND EQUIPMENT
Property, plant, and equipment consisted of the following:
December
31,
December
31,
2011
2010
Automobiles
$
896,648
$
840,873
Buildings
9,593,679
1,659,116
Office equipment
408,203
360,841
Machinery and equipment
2,954,783
2,620,243
Furniture and fixtures
605,705
33,479
Total cost
14,459,018
5,514,552
Less: Accumulated depreciation
(2,103,072
)
(1,227,180
)
Property, plant, and equipment, net
$
12,355,946
$
4,287,372
The buildings owned by the Company located in Jinzhong, Shanxi
Province, China are used for production, warehousing and offices for our grains business. The building structure of warehouses
and office located in Shanzhuangtou under the title of Jinzhong Deyu is mainly constructed of light steel and bricks. At the same
area, the Company acquired buildings of RMB 11.8 million ($1.9 million) on December 27, 2011, of which depreciation commenced
in January 2011.
The construction of a warehousing, processing, and logistics
center of Jinzhong Yongcheng (the "Yongcheng Plant") was completed in June 2011. Cost of the six (6) warehouses (total
9,525 square meters), one office building (3,860 square meters), and a processing center with five (5) cylinder storages in the
amount of RMB 30.1 million ($4.8 million) of the Yongcheng Plant was reclassified from Construction-in-Progress to Property, Plant
and Equipment as reported on the consolidated balance sheet as of December 31, 2011. Also due to the construction completion,
cost of the land use rights in the amount of RMB 15 million ($2.4 million) of the Yongcheng Plant was reclassified from Construction-in-Progress
to Intangible Assets as reported on the consolidated balance sheet as of December 31, 2011 (see Note 9). Depreciation of the warehouses,
office building, and processing center commenced in July 2011.
F-
18
Depreciation expense from continuing operations for the year
ended December 31, 2011 and 2010 was $794,853 and $489,379, respectively.
NOTE 9.
CONSTRUCTION-IN-PROGRESS
Construction-in-progress consisted of the following:
December
31,
December
31,
2011
2010
Construction of Jinzhong corn processing and storage center
$
-
$
6,732,189
Total cost
$
-
$
6,732,189
The Jinzhong processing and storage center and Jinzhong factory
heating system located in Jinzhong City, Shanxi Province, PRC are completed and transferred to fixed assets in June 2011 (see Note
8).
NOTE 10.
INTANGIBLE ASSETS
Intangible assets consisted of the following:
December 31,
December 31,
2011
2010
Software-ERP System and B2C platform
$
1,032,746
$
-
Land use rights
9,808,497
-
Less: Accumulated amortization
(189,399
)
-
Total
$
10,651,844
$
-
According to government regulations of the PRC, the PRC Government
owns all land. The Company leases and obtains a certificate of right to use the industrial land of 11,667 square meters with the
PRC Government in Jingzhong, Shanxi Province where Jinzhong Deyu's buildings and production facility are located at. The
term of the right is four to five years and renewed upon expiration. The right was fully amortized as of December 31, 2010 using
the straight-line method. The term of the right was for the period from March 14, 2007 to March 14, 2011. The Company has been
in the process of renewing the land use right certificate since the expiration date. According to a Certification issued by the
Jinzhong Municipal Bureau of Land and Resources on March 30, 2011, Jinzhong Deyu holds the legal title of the land use rights during
the period of the renewal process.
The construction of a warehousing, processing, and logistics
center of Jinzhong Yongcheng (the "Yongcheng Plant") was completed in June 2011. Cost of the six (6) warehouses (total
9,525 square meters), one office building (3,860 square meters), and a processing center with five (5) cylinder storages in the
amount of RMB 30.1 million ($4.8 million) of the Yongcheng Plant was reclassified from Construction-in-Progress to Property, Plant
and Equipment upon the construction completion as of June 30, 2011 (see Note 8). Cost of the land use rights in the amount of RMB
15 million ($2.4 million) of the Yongcheng Plant was reclassified from Construction-in-Progress to Intangible Assets upon the construction
completion and as reported on the consolidated balance sheet as of December 31, 2011. The industrial land underlying the certificate
of the land use rights is 46,860 square meters under the title of Jinzhong Deyu. The term of the rights is fifty (50) years starting
from November 26, 2010 to November 25, 2060. The amortization of the land use right was commenced in July, 2011using the straight-line
method over 49.40 years.
On September 30, 2010 and December 20, 2010, we entered into
Farmland Transfer Agreements with Shanxi Jinbei Plant Technology Co., Ltd. for the transfer of land use rights (the "Rights")
consisting of 53,000 mu (equivalent to 8,731 acres) and 52,337 mu (equivalent to 8,615 acres), respectively. We paid RMB 19,415,000
(approximately $2,900,000) and RMB 27,221,000 (approximately $4,066,000) in September 30, 2010 and December 20, 2010, respectively.
The variance in the balance denominated in US Dollars as of September 30, 2011 was the effect of foreign currency translation.
Pursuant to the agreement and the terms of the original land use right certificates, the Rights will continue for 43 years (on
average). The land will be used for agricultural planting of corn and grains. We obtained land use rights certificates dated September
6, 2011 evidencing our ownership of those land use rights. The terms of the rights stated on the certificates averaged 38.39 years,
based on which we commenced the amortization of these land use rights from September, 2011.
F-
19
Amortization expense of the continuing operations for the year
ended December 31, 2011 was $184,444.
NOTE 11.
OTHER ASSETS
Other assets consisted of the following:
December 31,
December 31,
2011
2010
Net deferred tax assets - noncurrent
$
648,759
$
749,250
Timber, timberland, and farmland use rights
78,776
1,558,479
Prepaid for acquisition of land use rights
-
7,066,061
Installment payment for ERP system
-
984,848
Others
-
35,608
Total
$
727,535
$
10,394,246
The cost of timber, timberland and farmland amounted to RMB
10.3 million ($1.6 million) as of December 31, 2010 was reclassified to assets held for sale as of December 31, 2011 (see Note
7).
NOTE 12.
SHORT-TERM LOAN
Short-term loan consisted of the following:
December 31,
2011
December 31,
2010
Bank loan payable to Bank of Communications, bearing interest at a floating rate of prime rate plus 30% of prime rate, of which prime rate was based on one-year loan interest rate released by The People's Bank of China. The actual interest rate as of December 31, 2011 was 8.5280%. The term of the loan started from May 10, 2011 with maturity date on May 9, 2012. The loan was obtained by Detain Yu and guaranteed by Zhongyuan Guoxin Credit Guarantee Co., Ltd., Wenjun Tian and Jianming Hao for a period of one year starting from May 10, 2011. Wenjun Tian and Jianming Hao for a period of one year starting from May 10, 2011.
$
7,944,200
$
-
Bank loan payable to China Merchants Bank Beijing Dongzhimen subbranch, bearing interest at a floating rate of prime rate plus 20% of prime rate, of which prime rate was based on one-year loan interest rate released by The People's Bank of China. The actual interest rate as of December 31, 2011 was 7.8720%. The term of the loan started from November 30, 2011 with maturity date on November 29, 2012. The loan was obtained by Detain Yu and guaranteed by China Agriculture Credit Guarantee Co., Ltd. for a period of one year starting from November 30, 2011.
2,121,101
-
F-
20
Bank loan payable to Jinzhong City Yuci District Rural Credit Union Co., Ltd, bearing interest at a floating rate of prime rate plus 130% of prime rate, of which prime rate was based on six-month to one-year loan interest rate released by The People's Bank of China. The actual interest rate as of December 31, 2011 was 15.084%. The term of the loan started from August 8, 2011 with maturity date on August 7, 2012. The loan was obtained by Jinzhong Deyu and guaranteed by Jinzhong Juntai Automotive Parts Manufacturing Co., Ltd., for a period of two years starting from August 7, 2012.
1,588,840
-
Bank loan payable to Jinzhong City Yuci District Rural Credit Union Co., Ltd., bearing interest at a floating rate of prime rate plus 130% of prime rate, of which prime rate was based on six-month to one-year loan interest rate released by The People's Bank of China. The actual interest rate as of December 31, 2011 was 15.084%. The term of the loan started from August 9, 2011 with maturity date on August 7, 2012. The loan was obtained by Jinzhong Yongcheng and guaranteed by Yuci Jinmao Food Processing Factory, for a period of two years starting from August 7, 2012.
1,350,514
-
Bank loan payable to Jinzhong City Yuci District Rural Credit Union Co., Ltd., bearing interest at a floating rate of prime rate plus 130% of prime rate, of which prime rate was based on six-month to one-year loan interest rate released by The People's Bank of China. The actual interest rate as of December 31, 2011 was 15.084%. The term of the loan started from August 9, 2011 with maturity date on August 7, 2012. The loan was obtained by Jinzhong Yuliang and guaranteed by Yuci Jinmao Food Processing Factory, for a period of two years starting from August 7, 2012.
1,350,514
-
Loan payable to Hangzhou TianCi Investment Management Co., Ltd., an unrelated party. The loan was unsecured, bearing no interest and no due date was specified.
58,311
55,606
Bank loan payable to Jinzhong Economic Development District Rural Credit Union, bearing interest at a floating rate of prime rate plus 129.83% of prime rate, of which prime rate was based on six-month to one-year loan interest rate released by The People's Bank of China. The loan was due March 8, 2011. The use of proceeds from the loan is for purchase of raw materials. The loan was obtained by Jinzhong Yuliang and guaranteed by Jinzhong Deyu for a period of two years starting from January 13, 2010. In January 2011, the Company entered into an agreement with the bank for an extension of the loan. The new term is from February 1, 2011 to October 1, 2011. The adjustable interest rate is a rate per annum equal to the Prime Rate plus 117.23 percentage points of prime rate. The prime rate is based on one- to three-year loan interest rate released by The People's Bank of China. Jinzhong Deyu continues to provide guarantees on the loan for a period of two years starting from October 1, 2011. This loan was paid off on May 11, 2011.
-
1,287,879
Bank loan payable to Shanxi Province Rural Credit Union, bearing interest at a floating rate of prime rate plus 107.00% of prime rate, of which prime rate was based on six-month-to-one-year loan interest rate released by The People's Bank of China and due January 13, 2011. The use of proceeds from the loan is restricted for purchase of corns. The loan was obtained by Jinzhong Yongcheng and guaranteed by Jinzhong Deyu and Jinzhong Yuliang for a period of two years starting from January 13, 2011. In January 2011, the Company entered into an agreement with bank with an extension for the bank loan. The new term of bank loan is from January 14, 2011 to June 11, 2011. The adjustable interest rate is a rate per annum equal to the Prime Rate plus 107 percentage points of prime rate. The prime rate is based one-to-three-year loan interest rate released by The People's Bank of China. Jinzhong Deyu and Jinzhong Yuliang remain providing guarantees on the loan for a period of two years starting from June 11, 2011. This loan was paid off on May 11, 2011.
-
1,287,879
Total
$
14,413,480
$
2,631,364
F-
21
NOTE 13. NOTES PAYABLE
Notes payable consisted of the following:
December
31,
December
31,
2011
2010
Bank notes payable to Jinzhong Haida Nongyi Trading Co., Ltd. issued by Bank of
Communication at Beijing Gongzhifen branch, bearing no interest and no finance
charge.This note is for August 17, 2011 through February 17, 2012.The note was
obtained and issued by Detian Yu Biotechnology (Beijing) Co., Ltd. The note was
paid off on March 7, 2012.
$
1,588,840
$
-
Total
$
1,588,840
$
-
NOTE 14.
ACCRUED EXPENSES
Accrued expenses consisted of the following:
December
31,
December
31,
2011
2010
Accrued VAT and other taxes
$
412,437
$
877,112
Accrued payroll
266,983
272,587
Others
469,785
141,528
Total
$
1,149,205
$
1,291,227
NOTE 15.
INCOME TAXES
United States
The Company is incorporated in the United States of America
and is subject to the U.S. federal and state taxation.  No provision for income taxes have been made as the Company has
no taxable income in the U.S..  The applicable income tax rate for the Company for the years ended December 31, 2011
and 2010 was 34%.  No tax benefit has been realized since a 100% valuation allowance has offset deferred tax asset resulting
from the net operating losses.
British Virgin Islands
City Zone, a wholly-owned subsidiary of the Company, is incorporated
in the British Virgin Islands ("BVI") and, under the current laws of the BVI, is not subject to income taxes.
Hong Kong
Most Smart, a wholly-owned subsidiary of the Company, is incorporated
in Hong Kong.  Most Smart is subject to Hong Kong taxation on its activities conducted in Hong Kong and income arising
in or derived from Hong Kong.  No provision for income taxes have been made as Most Smart has no taxable income in Hong
Kong.
F-
22
People's Republic of China (PRC)
Under the Enterprise Income Tax ("EIT") Law of the
PRC, the standard EIT rate is 25%. The PRC subsidiaries of the Company are subject to PRC income taxes on an entity basis on income
arising in or derived from the tax jurisdiction in which they operate. According to the Tax Pronouncement [2008] No. 149 issued
by the State Administration of Tax of the PRC, the preliminary processing industry of agricultural products is entitled to EIT
exemption starting January 1, 2008. Three of the Company's wholly-owned subsidiaries located in the Shanxi Province, China,
including Jinzhong Deyu, Jinzhong Yongcheng, and Jinzhong Yuliang are subject to the EIT exemption. All other subsidiaries and
consolidated VIEs are subject to the 25% EIT rate.
The provision for income taxes from continuing operations on
income consists of the following for the years ended December 31, 2011 and 2010:
For the Years Ended
Ended
December 31,
2011
2010
Current income tax expense (benefit)
U.S
$
-
$
-
PRC
-
-
Total current expense (benefit)
$
-
$
-
Deferred income tax expense (benefit)
U.S
$
-
$
-
PRC
(1,112,658
)
(1,163,461
)
Less: Income tax benefit attributable to discontinued operations
1,297,042
249,676
Income tax expense (benefit) attributable to continuing operations
$
184,384
$
(913,785
)
The following is a reconciliation of the statutory tax rate
to the effective tax rate of the continuing operations for the years ended December 31, 2011 and 2010:
For The Years Ended
December 31,
2011
2010
Expected U.S. income tax expense
34.0
%
34.0
%
Increase (decrease) in taxes resulting from:
Tax-exempt income
-39.0
%
-48.6
%
Foreign tax differential
0.9
%
2.8
%
Change in valuation allowance
5.6
%
2.9
%
Intercompany elimination
-0.6
%
0.9
%
Other
-
0.2
%
Income tax benefit attributable to continuing operations
0.9
%
-7.8
%
Significant components of the Company's net deferred tax
assets as of December 31, 2011 and 2010 are presented in the following table:
December 31,
December 31,
2011
2010
Deferred tax assets
Net operating loss carryforwards (NOL)
$
2,255,365
$
1,458,421
Share-based compensation
351,203
197,126
Gross deferred tax assets
2,606,568
1,655,547
Less: Valuation allowance
(1,813,056
)
(466,649
)
Total deferred tax assets, net
$
793,512
$
1,188,898
F-
23
NOTE 16.
NET INCOME PER SHARE
Reconciliation of the basic and diluted net income per share
was as follows:
Amounts
Shares
Per Share
(Numerator)
(Denominator)
Amount
For the year ended December 31, 2011:
Net income from continuing operations attributable to common stockholders - basic
$
20,126,017
10,522,432
$
1.91
Preferred dividends applicable to convertible preferred stocks
427,917
1,974,732
Net income from continuing operations attributable to common stockholders - diluted
$
20,553,934
12,497,164
$
1.64
Net income attributable to common stockholders - basic
$
17,335,442
10,522,432
$
1.64
Preferred dividends applicable to convertible preferred stocks
427,917
1,974,732
Net income attributable to common stockholders - diluted
$
17,763,359
12,497,164
$
1.42
For the year ended December 31, 2010:
Net income from continuing operations attributable to common stockholders - basic
$
12,258,733
8,445,880
$
1.45
Preferred dividends applicable to convertible preferred stocks
327,721
1,803,161
Net income from continuing operations attributable to common stockholders - diluted
$
12,586,454
10,249,041
$
1.23
Net income attributable to common stockholders - basic
$
11,502,253
8,445,880
$
1.36
Preferred dividends applicable to convertible preferred stocks
327,721
1,803,161
Net income attributable to common stockholders - diluted
$
11,829,974
10,249,041
$
1.16
NOTE 17.
SHAREHOLDERS' EQUITY
Reverse Acquisition and Private Placement
On April 27, 2010, we completed the acquisition of City Zone
by means of a share exchange.  Simultaneously with the acquisition, we completed a private placement for gross proceeds
of $8,211,166 from the sale of our securities to accredited investors at $4.40 per unit, with each "Unit" consisting
of one share of Series A Convertible Preferred Stock, and a warrant to purchase 0.4 shares of common stock with an exercise price
of $5.06 per share.
On April 27, 2010, the (the "Closing Date"), we
entered into a Share Exchange Agreement ("Exchange Agreement") by and among (i) City Zone, (ii) City Zone's shareholders,
(iii) us, and (iv) our principal stockholders.  Pursuant to the terms of the Exchange Agreement, Expert Venture Limited,
a company organized under the laws of the British Virgin Islands ("Expert Venture") and the other City Zone shareholders
will transfer to us all of the shares of City Zone in exchange for the issuance of 8,736,932 shares of our common stock as set
forth in the Exchange Agreement, so that Expert Venture and other minority shareholders of City Zone shall own at least a majority
of our outstanding shares (the "Share Exchange").
Our directors approved the Exchange Agreement and the transactions
contemplated thereby.  The directors of City Zone also approved the Exchange Agreement and the transactions contemplated
thereby.
As a result of the Exchange Agreement effective April 27, 2010,
we acquired 100% of the equity interest of City Zone, the business and operations of which now constitutes our primary business
and operations through its wholly-owned PRC subsidiaries.  Specifically, as a result of the Exchange Agreement:
·
We issued 8,736,932 shares of our common stock to the City Zone Shareholders;
·
The ownership position of our shareholders who were holders of common stock immediately prior to the Exchange Agreement changed from 100% to 9.5% (fully diluted) of our outstanding shares; and
F-
24
·
City Zone Shareholders were issued our common stock constituting approximately 65.71% of our fully diluted outstanding shares.
Immediately after the Share Exchange, we entered into a securities
purchase agreement (the "Purchase Agreement") with certain accredited investors (the "Investors") for the
issuance and sale in a private placement of 1,866,174 Units, consisting of 1,866,174 shares of our Series A Convertible Preferred
Stock, par value $0.001 per share (the "Investor Shares") and Series A Warrants to purchase up to 746,479 shares of
our Common Stock (the "Warrants"), for aggregate gross proceeds of $8,211,166 (the "Private Placement").  In
connection with the Private Placement, we also entered into a registration rights agreement (the "Registration Rights Agreement")
with the Investors, in which we agreed to file a registration statement (the "Registration Statement") with the Securities
and Exchange Commission (the "SEC") to register for resale the Investor Shares, within 60 calendar days of the Closing
Date of the Private Placement, and use our best efforts to have the Registration Statement declared effective within 180 calendar
days of the Closing Date of the Private Placement.  We will pay monthly liquidated damages in cash to each Investor of
0.5% of the dollar amount of the purchase price of the Investor Shares, on a pro rata basis, for each 30 day period the Registration
Statement is not declared effective, up to a maximum of 8% of the purchase price.  However, no liquidated damages shall
be paid with respect to any shares that we are not permitted to include in the Registration Statement due to the SEC's application
of Rule 415.  On October 21, 2010, the SEC declared our Form S-1 effective.
In connection with the Private Placement, Maxim Group,
LLC acted as our financial advisor and placement agent (the "Placement Agent").  Maxim received a cash fee
equal to 7% of the gross proceeds of the Private Placement.  Maxim also received warrants to purchase 171,911 shares
of our Common Stock at a price per share of $5.06 (the "Placement Agent Warrants").  Pursuant to the Original
Placement Agreement entered into by Detian Yu on January 27, 2010 with the Placement Agent (the " Original Placement Agreement"),
we engaged the Placement Agent to act as the exclusive agent to sell the Units in this Offering on a "commercially reasonable
efforts basis."  The Placement Agent received cash fees equal to 7% of our gross proceeds received in connection
with an equity financing and a cash corporate finance fee equally to 1% of our gross proceeds raised in the Offering, payable at
the time of each Closing; five (5) year warrants to purchase that number of Series A Preferred Shares and Shares equal to 5% of
the aggregate number of Series A Preferred Shares and Shares underlying the Units issued pursuant to this Offering; and a non-refundable
cash retainer (or restricted shares) of $25,000 payable upon the execution of the retainer agreement.  We also agreed
to pay for all of the reasonable expenses the Placement Agent incurred in connection with the Offering.
On May 10, 2010, we closed on the second and final round (the
"Final Closing") of the private placement offering for the issuance and sale of 589,689 Units, consisting of 589,689
shares of Series A Convertible Preferred Stock and 235,883 five-year Series A Warrants with an exercise price of $5.06 per share,
to certain accredited investors (the "Investors") for total gross proceeds of $2,594,607.
We raised an aggregate amount of $10,805,750 in the Offering.  As
of the Final Closing, we had 9,999,999 shares of common stock issued and outstanding.  In connection with the offering,
we issued a total of 2,455,863 shares of Series A Convertible Preferred Shares and 982,362 Series A Warrants to the investors.  Additionally,
the Placement Agent received 171,911 warrants.
Make Good Escrow Agreement
We also entered into a make good escrow agreement with the Investors
(the "Securities Escrow Agreement"), pursuant to which the City Zone Shareholders placed a number of shares of Common
Stock equal to 100% of the number of shares of Common Stock underlying the Investor Shares, which were initially convertible into
1,866,174 shares of Common Stock (the "Escrow Shares") in an escrow account.  The Escrow Shares were being
held as security in the event we did not achieve $11 million in audited net income for the fiscal year 2010 (the "2010 Performance
Threshold") and $15 million in audited net income for the fiscal year 2011 (the "2011 Performance Threshold").  If
we achieved the 2010 Performance Threshold and the 2011 Performance Threshold, the Escrow Shares would be released back to the
City Zone Shareholders.  If either the 2010 Performance Threshold or 2011 Performance Threshold was not achieved, an
aggregate number of Escrow Shares (such number to be determined by the formula set forth in the Securities Escrow Agreement) would
be distributed to the Investors, based upon the number of Investor Shares (on an as-converted basis) purchased in the Private Placement
and still beneficially owned by such Investor, or such successor, assign or transferee, at such time.  If any Investor
transfers Investor Shares purchased pursuant to the Purchase Agreement, the rights to the Escrow Shares shall similarly transfer
to such transferee, with no further action required by the Investor, the transferee or us.
F-
25
Common Stock
As of the Final Closing, we had 9,999,999 shares of common stock
issued and outstanding. Between the Final Closing date to December 31, 2011, an aggregate of 524,775 shares of Series A Preferred
were converted to 524,775 common stocks. For the year ended December 31, 2011, an aggregate of 40,000 common stocks were issued
for investor relations services, valued at the market price of the Company's common stock at the time of issuance, or $78,000
in total, and charged to operating expenses. As of December 31, 2011, total number of common stock issued and outstanding was 10,564,774
shares.
Series A Convertible Preferred Stock
The holders of Series A Convertible Preferred Shares ("Series
A Preferred") will be entitled to receive, cumulative dividends in preference to the holders of Common Stock at an annual
rate of 5% of the applicable per Series A Preferred original purchase price (the "Dividend Preference" and the "Dividends").  If,
after the Dividend Preference has been fully paid or declared and set apart, the Company shall make any additional distributions,
then the holders of Series A Preferred shall participate with the holders of common stock on an as-converted basis with respect
to such distributions.  Dividends will be payable in cash or stock, at the Company's option.
Upon any liquidation, dissolution or winding up of the Company,
the holders of Series A Preferred will be entitled to receive, out of the assets of the Company available for distribution to its
stockholders, an amount equal to $4.40 per share (the amount, the "Liquidation Preference Amount"), before any payment
shall be made or any assets distributed to the holders of the common stock (the "Liquidation Preference").
Each holder of Series A Preferred will have the right, at the
option of the holder at any time on or after the issuance of the Series A Preferred, without the payment of additional consideration,
to convert Series A Preferred into a number of fully paid and nonassessable shares of common stock equal to: (i) the Liquidation
Preference Amount of such share divided by (ii) the Conversion Price in effect as of the date of the conversion.
For a period of two (2) years following the issuance of the
Series A Preferred, the conversion price of Series A Preferred will be subject to adjustment for issuances of common stock (or
securities convertible or exchangeable into shares of Common Stock) at a purchase price less than the conversion price of the Series
A Preferred.   The Series A Preferred Stock does not contain any repurchase or redemption rights.
Current accounting standards require that we evaluate the terms
and conditions of convertible preferred stock to determine (i) if the nature of the hybrid financial instrument, based upon its
economic risks, is more akin to an equity contract or a debt contract for purposes of establishing classification of the embedded
conversion feature and (ii) the classification of the host or hybrid financial instrument.  Based upon a review of the
terms and conditions of the Series A Preferred, the Company has concluded that the financial instrument is more akin to an equity
financial instrument.  The major consideration underlying this conclusion is that the Series A Preferred is a perpetual
financial instrument with no stated maturity or redemption date, or other redemption that is not within the Company's control.  Other
considerations in support of the equity conclusion included the voting rights and conversion feature into common shares.  While
the cumulative dividend feature may, in some instances, be likened to a debt-type coupon, the absence of a stated maturity date
was determined to establish the cumulative dividend as a residual return, which does not obviate the equity nature of the financial
instrument.  Further, there are no cash redemption features that are not within the control of our management.  As
a result, classification in stockholders' equity is appropriate for the Series A Preferred.
As of December 31, 2011, an aggregate of 524,775 shares of Series
A Preferred were converted to common stocks. On July 29, 2011, 66,739 shares of Series A Preferred were issued as dividends to
the shareholders of Series A Preferred. As of December 31, 2011, total number of Series A Preferred Shares issued and outstanding
was 1,997,467 shares.
F-
26
For the year ended December 31, 2011, the Company recorded $427,917
preferred dividend expense, of which $212,420 was distributed in 66,739 shares of Series A Preferred on July 29, 2011, valued approximating
to their fair value at the time of issuance. The remaining $219,712 was accrued as preferred dividend payable on the consolidated
balance sheet as of December 31, 2011.
For the year ended December 31, 2010, the Company recorded $327,721
preferred dividend expense, of which $96,051 was distributed in cash on July 22, 2010 and the remaining $231,670 was accrued as
preferred dividend payable on the consolidated balance sheet as of December 31, 2010.  The distribution of $231,670 preferred
dividend was made on January 28, 2011.
Series A Warrants
The warrants issued to the investors and placement agent have
strike prices of $5.06 and $4.84, respectively, and expire in five years.  The strike prices are subject to adjustment
only for changes in our capital structure, but allow for cashless exercise under a formula that limits the aggregate issuable common
shares.  There are no redemption features embodied in the warrants and they have met the conditions provided in current
accounting standards for equity classification.
There were 982,362 Series A Warrants sold together with the
Series A Preferred to the investors, which:
(a)
entitle the holder to purchase 1 shares of Common Stock;
(b)
are exercisable at any time after consummation of the transactions contemplated by the Securities Purchase Agreement and shall expire on the date that is five years following the original issuance date of the Series A Warrants;
(c)
are exercisable, in whole or in part, at an exercise price of $5.06 per share of Common Stock; and
(d)
are exercisable only for cash (except that there will be a cashless exercise option if, after twelve months from the Issue Date, (i) the Per Share Market Value of one share of Common Stock is greater than the Warrant Price (at the date of calculation) and (ii) a registration statement under the Securities Act providing for the resale of the Common Stock issuable upon exercise of Warrant Shares is not in effect, in lieu of exercising this Warrant by payment of cash).
Aggregate gross proceeds from the two closing events amounted
to $10,805,750.  Direct financing costs totaled $1,742,993 of which $1,555,627 was paid in cash and the balance of $187,366
represents the fair value of warrants linked to 171,911 shares of our common stock that were issued to a placement agent.  The
proceeds and the related direct financing costs were allocated to the Series A Preferred and the warrants (classified in paid-in
capital) based upon their relative fair values.  The following table summarizes the components of the allocation:
Series A
Preferred
Paid-in
Capital
Warrants
Total
Fair values of financial instruments
$
10,248,092
$
1,039,978
$
11,288,070
Gross proceeds
$
9,810,227
$
995,523
$
10,805,750
Direct financing costs
(1,581,550
)
(161,443
)
(1,742,993
)
Fair value of placement agent warrants
-
187,366
187,366
$
8,228,677
$
1,021,446
$
9,250,123
Fair value considerations:
Our accounting for the sale of Series A Preferred and warrants,
and the issuance of warrants to the Placement Agent required the estimation of fair values of the financial instruments on the
financing inception date.  The development of fair values of financial instruments requires the selection of appropriate
methodologies and the estimation of often subjective assumptions.  We selected the valuation techniques based upon consideration
of the types of assumptions that market participants would likely consider in exchanging the financial instruments in market transactions.  The
Series A Preferred was valued based upon a common stock equivalent method, enhanced by the cumulative dividend feature.  The
dividend feature was valued as the estimated cash flows of the dividends discounted to present value using an estimated weighted
average cost of capital.  The warrants were valued using a Black-Scholes-Merton Valuation Technique because it embodies
all of the requisite assumptions (including trading volatility, estimated terms and risk free rates) necessary to fair value these
instruments.
F-
27
These fair values were necessary to develop relative fair value
calculation for allocations of certain elements of the financing arrangement, principally proceeds and the related direct financing
costs.  The following tables reflect assumptions used to determine the fair value of the Series A Preferred stock:
Fair Value
Hierarchy
Level
Series A
Preferred
April 27,
2010
Series A
Preferred
May 10,
2010
Indexed common shares
1,866,174
589,689
Components of fair value:
Common stock equivalent value
$
6,631,403
$
2,083,094
Dividend feature
659,821
209,439
$
7,791,224
$
2,292,533
Significant assumptions:
Common stock price
3
3.55
3.53
Horizon for dividend cash flow projection
3
2.00
2.00
Weighted average cost of capital ("WACC")
3
15.91
%
15.55
%
Fair value hierarchy of the above assumptions can be categorized
as follows:
(1)
Level 1 inputs are quoted prices in active markets for identical assets and liabilities, or derived there from.  There were no level 1 inputs.
(2)
Level 2 inputs are significant other observable inputs. There were no level 2 inputs.
(3)
Level 3 inputs are unobservable inputs. Inputs for which any parts are level 3 inputs are classified as level 3 in their entirety.
●
Stock price- Given that management did not believe our trading market price was indicative of the fair value of our common stock at the measurement date, the common stock price value was derived implicitly from an iterative process based upon the assumption that the consideration of the Private Placement was the result of an arm's length transaction. The Private Placement was composed of Series A Preferred Stock and Series A Warrants which were both indexed to our common stock; accordingly, we used an iterative process to determine the value of our common stock in order for the fair value of the Series A Preferred and Series A Warrants to equal the amount of consideration received in the Private Placement.
●
Dividend horizon- We estimated the horizon for dividend payment at 2 years.
●
WACC- The rates utilized to discount the cumulative dividend cash flows to their present values were based on a weighted average cost of capital of 18.94% and 18.60%, as of April 27, 2010 and May 10, 2010, respectively. This discount rate was determined after consideration of the rate of return on debt capital and equity that typical investors would require in an investment in companies similar in size and operating in similar markets as Deyu Agriculture Corporation. The cost of equity was determined using a build-up method which begins with a risk free rate and adds expected risk premiums designed to reflect the additional risk of the investment. Additional premiums or discounts related specifically to us and the industry are also added or subtracted to arrive at the final cost of equity rate. The cost of debt was determined based upon available financing terms.
●
Significant inputs and assumptions underlying the model calculations related to the warrant valuations are as follows:
F-
28
The following tables reflect assumptions used to determine the
fair value of the Warrants:
April 27, 2010
May 10, 2010
Fair Value
Hierarchy
Level
Investor
warrants
Agent
warrants
Investor
warrants
Agent
Warrants
Indexed shares
746,479
130,632
235,883
41,279
Exercise price
5.06
4.84
5.06
4.84
Significant assumptions:
Stock price
3
3.55
3.55
3.53
3.53
Remaining term
3
5 years
5 years
5 years
5 years
Risk free rate
2
2.39
%
2.39
%
2.24
%
2.24
%
Expected volatility
2
45.25
%
45.25
%
45.47
%
45.47
%
Fair value hierarchy of the above assumptions can be categorized
as follows:
(1)
There were no Level 1 inputs.
(2)
Level 2 inputs include:
●
Risk-free rate- This rate is based on publicly-available yields on zero-coupon Treasury securities with remaining terms to maturity consistent with the remaining contractual term of the warrants
●
Expected volatility- We did not have a historical trading history sufficient to develop an internal volatility rate for use in the model. As a result, we have used a peer approach wherein the historical trading volatilities of certain companies with similar characteristics as ours and who had a sufficient trading history were used as an estimate of our volatility. In developing this model, no one company was weighted more heavily.
(3)
Level 3 inputs include:
●
Stock price- Given that management did not believe our trading market price was indicative of the fair value of our common stock at the measurement date, the stock price was determined implicitly from an iterative process based upon the assumption that the consideration of the Private Placement was the result of an arm's length transaction.
●
Remaining term- We do not have a history to develop the expected term for our warrants.  Accordingly, we have used the contractual remaining term in our calculations.
The following is a summary of the status and activity of warrants
outstanding as of December 31, 2010:
Outstanding Warrants
Exercise Price
Number of Warrants
Average Remaining Contractual Life
$
5.06
982,362
3.32 years
$
4.84
171,911
3.32 years
Total
1,154,273
Number of Warrants
Outstanding as of January 1, 2011
1,154,273
Granted
-
Forfeited
-
Exercised
-
Outstanding as of December 31, 2011
1,154,273
F-
29
NOTE 18.
SHARE-BASED COMPENSATION
As of December 31, 2011, the Company had one share-based compensation
plan as described below.  The compensation cost that had been charged against income for the plan was $428,702 and $549,106
for the years ended December 31, 2011 and 2010 respectively.  The related income tax benefit recognized was $150,046
and $192,187 for the years ended December 31, 2011 and 2010, respectively.  A 100% valuation allowance was assessed against
the deferred tax assets derived from such tax benefit as of December 31, 2011 and 2010.
On November 4, 2010, the Company's Board of Directors
approved the Company's 2010 Share Incentive Plan (the "Plan").  Under the Plan, 1,000,000 shares of
the Company's common stock shall be allocated to and authorized for use pursuant to the terms of the Plan.  On
November 8, 2010, a total of 931,000 non-qualified incentive stock options were approved by our Board of Directors and granted
under the Plan, including 851,000 options granted to the Company's executives and key employees (collectively, "Employees")
and 80,000 options granted to consultants and independent directors of the Board (collectively, "Non-employees"), at
an exercise price of $4.40 per share.  On December 15, 2010, 40,000 non-qualified incentive stock options were approved
by our Board of Directors and granted under the Plan to a consultant at an exercise price of $4.40 per share.  The option
award granted in 2010 shall vest as follows:
(i)
33 1/3% of the option grants be vested one (1) month after the date of grant;
(ii)
33 1/3% of the option grants be vested twelve (12) months after the date of grant; and
(iii)
33 1/3% of the option grants be vested twenty-four (24) months after the date of grant
The fair value of each option award was estimated on the
date of grant using a Black-Scholes option pricing model that uses the assumptions noted in the following table.  The
model is based on the assumption that it is possible to set up a perfectly hedged position consisting of owning the shares of stock
and selling a call option on the stock.  Any movement in the price of the underlying stock will be offset by an opposite
movement in the options value, resulting in no risk to the investor.  This perfect hedge is riskless and, therefore,
should yield the riskless rate of return.  As the Black-Scholes option pricing model applies to stocks that do not pay
dividends, we made an adjustment developed by Robert Merton to approximate the option value of a dividend-paying stock.  Under
this adjustment method, it is assumed that the Company's stock will generate a constant dividend yield during the remaining
life of the options.
The following tables reflect assumptions used to determine the
fair value of the option award:
Options granted on November 8, 2010:
Exercisable Period
12/8/2010 - 11/8/2020
11/8/2011 - 11/8/2020
11/8/2012 - 11/8/2020
Risk-free Rate (%)
1.12
1.27
1.46
Expected Lives (years)
5.04
5.50
6.00
Expected Volatility (%)
46.10
44.49
43.04
Expected forfeitures per year (%)
0.00-18.00
0.00-18.00
0.00-18.00
Dividend Yield (%)
0.00
0.00
0.00
Options granted on December 15, 2010:
Exercisable Period
1/15/2011 - 12/15/2020
12/15/2011 - 12/15/2020
12/15/2012 - 12/15/2020
Risk-free Rate (%)
2.15
2.32
2.50
Expected Lives (years)
5.04
5.50
6.00
Expected Volatility (%)
46.15
44.52
43.09
Expected forfeitures per year (%)
0.00
0.00
0.00
Dividend Yield (%)
0.00
0.00
0.00
F-
30
Fair value hierarchy of the above assumptions can be categorized
as follows:
(1)
There were no Level 1 inputs.
(2)
Level 2 inputs include:
●
Risk-free rate- This rate is based on continuous compounding of publicly-available yields on U.S. Treasury securities with remaining terms to maturity consistent with the expected term of the options at the dates of grant.
●
Expected volatility- We did not have a historical trading history sufficient to develop an internal volatility rate for use in the model.  As a result, we have used a peer approach wherein the historical trading volatilities of certain companies with similar characteristics as ours and who had a sufficient trading history were used as an estimate of our volatility.  In developing this model, no one company was weighted more heavily.
(3)
Level 3 inputs include:
●
Expected lives- The expected lives of options granted were derived from the output of the option valuation model and represented the period of time that options granted are expected to be outstanding.
●
Expected forfeitures per year- The expected forfeitures are estimated at the dates of grant and will be revised in subsequent periods pursuant to actual forfeitures, if significantly different from the previous estimates.
The estimates of fair value from the model are theoretical values
of stock options and changes in the assumptions used in the model could result in materially different fair value estimates.  The
actual value of the stock options will depend on the market value of the Company's common stock when the stock options are
exercised.
A summary of option activity under the Plan as of December 31,
2011, and changes during the year then ended is presented below:
Options
Shares
Weighted-
Average
Exercise
Price
Weighted-
Average
Remaining
Contractual
Term
Outstanding as of January 1, 2011
971,000
$
4.40
Granted
-
-
Exercised
-
-
Forfeited
(156,000
)
$
4.40
Outstanding as of December 31, 2011
815,000
$
4.40
4.57 years
Exercisable as of December 31, 2011
543,333
$
4.40
4.43 years
Vested and expected to vest *
672,145
$
4.40
4.56 years
* Includes vested shares and unvested shares after a forfeiture
rate is applied.
A summary of the status of the Company's unvested shares
as of December 31, 2011, and changes during the year ended December 31, 2011, is presented below:
F-
31
Unvested Shares
Shares
Weighted-
Average
Grant-
Date Fair
Value
Unvested as of January 1, 2011
647,334
$
1,162,373
Granted
-
-
Vested
(271,667
)
(487,814
)
Forfeited
(104,000
)
(186,746
)
Unvested as of December 31, 2011
271,667
$
487,813
NOTE 19.
RELATED PARTY TRANSACTIONS
Transactions
For The Years Ended
Decmeber 31,
2011
2010
Sales to Beijing Yilian Gifts Tech. Development Co., Ltd.
$
3,250,946
$
-
Sales to Tieling Zhongnong Agriculture Technology Development Co., Ltd.
1,114,581
-
Sales to Beijing Doukounianhua Biotechnology Co., Ltd.
21,471
-
Mr. Yongqin Ren, Vice President of the corn division of the
Company is the legal representative of Tieling Zhongnong Agriculture Technology Development Co., Ltd. Mr. Jianming Hao, Chief Executive
Officer of the Company is the Executive Director of Beijing Yilian Gifts Tech. Development Co., Ltd. Mr. Wenjun Tian, the President
and Executive Director of the Company is the Executive Director of Jinshang International Finance Leasing Co., Ltd. The prices
in the transactions with related parties were determined according to market price sold to or purchased from third parties.
The company purchased a batch of sunflower seed of RMB 16 million
($2,6 million) from Tieling Zhongnong Agriculture Technology Development Co., Ltd. in June, 2011 and returned the goods at original
cost for quality rejection.
Due from related parties
December 31,
December 31,
2011
2010
Due from Beijing Yilian Gifts Tech. Development Co., Ltd.
$
468,976
$
-
Due from Deyufarm Innovation Food (Beijing) Co., Ltd.
89,929
-
Due from Beijing Doukounianhua Biotechnology Co., Ltd.
24,666
-
Due form Jinshang International Finance Leasing Co., Ltd.
3,537
-
Total
$
587,108
$
-
Due to related parties
December 31,
December 31,
2011
2010
Due to Dongsheng International Investment Co., Ltd.
$
2,899,633
$
-
Due to Mr. Wenjun Tian
2,542,144
-
Due to Deyufarm Innovation Food(Beijing) Co., Ltd.
3,338
Total
$
5,445,115
$
-
F-
32
Mr. Wenjun Tian, the President and Executive Director of the
Company is also the President and Executive Director of Dongsheng International Investment Co., Ltd. Those advances as of December
31, 2011 and 2010 are unsecured, bear no interest and no due date is specified.
Guarantees
As of December 31, 2011, Zhongyuan Guoxin Credit Guarantee Co.,
Ltd., China Agriculture Credit Guarantee Co., Ltd., Tian Wenjun and Jianming Hao provided guarantees on short-term loans obtained
by Detain Yu. Yuci Jinmao Food Processing Factory of which the legal representative is Junlian Zheng, the wife of Junde Zhang,
Vice President of the Company provided guarantees on short-term loans obtained by Jinzhong Yongcheng and Jinzhong Yulian.
As of December 31, 2010, Jinzhong Deyu provided guarantees on
short-term loans obtained by Jinzhong Yuliang and Jinzhong Yongcheng. Jinzhong Yuliang also provided guarantees on a short-term
loan obtained by Jinzhong Yongcheng.
NOTE 20.
SEGMENT REPORTING
The Company defined reportable segments according to ASC Topic
280. In the fourth quarter of 2011, the management changed the structure of allocating resources and assessing performance of the
group. The new three segments were identified primarily based on the structure of allocating resources and assessing performance
of the group, including corn division, grain division and bulk trade division. The segment reporting information for the year ended
December 31, 2011 was based on these three segments and that for the year ended December 31, 2010 was restated.
The corn division is in the business of purchasing corns from
farmers, processing simply and distributing to agricultural product trading companies through wholesale.  The business
of grain division is conducted by purchasing of grains from farmers and distributing to wholesalers and supermarkets after processing
with our own brand names, including "Deuu" and "Shi-Tie" for certified organic grain products.  The
business of bulk trading division is conducted by bulk purchasing and selling of raw grain.
For The Year Ended
Corn
Grain
Bulk
Trading
December 31, 2011
Division
Division
Division
Others
Total
Revenues from external customers
$
177,723,149
$
40,507,527
$
43,345,990
$
-
$
261,576,666
Intersegment revenues
-
-
-
-
-
Interest revenue
33,733
3,867
4,469
90
42,159
Interest expense
(608,337
)
(119,835
)
(77,429
)
-
(805,601
)
Net interest (expense) income
(574,604
)
(115,968
)
(72,960
)
90
(763,442
)
Depreciation and amortization
479,538
475,854
92
23,813
979,297
Noncontrolling interest
-
-
-
38,673
38,673
Segment net profit (loss)
19,388,742
2,500,612
2,964,146
(4,338,239
)
20,515,261
For The Year Ended
Corn
Grain
Bulk
Trading
December 31, 2010
Division
Division
Division
Others
Total
Revenues from external customers
$
69,516,954
$
11,474,912
$
4,183,018
$
-
$
85,174,884
Intersegment revenues
-
-
-
-
-
Interest revenue
4,823
8,283
4,394
5
17,505
Interest expense
(317,142
)
(24,413
)
-
-
(341,555
)
Net interest (expense) income
(312,319
)
(16,130
)
4,394
5
(324,050
)
Depreciation and amortization
(164,598
)
(372,597
)
63,171
(15,355
)
(489,379
)
Noncontrolling interest
-
-
-
-
-
Segment net profit (loss)
11,298,781
3,321,566
(255,912
)
(1,777,981
)
12,586,454
F-
33
All of our revenues were generated from customers in China.  All
long-lived assets are located in China.  The following tables set forth our three major customers in each segment:
For The Years Ended
December 31,
Corn Division:
2011
2010
Chengdu Zhengda Co., Ltd.
5.7
%
3.7
%
Shanxi Pingyao Longhai Industrial Co., Ltd.
3.8
%
-
Chengdu Yifenghang Feed Co., Ltd.
3.7
%
0.9
%
Top Three Customers as % of Total Gross Sales:
13.2
%
4.6
%
Grain Division:
Beijing Yilian Gifts Tech. Development Co., Ltd.
8.0
%
0.1
%
Tianjing Haoshoucheng Logestic Co., Ltd.
4.8
%
0.9
%
Tianjing Hongfuyongsheng Trading Co., Ltd.
4.1
%
0.3
%
Top Three Customers as % of Total Gross Sales
16.9
%
1.3
%
Bulk Trading Division:
Tianjin Yimingda Grain Division
28.3
%
27.0
%
Shanxi Helifeihua Trading Co., Ltd.
8.9
%
-
Shanxi Guchuan Food Co., Ltd.
8.3
%
-
Top Three Customers as % of Total Gross Sales:
45.5
%
27.0
%
NOTE 21.
CONCENTRATION OF CREDIT RISK
As of December 31, 2011 and 2010, all of the Company's
cash balances in bank were maintained within the PRC where no rule or regulation currently in place to provide obligatory insurance
for bank deposits in the event of bank failure.  However, the Company has not experienced any losses in such accounts
and believes it is not exposed to such risks on its cash balances in bank.
For the years ended December 31, 2011 and 2010, all of the Company's
sales were generated in the PRC.  In addition, all accounts receivable as of December 31, 2011 and 2010 were due from
customers located in the PRC.
No single customer accounted for greater than 10% of the Company's
consolidated gross revenue for the year ended December 31, 2011 or consolidated accounts receivable as of December 31, 2011. For
the year ended December 31, 2010, one customer accounted for 18% of the Company's consolidated gross revenue while no other
single customer accounted for greater than 10%. The same customer accounted for 3% of the Company's consolidated accounts
receivable as of December 31, 2010 while no single customer accounted for greater than 10%.
NOTE 22.
COMMITMENTS AND CONTINGENCIES
Lease Commitments
The Company leases railroad lines, warehouses, and offices under
operating leases.  Future minimum lease payments under operating leases with initial or remaining terms of one year or
more are as follows:
As of December 31,
Operating Leases
2,012
$
134,402
2,013
90,206
2,014
85,409
2,015
85,409
2,016
85,409
Thereafter
908,892
$
1,389,727
F-
34
Contingencies
On February 12, 2012, the Company's former Chief Financial
Officer alleged that the Company may have violated certain regulations and upon receipt of such allegations, the Company's Audit
Committee retained K&L Gates LLP to conduct an inquiry into such allegations. On March 27, 2012, the Company received a letter
asserting a claim of wrongful termination wherein the former Chief Financial Officer seeks payment of $250,000 plus the issuance
of 60,000 shares of common stock in settlement for the claimed damages therein.
The Company believes that such allegations and claims are without
merit and intends to vigorously defend such allegations and claims. Because the inquiry is in its initial stages, the Company is
not currently able to predict the probability of a favorable or unfavorable outcome, or the amount of any possible loss in the
event of an unfavorable outcome. Consequently, no material provision or liability has been recorded for such allegations and claims
as of December 31, 2011. However, management is confident in its defenses to such allegations and claims.
NOTE 23.
SUBSEQUENT EVENTS
On January 11, 2012, Detain Yu obtained a bank loan of $262,158
(or RMB 1,650,000) from China Merchants Bank Beijing, bearing interest at a floating rate of prime rate plus 20% of prime rate,
of which prime rate was based on one-year loan interest rate released by The People's Bank of China. The term of the loan started
from January 11, 2012 with maturity date on January 10, 2013. The loan was guaranteed by China Agriculture Credit Guarantee Co.,
Ltd. for a period of one year starting from January 11, 2012.
On February 2, 2012, Shenzhen Redsun, a wholly-owned subsidiary
of the Company entered into a Stock Equity Transfer Agreement whereby Shenzhen Redsun acquired 100% of the issued and outstanding
registered share capital of Taizihu
and its subsidiary, Huichun. The total amount of the consideration paid for the acquisition
of the Taizihu Group is RMB34.7 million ($5.5 million), and such consideration was determined pursuant to arm's length negotiations
between the parties. As a result of the acquisition, the Company now owns and controls 100% of the Taizihu Group.
On March 19, 2012, Jinzhong Deyu, a wholly-owned subsidiary
of the Company entered into an Assets Exchange Agreement with a third party whereby Jinzhong Deyu exchange its timberland with
RMB10.3 million ($1.6 million) of carrying amount for an office building with paying cash consideration of RMB7.2 million ($1.1
million) for the variance between the fair values of the office building and the timberland. No material gain or loss was generated
from this exchange transaction.
On March 8, 2012, the Company's Board of Directors allocated
to and authorized for use the maximum number of shares allowable pursuant to the terms of the Plan and granted 420,000 options
under the Plan, of which 264,000 were new options and 156,000 were re-granted after such options were forfeited by employees as
a result of their resignations from the Company in accordance with the terms of their option agreements. All of the newly granted
options vest as follows:
50% of the options granted will vest six
(6) months after the date of the grant; and
50% of the options granted will vest twelve
(12) months after the date of the grant.
Management was in the process of completing the fair value measurement
of the 420,000 options granted as of the date of this filing.
F-
35
Up to 250,000 Shares
DEYU AGRICULTURE CORP.
Common Stock
PROSPECTUS
______________ ___, 2012
Dealer Prospectus Delivery Obligation
Until [*], 2012, 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.
You should rely only on the information
contained in this prospectus. We have not authorized anyone to provide you with information different from that which is set forth
in this prospectus. We are offering to sell shares of our common stock and seeking offers to buy shares of our common stock only
in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the
date of this prospectus, regardless of the time of delivery of this prospectus or any sale of these securities. Our business, financial
condition, results of operation and prospects may have changed after the date of this prospectus.
-
88
-
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 13.
Other Expenses of Issuance and Distribution.
SEC registration fee
$
95
Printing and engraving expenses
$
2,000
Legal fees and expenses
$
15,000
Accounting fees and expenses
$
5,000
Transfer agent and registrar fees and expenses
$
1,000
Miscellaneous expenses
$
1,905
Total
$
25,000
All amounts are estimates other than the
Commission's registration fee. We are paying all expenses of the offering listed above. No portion of these expenses will
be borne by the selling stockholder. The selling stockholder, however, will pay any other expenses incurred in selling their common
stock, including any brokerage commissions or costs of sale.
Item 14.
Indemnification of Directors and Officers.
Nevada Revised Statute 78.037 permits a
corporation to eliminate or limit the personal liability of a director or officer to the corporation or its stockholders for damages
relating to breach of fiduciary duty as a director or officer, but such a provision must not eliminate or limit the liability of
a director or officer for (a) acts or omissions which involve intentional misconduct, fraud or a knowing violation of law or (b)
the payment of distributions in violation of Nevada Revised Statute 78.300.
Nevada Revised Statutes 78.7502 provides
as follows with respect to indemnification of directors, officers, employees and agents:
(a)
We may indemnify any person who was or is a party or is threatened to be made a party to any action, except an action by us, by reason of the fact that he is or was our director, officer, employee or agent, or is or was serving as a director, officer, employee or agent of any other person at our request, against expenses actually and reasonably incurred by him in connection with the action, suit or proceeding if he: (i) is not liable for breach of his fiduciary duties as a director or officer pursuant to Nevada Revised Statutes 78.138; and (ii) acted in good faith and in a manner which he reasonably believed to be in or not opposed to our best interests and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful.
(b)
We may indemnify any person who was or is a party or is threatened to be made a party to any action by us, by reason of the fact that he is or was our director, officer, employee or agent, or is or was serving as a director, officer, employee or agent of any other person at our request, against expenses actually and reasonably incurred by him in connection with the defense or settlement of the action or suit if he: (i) is not liable for breach of his fiduciary duties pursuant to Nevada Revised Statutes 78.138; and (ii) acted in good faith and in a manner which he reasonably believed to be in or not opposed to our best interest.  We may not indemnify him for any claim, issue or matter as to which he has been adjudged by a court of competent jurisdiction, after exhaustion of all appeals therefrom, to be liable to us or for amounts paid in settlement to us, unless and only to the extent that the court in which the action or suit was brought or other court of competent jurisdiction determines upon application that in view of all the circumstances of the case, he is fairly and reasonably entitled to indemnity for such expenses as the court deems proper.
(c)
To the extent that our director, officer, employee or agent has been successful on the merits or otherwise in defense of any action, suit or proceeding, or in defense of any claim, issue or matter therein, we are required to indemnify him against expenses, including attorneys' fees actually and reasonably incurred by him in connection with the defense.
-
89
-
Our Articles of Incorporation and Bylaws
provide for elimination of any liability of our directors and officers and indemnity of our directors and officers to the fullest
extent permitted by Nevada law.
The above-described provisions relating
to the exclusion of liability and indemnification of directors and officers are sufficiently broad to permit the indemnification
of such persons in certain circumstances against liabilities arising under the Securities Act of 1933.  Insofar as indemnification
for liabilities arising under the Securities Act of 1933 may be permitted to our directors and officers and to persons controlling
us pursuant to the foregoing provisions, we have been informed that in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Securities Act of 1933 and is, therefore, unenforceable.
Item 15.
Recent Sales of Unregistered Securities.
In connection with the Share Exchange, on
April 27, 2010, we issued an aggregate of 8,736,932 shares of our common stock to the shareholders of City Zone.  We
received in exchange from the City Zone shareholders 100% of the shares of City Zone, which exchange resulted in City Zone becoming
our wholly owned subsidiary. The issuance of such securities was exempt from registration pursuant to Section 4(2) of, and Regulation
D and/or Regulation S promulgated under the Securities Act of 1933, as amended.
Simultaneous with the closing the Share
Exchange, we entered into the Purchase Agreement with certain accredited Investors for the issuance and sale in a private placement
of Units, consisting of 2,455,863 shares of our Series A convertible preferred stock, par value $0.001 per share and Series A warrants
to purchase up to 982,362 shares of our common stock, for aggregate gross proceeds of approximately $10,805,750. The issuances
of the aforementioned securities were exempt from registration pursuant to Section 4(2) of, and Regulation D and/or Regulation
S promulgated under the Securities Act of 1933, as amended.
On November 4, 2010, the Company's
Board of Directors approved the Company's 2010 Share Incentive Plan.  Under the Plan, 1,000,000 shares of the Company's
common stock shall be allocated to and authorized for use pursuant to the terms of the Plan.  On November 8, 2010, a
total of 931,000 non-qualified incentive stock options were approved by our Board of Directors and granted under the Plan to executives,
key employees, independent directors, and consultants at an exercise price of $4.40 per share and on December 15, 2010, 40,000
non-qualified incentive stock shares were approved by our Board of Directors and granted under the Plan to a consultant at an exercise
price of $4.40 per share, of which shall vest as follows:
33 1/3% of the option grants vested one (1) month
after the date of grant;
33 1/3% of the option grants vested twelve (12) months
after the date of grant; and
33 1/3% of the option grants will vest twenty-four
(24) months after the date of grant.
On March 8, 2012, the Company's Board
of Directors allocated to and authorized for use the maximum number of shares allowable pursuant to the terms of the Plan and granted
420,000 options under the Plan, of which 264,000 were new options and 156,000 were re-granted after such options were forfeited
by employees as a result of their resignations from the Company in accordance with the terms of their option agreements. All of
the newly granted options vest as follows:
50% of the options granted will vest six
(6) months after the date of the grant; and
50% of the options granted will vest twelve
(12) months after the date of the grant.
The issuances of the aforementioned securities
under the Plan were exempt from registration pursuant to Section 4(2) of, and Regulation D and/or Regulation S promulgated under
the Securities Act of 1933, as amended.
-
90
-
Item 16.
Exhibits and Financial Statement Schedules.
(a)
Exhibits
2.1
Share Exchange Agreement Dated April 27, 2010 (1)
3.1
Articles of Incorporation of Deyu Agriculture Corp. (2)
3.2
Certificate of Amendment of Articles of Incorporation of Deyu Agriculture Corp. (3)
3.3
Bylaws of Deyu Agriculture Corp. (2)
4.1
Certificate of Designation of Rights and Preferences of Series A Convertible Preferred Stock (1)
4.2
Form of Series A Warrant (1)
5.1
Opinion of Burton Bartlett & Glogovac*
10.1
Securities Purchase Agreement Dated April 27, 2010 (1)
10.2
Registration Rights Agreement Dated April 27, 2010 (1)
10.3
Form of Lock-Up Agreement Dated April 27, 2010 (1)
10.4
Securities Escrow Agreement Dated April 27, 2010 (1)
10.5
Placement Agent Agreement between the Company and Maxim Group, LLC dated January 27, 2010(6)
10.6
Share Transfer Agreement between Hong Wang and Yam Sheung Kwok dated April 26, 2010 (6)
10.7
Share Transfer Agreement between Jianming Hao and Yam Sheung Kwok dated April 26, 2010 (6)
10.8
Share Transfer Agreement between Wenjun Tian and Yam Sheung Kwok dated April 26, 2010 (6)
10.9
Share Transfer Agreement between Yongqing Ren and Yam Sheung Kwok dated April 26, 2010 (6)
10.10
Share Transfer Agreement between Junde Zhang and Yam Sheung Kwok dated April 26, 2010 (6)
10.11
Employment Agreement between David Lethem, as Chief Financial Officer, and the Company dated June 18, 2010 (4)
10.12
Certificate from China Organic Food Certification Center dated December 21, 2009 (6)
10.13
Corn Purchase Letter of Intent between Shanghai Yihai Trading Co., Ltd., Shanxi Office and Jinzhong Yuliang Agricultural Trading Co., Limited dated December 20, 2009 (6)
10.14
Warehouse Lease Agreement between Shanxi 661 Warehouse and Jinzhong Yongcheng Agricultural Trading Co., Limited dated December 21, 2006 (6)
10.15
Warehouse Lease Agreement between Shanxi Means of Production Company, Yuci Warehouse (formerly, the 671 Warehouse) and Jinzhong Yongcheng Agricultural Trading Co., Limited dated December 28, 2008 (6)
10.16
Railway Lease Agreement between Shanxi Cereal & Oil Group, Mingli Reservation Depot and Jinzhong Yongcheng Agriculture Trading Co., Limited dated December 21, 2006 (6)
10.17
Railway Lease Agreement between Shanxi Yuci Cereal Reservation Depot and Jinzhong Yongcheng Agriculture Trading Co., Limited dated November 15, 2007 (6)
10.18
Railway Lease Agreement between Yuci Dongzhao Railway Freight Station and Jinzhong Yongcheng Agriculture Trading Co., Limited dated December 21, 2006 (6)
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10.19
Agricultural Technology Cooperation Agreement between Jinzhong Deyu Agriculture Trading Co., Ltd. and Millet Research Institute, Shanxi Academy of Agricultural Science dated October 2007 (6)
10.20
Agricultural Technology Cooperation Agreement between Sorghum Institute, Shanxi Academy of Agricultural Sciences and Jinzhong Deyu Agriculture Trading Co., Ltd. dated August 24, 2008 (6)
10.21
Certificate of Forest Rights for the Yuci Forest Right Certificate (2005) No. 01518 dated August 11, 2006 (6)
10.22
Farmland Transfer Agreement between Detian Yu Biotechnology (Beijing) Co. Ltd. and Shanxi Jinbei Plant Technology Co, Ltd. dated September 30, 2010 (6)
10.23
Land Use Rights Acquisition Contract Dated September 30, 2010 (5)
10.24
Deyu Agriculture Corp. 2010 Share Incentive Plan (7)
10.25
Exclusive Management and Consulting Service Agreement, dated November 16, 2010, by and between Detian Yu Biotechnology (Beijing) Co. Limited and Beijing Jundaqianyuan Investment Management Co., Ltd. (English translated version) (8)
10.26
Exclusive Management and Consulting Service Agreement, dated November 16, 2010, by and between Detian Yu Biotechnology (Beijing) Co. Limited and Jinzhong Longyue Investment Consulting Co., Ltd. (English translated version) (8)
10.27
Business Cooperation Agreement, dated November 16, 2010, by and between Detian Yu Biotechnology (Beijing) Co. Limited and Beijing Jundaqianyuan Investment Management Co., Ltd. (English Translated Version) (8)
10.28
Business Operation Agreement, dated November 16, 2010, by and among Detian Yu Biotechnology (Beijing) Co. Limited, Beijing Jundaqianyuan Investment Management Co., Ltd. and each of the shareholders of Beijing Jundaqianyuan Investment Management Co., Ltd. (English translated version) (8)
10.29
Business Operation Agreement, dated November 16, 2010, by and among Detian Yu Biotechnology (Beijing) Co. Limited, Jinzhong Longyue Investment Consulting Co., Ltd. and both of the shareholders of Jinzhong Longyue Investment Consulting Co., Ltd. (English translated version) (8)
10.30
Share Pledge Agreement, dated November 16, 2010, by and among Detian Yu Biotechnology (Beijing) Co. Limited and the following shareholders of Beijing Jundaqianyuan Investment Management Co., Ltd.: Tian Wenjun, Hao Jianming, Yang Jianhui, Zhou Jianbin, Ren Li, Ren Yongqing, Zhang Junde and Wang Tao (English translated version) (8)
10.31
Share Pledge Agreement, dated November 16, 2010, by and among Detian Yu Biotechnology (Beijing) Co. Limited and the following shareholders of Jinzhong Longyue Investment Consulting Co., Ltd.: Zhao Jing and Zhao Peilin (English translated version) (8)
10.32
Form of Power of Attorney (English translated version) (8)
10.33
Equity Acquisition Option Agreement, dated November 16, 2010,  by and among Detian Yu Biotechnology (Beijing) Co. Limited and the following shareholders of Beijing Jundaqianyuan Investment Management Co., Ltd.: Tian Wenjun, Hao Jianming, Yang Jianhui, Zhou Jianbin, Ren Li, Ren Yongqing, Zhang Junde and Wang Tao (English translated version) (8)
10.34
Equity Acquisition Option Agreement, dated November 16, 2010,  by and among Detian Yu Biotechnology (Beijing) Co. Limited and the following shareholders of Jinzhong Longyue Investment Consulting Co., Ltd.: Zhao Jing and Zhao Peilin (English translated version) (8)
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10.35
Business Cooperation Agreement, dated November 16, 2010, by and between Detian Yu Biotechnology (Beijing) Co. Limited and Jinzhong Longyue Investment Consulting Co., Ltd. (English Translated Version) (8)
10.36
Village Collective Farmland Transfer Agreement, dated December 20, 2010, by and between Detian Yu Biotechnology (Beijing) Co., Ltd. and Shanxi Jinbei Plant Technology Development Co., Ltd. (English Translated and Mandarin Versions) (9)
10.37
Contract of Agreement, effective as of January 10, 2011,  by and between Deyu Agriculture Corp. and Charlie Lin (10)
10.38
Termination Agreement Regarding the Exclusive Management and Consulting Service Agreement, by and between Detian Yu Biotechnology (Beijing) Co. Limited and Beijing Jundaqianyuan Investment Management Co., Ltd. (English translated version) (14)
10.39
Termination Agreement Regarding the Exclusive Management and Consulting Service Agreement, by and between Detian Yu Biotechnology (Beijing) Co. Limited and Jinzhong Longyue Investment Consulting Co., Ltd. (English translated version) (14)
10.40
Termination Agreement Regarding the Business Cooperation Agreement, by and between Detian Yu Biotechnology (Beijing) Co. Limited and Beijing Jundaqianyuan Investment Management Co., Ltd. (English Translated Version) (14)
10.41
Termination Agreement Regarding the Business Cooperation Agreement, by and between Detian Yu Biotechnology (Beijing) Co. Limited and Jinzhong Longyue Investment Consulting Co., Ltd. (English Translated Version) (14)
10.42
Termination Agreement Regarding the Business Operation Agreement, by and among Detian Yu Biotechnology (Beijing) Co. Limited, Beijing Jundaqianyuan Investment Management Co., Ltd. and each of the shareholders of Beijing Jundaqianyuan Investment Management Co., Ltd. (English translated version) (14)
10.43
Termination Agreement Regarding the Business Operation Agreement, by and among Detian Yu Biotechnology (Beijing) Co. Limited, Jinzhong Longyue Investment Consulting Co., Ltd. and both of the shareholders of Jinzhong Longyue Investment Consulting Co., Ltd. (English translated version) (14)
10.44
Termination Regarding the Equity Pledge Agreement, by and among Detian Yu Biotechnology (Beijing) Co. Limited and the following shareholders of Beijing Jundaqianyuan Investment Management Co., Ltd.: Tian Wenjun, Hao Jianming, Yang Jianhui, Zhou Jianbin, Ren Li, Ren Yongqing, Zhang Junde and Wang Tao (English translated version) (14)
10.45
Termination Regarding the Equity Pledge Agreement, by and among Detian Yu Biotechnology (Beijing) Co. Limited and the following shareholders of Jinzhong Longyue Investment Consulting Co., Ltd.: Zhao Jing and Zhao Peilin (English translated version) (14)
10.46
Form of Termination Notice of the Power of Attorney (English translated version) (14)
10.47
Termination Agreement Regarding the Equity Acquisition Option Agreement, dated November 16, 2010,  by and among Detian Yu Biotechnology (Beijing) Co. Limited and the following shareholders of Beijing Jundaqianyuan Investment Management Co., Ltd.: Tian Wenjun, Hao Jianming, Yang Jianhui, Zhou Jianbin, Ren Li, Ren Yongqing, Zhang Junde and Wang Tao (English translated version) (14)
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10.48
Termination Agreement Regarding the Equity Acquisition Option Agreement, dated November 16, 2010,  by and among Detian Yu Biotechnology (Beijing) Co. Limited and the following shareholders of Jinzhong Longyue Investment Consulting Co., Ltd.: Zhao Jing and Zhao Peilin (English translated version) (14)
10.49
Stock Equity Transfer Agreement in relation to Shanxi Taizihu Food Co., LTd. and Shanxi Huichun Bean Products Co., Ltd., dated February 2, 2012, by and among Redsun, HE Hao, an individual, XU Qinghe, an individual, XIE Jinqing, an individual and Beijing Kanggang Food Development Co., Ltd. (Chinese and English Translated Versions) (15)
10.50
Cooperation Agreement, by and between the Administration Committee of Sino-Singapore Tianjin Eco-city and Tianjin Detian Yu (Tianjin) Co., Ltd., dated June 16, 2011 (English translated and Chinese versions) (13)
14.1
Code of Conduct (6)
16.1
Letter from Auditor (11)
21
List of Subsidiaries (12)
23.1
Consent of Morison Cogen LLP, independent registered public accounting firm
23.2
Consent of Burton Bartlett & Glogovac (contained in Exhibit 5.1)
99.1
Audit Committee Charter adopted August 19, 2010 (6)
101. INS
XBRL Instance Document*
101. CAL
XBRL Taxonomy Extension Calculation Link base Document*
101. DEF
XBRL Taxonomy Extension Definition Link base Document*
101. LAB
XBRL Taxonomy Label Link base Document*
101. PRE
XBRL Extension Presentation Link base Document*
101. SCH
XBRL Taxonomy Extension Scheme Document*
(1)
Incorporated by reference to our Form 8-K filed on May 3, 2010
(2)
Incorporated by reference to our Registration Statement on Form S-1 filed on July 8, 2009
(3)
Incorporated by reference to our Form 8-K filed on June 4, 2010
(4)
Incorporated by reference to our Form 8-K filed on June 18, 2010
(5)
Incorporated by reference to our Form 8-K filed on October 6, 2010
(6)
Incorporated by reference to our Form S-1/A filed on October 21, 2010
(7)
Incorporated by reference to our Form S-8 filed on November 5, 2010
(8)
Incorporated by reference to our Form 8-K filed on November 17, 2010
(9)
Incorporated by reference to our Form 8-K filed on December 21, 2010
(10)
Incorporated by reference to our Form 8-K filed on January 10, 2011
(11)
Incorporated by reference to our Form 8-K filed on May 3, 2010
(12)
Incorporated by reference to our Form 10-K filed on March 30, 2012
(13)
Incorporated by reference to our Form 8-K filed on June 21, 2011
(14)
Incorporated by reference to our Form 8-K filed on December 27, 2011
(15)
Incorporated by reference to our Form 8-K filed on February 8, 2012
*   Filed herewith.
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(b) Financial Statement Schedules
No financial statement schedules are provided
because the information called for is not required or is shown either in the financial statements or the notes thereto.
Item 17.
Undertakings.
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, as amended (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 the purpose of determining any liability under the Securities Act of 1933, 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 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 the 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:
(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.
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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 Securities and Exchange Commission
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 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.
Each prospectus filed pursuant to Rule 424(b)
as part of a registration statement relating to an offering, other than registration statements relying on Rule 430B or other than
prospectuses filed in reliance on Rule 430A, shall be deemed to be part of and included in the registration statement as of the
date it is first used after effectiveness. Provided, however, that no statement made in a registration statement or prospectus
that is part of the registration statement or made in a document incorporated or deemed incorporated by reference into the registration
statement or prospectus that is part of the registration statement will, as to a purchaser with a time of contract of sale prior
to such first use, supersede or modify any statement that was made in the registration statement or prospectus that was part of
the registration statement or made in any such document immediately prior to such date of first use.
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SIGNATURES
Pursuant to the requirements of the Securities
Act, the Registrant has duly caused this Registration Statement to be signed on its behalf by the undersigned, thereunto duly authorized,
in the City of Newark, State of Delaware, on the 4th  day of May, 2012.
DEYU AGRICULTURE CORP.
By:
/s/ Jianming Hao
Jianming Hao, Principal Executive Officer, President, Chief Executive Officer and Chairman of the Board
Pursuant to the requirements of the Securities Act, this Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
Signatures
Title
Date
/s/ Jianming Hao
Principal Executive Officer, President, Chief Executive Officer and Chairman of the Board
May 4, 2012
Jianming Hao
/s/ Amy He
Principal Financial and Accounting Officer and Acting Chief Financial Officer
May 4, 2012
Amy He
/s/ Jianbin Zhou
Chief Operating Officer
May 4, 2012
Jianbin Zhou
/s/ Al Carmona
Independent Director
May 4, 2012
Al Carmona
/s/ Longjiang Yuan
Independent Director
May 4, 2012
Longjiang Yuan
/s/ Timothy Stevens
Independent Director
May 4, 2012
Timothy Stevens
/s/ Hong Wang
Director
May 4, 2012
Hong Wang
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