UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

þ	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended: June 30, 2011

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 0-53436

FUER INTERNATIONAL INC.

(Exact Name of Registrant as Specified in its Charter)

Nevada		84-0290243
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

Neiwei Road,

Fulaerji District, Qiqihar,

Heiloingjiang, China 161041

(Address of Principal Executive Offices and Zip Code)

86-0452-6969150

(Registrant’s Telephone Number, including Area Code)

N/A

(Former Name or Former Address, if Changed Since Last Report)

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

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

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 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

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

As of August 12, 2011, there were 12,958,031 shares of common stock, par value $0.001 per share, outstanding

EXPLANATORY NOTE

As used herein, unless otherwise expressly stated or the context otherwise requires, all references to “Fuer International,” “we,” “us,” “our,” “Company” and similar references are to Fuer International Inc. and its consolidated subsidiaries and variable interest entities.

In connection with this Quarterly Report on Form 10-Q, we have restated our previously issued unaudited consolidated financial statements and related disclosures for the quarter ended June 30, 2010 to properly record accrued shipping expenses and certain tax items.

We concluded that United States generally accepted accounting principles, or US GAAP, required us to reclassify our accrued shipping expenses. This Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2011, includes the corrections to our previously issued unaudited consolidated financial statements for the quarter ended June 30, 2010.

Generally, for the quarterly period ended June 30, 2010, this financial statement restatement has resulted in:

·	An increase in our selling and marketing expenses and a corresponding decrease in our income from operations;

·	A decrease in our non-operating income; and

·	A decrease in our net income of $162,656 for the three months ended June 30, 2010, and $433,727 for the six months ended June 30, 2010.

For a more detailed description of this financial statement restatement, see Note 2, “Adjustments to Previously Issued Financial Statements” to our unaudited consolidated financial statements and the section entitled “Restatement of Previously Issued Consolidated Financial Statements” in Management’s Discussion and Analysis of Financial Condition and Results of Operations contained in this Form 10-Q.

Throughout this Quarterly Report on Form 10-Q, all amounts presented from prior periods and prior period comparisons that have been revised are labeled “Restated” and reflect the balances and amounts on a restated basis.

TABLE OF CONTENTS

PART I – FINANCIAL INFORMATION

Item 1.	Financial Statements	4

	Consolidated Balance Sheets as of June 30, 2011 (Unaudited) and December 31, 2010	4

	Unaudited consolidated Statements of Operations and Comprehensive Income for the Three and Six Months Ended June 30, 2011 and 2010	5

	Unaudtied consolidated Statements of Cash Flows for the Six Months Ended June 30, 2011 and 2010	6

	Notes to Consolidated Financial Statements	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	24

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	37

Item 4.	Controls and Procedures	37

PART II – OTHER INFORMATION

Item 1A.	Risk Factors	39

Item 6.	Exhibits	39

	Signatures	40

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

FUER INTERNATIONAL INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	June 30,		December 31,
	2011		2010
	(Unaudited)
ASSETS
Current Assets
Cash and cash equivalents	$	17,790,386	$	2,454,583
Trade receivables, net		3,559,883		3,076,112
Other receivables		258,894		33,093
Inventories		1,050,862		8,751,884
Advances to suppliers		364,169		1,408,477
Biological assets		268,056		-
Current portion of prepaid leases		641,695		559,498
Total Current Assets		23,933,945		16,283,647

Property, plant and equipment, net		3,446,375		3,051,231
Construction in progress		-		24,318
Intangibles, net		653,464		370,088
Long term portion of prepaid leases		6,239,938		6,246,757
Total Assets	$	34,273,722	$	25,976,041

LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Short term debt	$	2,985,998	$	3,686,846
Accounts payable and accrued expenses		1,366,378		58,756
Other payables		97,341		354,988
Income tax payable		1,357,163		835,463
Total Liabilities		5,806,880		4,936,053

SHAREHOLDERS' EQUITY
Common stock, $0.001 par value; 20,000,000 shares authorized, 12,958,031 shares issued and outstanding as of June 30, 2011 and December 31, 2010, respectively.		12,958		12,958
Additional paid in capital		7,046,494		7,046,495
Statutory reserves		1,682,673		1,682,673
Retained earnings		17,493,930		10,557,736
Accumulated other comprehensive income		2,230,787		1,740,126
Total Shareholders' Equity		28,466,842		21,039,988
Total Liabilities and Shareholders' Equity	$	34,273,722	$	25,976,041

The accompanying notes are an integral part of the unaudited consolidated financial statements

FUER INTERNATIONAL INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(UNAUDITED)

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2011			2010			2011			2010
				(Restated)						(Restated)
Sales	$	5,855,873		$	3,633,913		$	28,712,721		$	18,943,542
Cost of goods sold		3,705,949			2,081,809			18,132,165			11,073,852
Gross profit		2,149,924			1,552,104			10,580,556			7,869,690

Operating and administrative expenses:
Selling and marketing		386,018			360,665			1,391,838			801,595
General and administrative		479,176			436,580			970,844			721,618
Total operating expenses		865,194			797,245			2,362,682			1,523,213
Income from operations		1,284,730			754,859			8,217,874			6,346,477

Other income (expenses):
Interest income		11,511			6,038			14,401			7,803
Interest expense		(58,785	)		(28,406	)		(126,597	)		(56,445	)
Other income (expenses)		-			(23,914	)		-			(23,910	)
Non operating income (expenses)		358			39,219			60,661			75,788
Other income (expenses), total		(46,916	)		(7,063	)		(51,535	)		3,236

Income before income tax		1,237,814			747,796			8,166,339			6,349,713
Income tax expenses (benefit)		136,787			(313,043	)		1,230,145			527,323
Net income		1,101,027			1,060,839			6,936,194			5,822,390

Other comprehensive income:
Foreign currency translation adjustments		750,887			76,000			620,774			75,303
Comprehensive income	$	1,851,914		$	1,136,839		$	7,556,968		$	5,897,693

Earnings per share:
Basic	$	0.08		$	0.09		$	0.54		$	0.48
Diluted	$	0.08		$	0.08		$	0.51		$	0.46

Weighted average number of shares issued and outstanding:
Basic		12,958,031			12,095,881			12,958,031			12,017,940
Diluted		13,473,947			12,611,797			13,473,947			12,533,856

The accompanying notes are an integral part of the unaudited consolidated financial statements

FUER INTERNATIONAL INC. AND SUBSIDIARIES

CONSLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

	For the Six Months Ended June 30,
	2011			2010
				(Restated)
Cash flow from operating activities:
Net income	$	6,936,194		$	5,822,390
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation		123,767			102,779
Amortization of intangible assets and prepaid leases		355,531			18,715
Changes in current assets and liabilities
Trade receivables		(418,282	)		(1,444,586	)
Other receivables		(222,565	)		274,208
Inventories		7,784,182			6,880,200
Advances to suppliers		1,059,909			2,340,067
Prepaid leases		(241,399	)		(439,047	)
Biological assets		(265,010	)		(48,707	)
Accounts payable and accrued expenses		1,291,615			686,557
Advances from customers		-			(269,304	)
Other payables		(261,374	)		83,105
Income tax payables		499,478			283,508
Net cash provided by operating activities		16,642,046			14,289,885

Cash flow from investing activities:
Purchase of property, plant and equipment		(430,400	)		(44,540	)
Purchase of intangible assets		(328,857	)		(124,365	)
Net cash used in investing activities		(759,257	)		(168,905	)

Cash flow from financing activities:
Proceeds from issuance of common stock		-			2,500,000
Repayment of short term loan		(764,783	)		(951,024	)
Net cash (used in) provided by financing activities		(764,783	)		1,548,976

Effect of exchange rate on cash		217,797			59,836
Net increase in cash and cash equivalents		15,335,803			15,729,792
Cash and cash equivalents - beginning of period		2,454,583			155,425
Cash and cash equivalents - end of period	$	17,790,386		$	15,885,217

Supplemental disclosure of cash flow information
Interest paid	$	104,476		$	56,257
Income taxes paid	$	730,514		$	243,815

The accompanying notes are an integral part of the unaudited consolidated financial statements

FUER INTERNATIONAL INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

NOTE 1 – ORGANIZATION AND NATURE OF OPERATION

The consolidated financial statements include the financial statements of Fuer International Inc. (referred to herein as “Fuer International”), its subsidiaries, and variable interest entities (“VIE”) where Fuer International is deemed the primary beneficiary. Fuer International, its consolidated subsidiaries and VIEs are collectively referred to herein as the “Company.” The Company produces and distributes corn seeds, rice seeds, soybean seeds, humic fertilizer and plant additives.

Fuer International was incorporated in Nevada on February 8, 1984. On July 28, 2010, the Company changed its name from “Forex365, Inc.” to “Fuer International Inc.” On June 16, 2010, Fuer International entered into a Share Exchange Agreement (the “Exchange Agreement”) with China Golden Holdings, Ltd., a company organized under the laws of the British Virgin Islands (“China Golden”), and the shareholders of China Golden, who together owned shares constituting 100% of the issued and outstanding common shares of China Golden. Pursuant to the terms of the Exchange Agreement, the China Golden shareholders transferred to the Company all of the China Golden shares in exchange for the issuance of 11,550,392 shares of the Company’s common stock (the “Share Exchange”). As a result of the Share Exchange, China Golden became the Company’s wholly-owned subsidiary and the China Golden shareholders acquired approximately 96.47% of the Company’s issued and outstanding stock.

The Share Exchange constituted a reorganization of the entities for accounting purposes and was deemed to be a reverse acquisition. Subsequent to the Share Exchange the financial statements presented are those of a consolidated China Golden and its subsidiaries, including their VIE, as if the Share Exchange had been in effect retroactively for all periods presented.

China Golden was incorporated in the British Virgin Islands on November 30, 2009 as a limited liability company. Its wholly owned subsidiary, Qiqihar Deli Enterprise Management Consultancy Co., Ltd. (“Deli”) was incorporated in Heilongjiang, People’s Republic of China (“PRC”) on February 10, 2010 as a limited liability company. Other than the equity interest in Deli, China Golden does not own any assets or conduct any operations.

Qiqihar Fuer Agronomy Inc. (“Qiqihar Fuer”) was incorporated in the Heilongjiang Province, in the PRC on March 18, 2003. Qiqihar Fuer is a provider of corn seeds, rice seeds, soybean seeds, humic fertilizer and plant additives that distributes products through its distributors to farmers located primarily in the PRC provinces of Heilongjiang, Jilin, Inner Mongolia and other provinces of PRC. Qiqihar Fuer breeds its proprietary seeds through farmers under contractual agreements. Qiqihar Fuer also distributes humic fertilizer, plant additives as well as pesticides, germicides and herbicides. Deli, through a series of contractual arrangements, has the ability to substantially influence the daily operations and financial affairs of Qiqihar Fuer, in addition to being able to appoint Qiqihar Fuer’s senior executives and approve all matters requiring shareholder approval. The structure of the contractual arrangements are such that Qiqihar Fuer is effectively a VIE of Deli. Accordingly, Fuer International, through its wholly-owned subsidiaries, consolidates Qiqihar Fuer’s results of operation, assets and liabilities in its financial statements. Hereafter, Fuer International, China Golden, Deli and Qiqihar Fuer are collectively referred to as “the Company” unless specific reference is made to an individual entity. Deli and Qiqihar Fuer are both controlled by the same majority shareholders.

As of June 30, 2011 the consolidated affiliates of Fuer International Inc. were as follows:

Name	Domicile and Date of Incorporation	Paid-in Capital		Percentage of Effective Ownership	Principal Activities
Fuer International Inc.	February 8, 1984, Nevada	USD	12,958	56.55% owned by Oriental Agriculture Inc., 43.45% owned by other institutional and individual investors	Investment Holding

China Golden Holdings, Ltd.	November 30, 2009, British Virgin Island	USD	50,000	100% owned by Fuer International Inc.	Investment Holding

Qiqihar Deli Enterprise Management Consultancy Co., Ltd.	February 10, 2010, PRC	USD	2,100,000	100% owned by China Golden	Advisory

Qiqihar Fuer Agronomy Inc.	March 18, 2003, PRC	RMB	35,100,000	100% owned by Zhang Li and Liu Yuhua Deemed as a variable interest entity through contractual agreements with Deli	Production and distribution of seeds, fertilizers and distribution of pesticides, germicides and herbicides

Chinese laws and regulations currently restrict foreign ownership in a seed producing company. The Company entered into the contractual agreements described below on March 25, 2010 in an effort to address these foreign ownership restrictions.

Based on these exclusive agreements, the Company consolidates the variable interest entity (“VIE”), Qiqihar Fuer, as required by generally accepted accounting principles in the United States (“US GAAP”), because the Company is the primary beneficiary of the VIE. The profits and losses of the Company are allocated based upon the exclusive business cooperation agreement.

The followings are brief descriptions of the contractual agreements entered between Deli and Qiqihar Fuer:

Exclusive Business Cooperation Agreement. Pursuant to the exclusive business cooperation agreement between Deli and Qiqihar Fuer, Deli has the exclusive right to provide to Qiqihar Fuer general business operation services, including advice and strategic planning, as well as consulting services related to the technological research and development of Qiqihar Fuer’s products (the “Services”). Under this agreement, Deli owns the intellectual property rights developed or discovered through research and development, in the course of providing the Services, or derived from the provision of the Services. Qiqihar Fuer shall pay consulting service fees in Renminbi (“RMB”) to Deli equal to all of Qiqihar Fuer’s profits as defined in the Exclusive Option Agreement. The term of the agreement is 10 years. Termination or renewal of the agreement is determined by Deli and shall have binding force upon Qiqihar Fuer.

Equity Pledge Agreement. Under the equity pledge agreement between Qiqihar Fuer’s shareholders and Deli, Qiqihar Fuer’s shareholders pledged all of their equity interests in Qiqihar Fuer to Deli to guarantee Qiqihar Fuer’s performance of its obligations under the Exclusive Option Agreement. If Qiqihar Fuer or Qiqihar Fuer’s shareholders breach their respective contractual obligations, Deli, as pledgee, will be entitled to certain rights, including the right to sell the pledged equity interests. Qiqihar Fuer’s Shareholders also agreed that upon the occurrence of any event of default, Deli shall be granted an exclusive, irrevocable power of attorney to take actions in the place and stead of Qiqihar Fuer’s shareholders to carry out the security provisions of the equity pledge agreement and take any action and execute any instrument that Deli may deem necessary or advisable to accomplish the purposes of the equity pledge agreement. Qiqihar Fuer’s shareholders agreed not to dispose of the pledged equity interests or take any actions that would undermine Deli’s interest.

Exclusive Option Agreement. Under the exclusive option agreement between Qiqihar Fuer’s shareholders and Deli, Qiqihar Fuer’s shareholders irrevocably granted Deli or its designated person an exclusive option to purchase, to the extent permitted under PRC law, all or part of the equity interests in Qiqihar Fuer for the cost of the initial contributions to the registered capital of Qiqihar Fuer or the minimum amount of consideration permitted by applicable PRC law. Deli or its designated person has sole discretion to decide when to exercise the option, whether in part or in full. The term of this agreement is 10 years, and shall be renewed at Deli’s election, unless terminated in accordance with this agreement.

Loan Agreement. Under the Loan Agreement, the shareholders of Qiqihar Fuer borrowed RMB 10,000,000 from Deli, for the purpose of increasing the paid-in capital of Qiqihar Fuer. In addition, shareholders of Qiqihar Fuer agreed to (1) enter into the aforementioned contractual agreements with Deli; (2) appoint directors as nominated by Deli; and (3) maintain the value of its assets. Also included in this agreement, unless consented by Deli, Qiqihar Fuer agreed not to: (1) purchase and dispose of any and assets; (2) enter into any material agreements with any third party within its operating activities; or (3) declare any dividends to its shareholders.

The accounts of Qiqihar Fuer are consolidated in the accompanying consolidated financial statements pursuant to Accounting Standards Codification Topic 810, “Consolidation,” as of June 30, 2011 and December 31, 2010. As a VIE, Qiqihar Fuer’s sales are included in the Company’s total sales, its income from operations is consolidated with the Company’s, and the Company’s net income includes all of Qiqihar Fuer’s net income. The Company does not have any non-controlling interest and, accordingly, did not subtract any net income in calculating the net income attributable to the Company.

NOTE 2 – ADJUSTMENTS TO PREVIOUSLY ISSUED FINANCIAL STATEMENTS

The Company’s management, with concurrence from the Company’s Board of Directors, concluded that the financial statements contained in the Company’s quarterly report on Form 10-Q for the quarterly period ended June 30, 2010 should be restated to properly record accrued shipping expenses and certain tax items.

The Company accounts for the correction of an error in previously issued financial statements in accordance with the provisions of ASC Topic 250, Accounting Changes and Error Corrections. In accordance with the disclosure provisions of ASC 250, when financial statements are restated to correct an error, an entity is required to disclose that its previously issued financial statements have been restated along with a description of the nature of the error, the effect of the correction on each financial statement line item and any per share amount affected for each prior period presented, and the cumulative effect on retained earnings or other appropriate component of equity or net assets in the statement of financial position, as of the beginning of the earliest period presented.

Throughout this quarterly report on Form 10-Q, all amounts presented from prior periods and prior period comparisons that have been revised reflect the balances and amounts on a restated basis.

The specific line-item effect of the restatement on the Company’s previously issued unaudited consolidated financial statements as of and for the quarter ended June 30, 2010 are as follows:

Consolidated Balance Sheet as of June 30, 2010:

	Note		Previously reported		Correction of Errors			As Restated
ASSETS
Current Assets
Cash and cash equivalents			$	15,885,217				$	15,885,217
Restricted cash				220,904					220,904
Trade receivables, net				3,525,243					3,525,243
Other receivables, net				109,767					109,767
Inventories				847,373					847,373
Advances to suppliers				332,541					332,541
Biological assets				42,047					42,047
Current portion of prepaid leases				27,561					27,561
Total Current Assets				20,990,653		-			20,990,653

Property, plant and equipment, net				2,692,429					2,692,429
Intangibles, net				294,394					294,395
Prepaid leases				406,282					406,281
Total Assets			$	24,383,758		-		$	24,383,758

LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Short term debt			$	1,248,421				$	1,248,421
Accounts payable and accrued expenses		a		659,673	$	536,972			1,196,645
Advances from customers				34,608					34,608
Other payables				84,633					84,633
Income tax payable		b		984,705		(101,580	)		883,125
Total Liabilities				3,012,040		435,392			3,447,432

SHAREHOLDERS' EQUITY
Common stock, $0.001 par value; 20,000,000 shares authorized, 12,958,031 shares issued and outstanding as of June 30, 2010				12,958					12,958
Additional paid in capital				7,045,195					7,045,195
Statutory reserves		c		1,751,456		(639,337	)		1,112,119
Retained earnings		d		11,414,608		205,610			11,620,218
Accumulated other comprehensive income		e		1,147,501		(1,665	)		1,145,836
Total Shareholders' Equity				21,371,718		(435,392	)		20,936,326
Total Liabilities and Shareholders' Equity			$	24,383,758	$	-		$	24,383,758

Notes:

(a)

Accounts payable and accrued expenses was increased by $536,972, representing a correction of accrued shipping expense.

(b)

Current income tax payable was decreased by $101,579, related to under accrued shipping expenses.

(c)

Statutory reserves were decreased by $639,337, representing of a reverse of appropriation of statutory reserve.

(d)

Retained earnings was increased by $205,610, reflecting the factors stated above.

(e)

Foreign currency translation adjustments were decreased by $1,665, representing effects of adjustments stated above.

Consolidated Statement of Operations for the Six Months Ended June 30, 2010:

	Note		Previously reported			Reclassification			Correction of Errors			As Restated

Sales			$	18,943,542								$	18,943,542
Cost of goods sold				11,073,852									11,073,852
Gross profit				7,869,690									7,869,690

Operating and administrative expenses:
Sales and marketing		a		266,677					$	534,918			801,595
General and administrative				721,618									721,618
Total operating expenses				988,295						534,918			1,523,213

Income from operations				6,881,395									6,346,477

Other income (expenses):
Interest income				7,803									7,803
Interest expense				(56,445	)								(56,445	)
Other income, net				(23,910	)								(23,910	)
Non operating income (expenses)		b		500,922		$	(425,134	)					75,788
Other income (expenses), total				428,370			(425,134	)		(534,918	)		3,236

Income before income tax				7,309,765									6,349,713
Income tax expenses		b, c		1,053,648			(425,134	)		(101,191	)		527,323
Net income				6,256,117			-			(433,727	)		5,822,390

Other comprehensive income:
Foreign currency translation adjustments		d		76,968			(388	)		(1,277	)		75,303
Comprehensive income			$	6,333,085		$	(388	)	$	(435,004	)	$	5,897,693

Earnings per share
Basic			$	0.52		$	-		$	(0.04	)	$	0.48
Diluted			$	0.50		$	-		$	(0.03	)	$	0.46

Weighted average number of shares issued and outstanding
Basic				12,017,940									12,017,940
Diluted				12,533,856									12,533,856

Notes:

(a)

Sales and marketing expenses was increased by $534,918, representing a correction of accrued shipping expense.

(b)

Non operating income was decreased by $425,134, representing reclassification of adjusted enterprise income tax favor for 2009.

(c)

Current income tax expense was decreased by $101,191, related to under accrued shipping expenses.

(d)

Foreign currency translation adjustments were decreased by $388 and $1,277, representing effects of adjustments stated above.

Consolidated Statement of Operations for the Three Months Ended June 30, 2010:

	Note		Previously reported			Reclassification			Correction of Errors			As Restated

Sales			$	3,633,913								$	3,633,913
Cost of goods sold				2,081,809									2,081,809
Gross profit				1,552,104									1,552,104

Operating and administrative expenses:
Sales and marketing		a		143,626					$	217,039			360,665
General and administrative				436,580									436,580
Total operating expenses				580,206						217,039			797,245

Income from operations				971,898									754,859

Other income (expenses):
Interest income				6,038									6,038
Interest expense				(28,406	)								(28,406	)
Other income, net				(23,914	)								(23,914	)
Non operating income (expenses)		b		464,431		$	(425,212	)					39,219
Other income (expenses), total				418,149			(425,212	)		(217,039	)		(7,063	)

Income before income tax				1,390,047									747,796
Income tax expenses		b, c		(166,552	)		425,212			54,383			(313,043	)
Net income				1,223,495			-			(162,656	)		1,060,839

Other comprehensive income:
Foreign currency translation adjustments		d		75,005			199			796			76,000
Comprehensive income			$	1,298,500		$	199		$	(161,860	)	$	1,136,839

Earnings per share
Basic			$	0.10		$	-		$	(0.01	)	$	0.09
Diluted			$	0.10		$	-		$	(0.01	)	$	0.08

Weighted average number of shares issued and outstanding
Basic				12,095,881									12,095,881
Diluted				12,611,797									12,611,797

Notes:

(a)

Sales and marketing expenses was increased by $217,039, representing a correction of accrued shipping expense.

(b)

Non operating income was decreased by $425,212, representing reclassification of adjusted enterprise income tax favor for 2009.

(c)

Current income tax expense was decreased by $54,383 related to under accrued shipping expenses.

(d)

Foreign currency translation adjustments was increased by $199 and $796, representing adjustment stated above.

Consolidated Statement of Cash Flows for the Six Months Ended June 30, 2010:

	Note		Previously reported			Correction of Errors			As Restated
Cash flow from operating activities:
Net income		a	$	6,256,117		$	(433,727	)	$	5,822,390

Adjustments to reconcile net income to net cash provided by operating activities
Depreciation				102,779						102,779
Amortization		b		11,851			6,864			18,715
Non cash income		c		(425,134	)		425,134			-
Changes in current assets and liabilities
Trade receivables				(1,444,586	)					(1,444,586	)
Other receivables				274,208						274,208
Inventories				6,880,200						6,880,200
Advances to suppliers				2,340,067						2,340,067
Biological assets				(48,707	)					(48,707	)
Increase in prepaid leases				(439,047	)					(439,047	)
Accounts payable and accrued expenses		d		151,639			534,918			686,557
Advances from customers				(269,304	)					(269,304	)
Other payables				83,105						83,105
Income tax payables		e		809,833			(526,325	)		283,508
Net cash provided by operating activities				14,283,021			6,864			14,289,885

Cash flow from investing activities:
Purchase of property, plant and equipment				(44,540	)					(44,540	)
Purchase of intangible assets				(124,365	)					(124,365	)
Net cash used in investing activities				(168,905	)		-			(168,905	)

Cash flow from financing activities:
Proceeds from issuance of common stock				2,500,000						2,500,000
Repayment of short term loans				(951,024	)					(951,024	)
Net cash providede by financing activities				1,548,976			-			1,548,976

Foreign currency translation adjustment		f		66,700			(6,864	)		59,836
Net increase in cash and cash equivalents				15,729,792						15,729,792
Cash and cash equivalents - beginning of period				155,425						155,425
Cash and cash equivalents - end of period			$	15,885,217		$	-		$	15,885,217

Supplemental disclosure of cash flow information
Interest paid			$	56,257					$	56,257
Income taxes paid			$	243,815					$	243,815

Notes:

(a)

Net income was decreased by $433,727, representing a correction of accrued shipping expense and adjustment of overstated enterprise income tax.

(b)

Amortization was increased by $6,864, representing correction of amortization for prepaid leases.

(c)

Non cash income was increased by $425,134, representing reclassification adjustment for tax favor for 2009 as discussed above.

(d)

Change in accounts payable and accrued expenses was increased by $534,918, reflecting a correction of accrued shipping expense

(e)

Change in income tax payable was decreased by $526,325, reflecting reclassification of tax favor for 2009 and correction of over accrued enterprise income tax.

(f)

Foreign currency translation adjustment was decreased by $6,864, representing adjustment stated above.

NOTE 3 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

(a)

Basis of presentation

Management acknowledges its responsibility for the preparation of the accompanying consolidated financial statements which reflect all adjustments, consisting of normal recurring adjustments, considered necessary in its opinion for a fair statement of its financial position and the results of its operations for the years presented. The accompanying consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). This basis differs from that used in the statutory accounts in the PRC, which are prepared in accordance with the accounting principles and relevant financial regulations applicable to enterprises in the PRC. All significant intercompany accounts and transactions have been eliminated in consolidation. All necessary adjustments have been made to present the Company’s consolidated financial statements in accordance with U.S. GAAP. The Company’s functional currency is the Chinese Renminbi (“RMB”); however the accompanying consolidated financial statements have been translated and presented in United States Dollars (“USD”). All significant inter-company transactions and balances have been eliminated. The financial statements include all adjustments that, in the opinion of management, are necessary to make the financial statements not misleading.

(b)

Unaudited Financial Statements

The accompanying consolidated financial statements are unaudited. In the opinion of management, all necessary adjustments (which include only normal recurring adjustments) have been made to present fairly the financial position, results of operations and cash flows for the periods presented. Certain information and footnote disclosure normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. However, the Company believes that the disclosures are adequate to make the information presented not misleading. These consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements and notes thereto for the years ended December 31, 2010 and 2009. The results of operations for the three and six months ended June 30, 2011 and 2010 are not necessarily indicative of the operating results to be expected for the full year ended December 31, 2011, or that which was achieved in the year ended December 31, 2010.

(c)

Principles of consolidation

Pursuant to US GAAP, Qiqihar Fuer is a VIE of Deli and the Company is the primary beneficiary of the VIE. Accordingly, Qiqihar Fuer has been consolidated in the Company’s financial statements.

Based on various VIE agreements, the Company is able to excise control over Qiqihar Fuer; and has the exclusive right to obtain the full financial interests of QiqiharFuer, such as obtaining periodic income through the Exclusive Business Cooperation Agreements and obtaining the net assets of Qiqihar Fuer through purchase of their equities at essentially a no cost basis. There is no non-controlling interest held by other parties in Qiqihar Fuer, Deli and China Golden.

(d)

Business Segment

The Company operates in one business segment, as a provider and distributor of field seeds, fertilizers, and herbicides. The Company’s revenue is generated from its sales directly to farmers, through company-owned retail establishments and through its branded retail stores. The Company’s revenue is derived exclusively from the sales of corn seeds, rice seeds, soybean seeds, fertilizers and herbicides. Substantially all of the Company’s sales and operations are conducted in the PRC with an emphasis in the northeast of China.

(e)

Use of estimates

The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses, and the related disclosures at the date of the financial statements and during the reporting period. Actual results could materially differ from these estimates. Significant estimates in the reported financial statements include the allowance for doubtful accounts and the useful life of property and equipment.

(f)

Foreign currency translation

The Company primarily operates in the PRC. The financial position and results of operations of the subsidiaries are determined using the local currency (“Renminbi” or “RMB”) as the functional currency.

Translation from RMB into United States dollars (“USD” or “$”) for reporting purposes is performed by translating the results of operations denominated in the foreign currency at the weighted average rates of exchange during the reporting periods. Assets and liabilities denominated in foreign currencies at the balance sheet dates are translated at the market rate of exchange in effect at that date. The registered equity capital denominated in the functional currency is translated at the historical rate of exchange at the time of capital contribution. All translation adjustments resulting from the translation of the financial statements into USD are reported as a component of accumulated other comprehensive income in shareholders’ equity. The exchange rates used in translation from RMB to USD amount was published by People’s Bank of the People’s Republic of China.

	2011	2010
Balance sheet items, except for the registered and paid-in capital and retained earnings as of June 30, 2011 and December 31, 2010	US$1=RMB6.4635	US$1=RMB6.8086

Amounts included in the statements of operations, and statements of cash flows for the six months ended June 30, 2011 and 2010	US$1=RMB6.5378	US$1=RMB6.83474

For the three months ended June 30, 2011 and 2010, foreign currency translation adjustments of $750,887 and $76,000, respectively, have been reported as comprehensive income in the consolidated financial statements and for the six months ended June 30, 2011 and 2010, foreign currency translation adjustments of $620,774 and a gain of $75,303, respectively, have been reported as comprehensive income in the consolidated financial statements.

(g)

Fair value of financial instruments

The Company adopted the guidance of Accounting Standards Codification (“ASC”) 820 “Fair Value Measurement and Disclosure” for fair value measurements, which clarifies the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows:

Level 1-Inputs are unadjusted quoted prices in active markets for identical assets or liabilities available at the measurement date.

Level 2-Inputs are unadjusted quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, inputs other then quoted prices that are observable, and inputs derived from or corroborated by observable market data.

Level 3-Inputs are unobservable inputs which reflect the reporting entity’s own assumptions on what assumptions the market participants would use in pricing the asset or liability based on the best available information.

The carrying amounts reported in the consolidated balance sheets for cash and cash equivalents, trade receivables, other receivable, accounts payable, other payables, and income tax payables approximate their fair market value based on the short-term maturity of these instruments. As of June 30, 2011, the Company did not identify any assets or liabilities that were required to be presented on the balance sheets at fair value in accordance with the new accounting guidance.

ASC 825-10 “Financial Instruments,” allows entities to voluntarily choose to measure certain financial assets and liabilities at fair value (fair value option). The fair value option may be elected on an instrument-by-instrument basis and is irrevocable, unless a new election date occurs. If the fair value option is elected for an instrument, unrealized gains and losses for that instrument should be reported in earnings at each subsequent reporting date. The Company did not elect to apply the fair value option to any outstanding instruments.

(h)

Cash and cash equivalents

For purposes of the consolidated statements of cash flows, the Company considers all highly liquid instruments purchased with a maturity of three months or less and money market accounts to be cash equivalents. The Company maintains cash and cash equivalents with various financial institutions in the PRC and balances are uninsured.

(i)

Concentrations of credit risk

The Company's operations are carried out in the PRC. Accordingly, the Company's business, financial condition and results of operations may be influenced by the political, economic and legal environment in the PRC, and by the general state of the PRC's economy. The Company's operations in the PRC are subject to specific considerations and significant risks not typically associated with companies in North America. The Company's results may be adversely affected by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things. No customer accounted for over 10% of the Company’s total sales for the three and six months ended June 30, 2011 and 2010.

Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash and trade accounts receivable. Substantially all of the Company’s cash is maintained with state-owned banks within the PRC, and no deposits are covered by insurance. The Company has not experienced any losses in such accounts and does not believe it is exposed to material risk with respect to its cash in bank accounts.

(j)

Trade receivables

Trade receivables are presented net of an allowance for doubtful accounts. The Company maintains allowances for doubtful accounts for estimated losses. The Company reviews its trade receivables on a periodic basis and makes general and specific allowances when there is doubt as to the collectability of individual balances. In evaluating the collectability of individual receivable balances, the Company considers many factors, including the age of the balance, the customer’s historical payment history, its current credit-worthiness and current economic trends. Accounts are written off after efforts at collection. As of June 30, 2011 and December 31 2010, the Company had an allowance for doubtful accounts of $378,460 and $371,139, respectively.

(k)

Other receivables, net

Other receivables consist of travel and business advances to employees. The amounts advanced under such arrangements totaled $258,894 and $33,093 as of June 30, 2011 and December 31, 2010, respectively. Included in these advances were funds that permitted employees to launch promotional activities. The Company has not experienced any losses with other receivables during its operating history, and made no allowances for other receivables.

(l)

Inventories

Inventories, consisting of raw materials and finished goods acquired from third party vendors, are stated at the lower of cost, determined on a weighted average basis, or net realizable value. Raw materials are recognized at the purchase price, and consist primarily of seeds, fertilizers, pesticides, and packaging materials. Costs of finished goods are composed of raw materials, direct labor and an attributable portion of manufacturing overhead. Inclusive in manufacturing overhead is amortization expense of intangible assets acquired to secure certain varieties of seeds that are exclusive for the Company’s use and sale. Minimal process is applied to raw material seeds, fertilizers, and pesticides to convert them into finished goods, as raw materials are primarily in a customer usable state. Raw materials are packaged for the specification and needs of the Company’s customers, inclusive of its distributors and branded retail establishments. Inventories are accounted for under the weighted average basis during the reporting period. Net realizable value is the estimated selling price, in the ordinary course of business, less estimated costs to complete and dispose. Management also regularly evaluates the composition of its inventories to identify slow-moving and obsolete inventories to determine if valuation allowance is required. The Company has not recorded an inventory reserve as of June 30, 2011 and December 31, 2010, respectively.

(m)

Advance to suppliers

Advances to suppliers represent the cash paid in advance for purchasing of inventory items from suppliers. The advance payments are designed to provide the Company preferential pricing and delivery. The amounts advanced under such arrangements totaled $364,169 and $1,408,477 as of June 30, 2011 and December 31, 2010, respectively.

(n)

Property, plant and equipment

Property, plant and equipment are carried at cost and are depreciated on a straight-line basis over the estimated useful lives of the assets. The cost of repairs and maintenance is expensed as incurred; major replacements and improvements are capitalized. When assets are retired or disposed of, the cost and accumulated depreciation are removed from the accounts, and any resulting gains or losses are included in income in the year of disposition. The Company examines the possibility of decreases in the value of fixed assets when events or changes in circumstances reflect the fact that their recorded value may not be recoverable.

Depreciation of property and equipment is provided using the straight-line method for substantially all assets with estimated lives as follows:

Buildings	20 years
Operating equipment	5 -10 years
Office equipment	3 years
Vehicles	4 years

(o)

Prepaid leases

Leases where substantially all the risks and rewards of ownership of assets remain with the lessor are accounted for as operating leases. Payments made under operating leases net of any incentives received from the lessor are charged to the consolidated statements of operations on a straight-line basis over the terms of the underlying lease.

The Company records lease payments at cost less accumulated amortization and amount that to be amortized within one year. The amount to be amortized within one year is recorded as current portion of prepaid leases. As China’s regulations prohibit companies from acquiring land use right of farmlands, the Company entered into long term agreements with certain unrelated parties to rent land. The rental payments for the entire contract period are prepaid at the inception of leases. The rental payments are recorded as operating lease expenses using the straight line method during the contract period, varying from 5 to 12 years.

The operating lease expenses for the six months ended June 30, 2011 and 2010 amounted to $299,613 and $6,864, respectively, and for the three months ended June 30, 2011 and 2010 totaled $159,572 and $6,864, respectively.

(p)

Impairment of long-lived assets

The Company reviews long-lived assets for impairment on an annual basis, or whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable. The Company recognizes an impairment loss when the sum of expected undiscounted future cash flows is less than the carrying amount of the asset. The amount of impairment is measured as the difference between the asset’s estimated fair value and its book value. The Company did not record any impairment charges for the three and six months ended June 30, 2011.

(q)

Income taxes

The Company is governed by the Income Tax Law and associated legislations of the People’s Republic of China. Income taxes are accounted for under Accounting Standard Codification Topic 740 (ASC 740), “Income Taxes”, which is an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Company's financial statements or tax returns. Current tax is the expected tax payable on the taxable income for the current year, using tax rates enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years. ASC 740 additionally requires the establishment of a valuation allowance to reflect the likelihood of realization of deferred tax assets. Realization of deferred tax assets is dependent upon future earnings, if any, of which the timing and amount are uncertain.

According to ASC 740, the evaluation of a tax position is a two-step process. The first step is to determine whether it is more likely than not that a tax position will be sustained upon examination, including the resolution of any related appeals or litigation based on the technical merits of that position. The second step is to measure a tax position that meets the more-likely-than-not threshold to determine the amount of benefit to be recognized in the financial statements. A tax position is measured at the largest amount of benefit that is greater than 50% likelihood of being realized upon ultimate settlement. Tax positions that previously failed to meet the more-likely-than-not recognition threshold should be recognized in the first subsequent period in which the threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not criteria should be de-recognized in the first subsequent financial reporting period in which the threshold is no longer met. ASC 740 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosures, and transition.

(r)

Revenue recognition

The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the purchase price is fixed or determinable and collectability is reasonably assured. The Company recognizes revenues from the sale of seeds, fertilizers, pesticides, germicides and herbicides upon shipment to the distributors and transfer of title. All sales are FOB shipping point.

Historically, the Company has not offered sales returns to their customers or distributors subsequent to acceptance of goods by their customers or distributors. Based on previous prior year performance, the Company has not experienced significant dissatisfaction with any of its products. In certain instances, when customers or distributors reported negative results from the usage of the Company’s products, the Company has allowed credits to be issued to these customers or distributors on a limited basis. The Company issuance of credits during the three and six months ended June 30, 2011 and 2010 has been minimal. The Company has not accrued such potential customer credit as of June 30, 2011 and December 31, 2010 based on the Company’s previous positive experience with products sold.

(s)

Cost of goods sold

Cost of goods sold primarily consists of direct and indirect manufacturing costs, including production overhead costs.

(u)

Shipping expense

Shipping costs are classified into selling and marketing expenses. For the six months ended June 30, 2011 and 2010, shipping expense totaled $766,403 and $522,166, respectively. For the three months ended June 30, 2011 and 2010, shipping expense totaled $59,176 and $180,755, respectively.

(v)

Employee benefits

The Company’s operations and employees are all located in the PRC. The Company makes mandatory contributions to the PRC government’s health, retirement benefit and unemployment funds in accordance with the relevant Chinese social security laws, which is approximately 25% of salaries. For the three months ended June 30, 2011 and 2010, the costs of these payments were charged to general and administrative expenses in the same period as the related salary costs and amounted to $152,271 and $58,446, respectively. For the six months ended June 30, 2011 and 2010, the costs of these payments were charged to general and administrative expenses in the same period as the related salary costs and amounted to $249,743 and $115,360, respectively.

(w)

Advertising

Advertising is expensed as incurred and is included in selling and marketing expenses on the accompanying consolidated statement of operations. For the six months ended June 30, 2011 and 2010, advertising expense amounted to $378,807 and $110,134, respectively. For the three months ended June 30, 2011 and 2010, advertising expense amounted to $74,958 and $81,373, respectively.

(x)

Accumulated other comprehensive income

Comprehensive income is comprised of net income and all changes to the statements of shareholders’ equity, except those due to investments by shareholders, changes in paid-in capital and distributions to shareholders. Comprehensive income for the periods ended June 30, 2011 and 2010 included net income and unrealized gains from foreign currency translation adjustments. As of June 30, 2011 and December 31, 2010 accumulated comprehensive income was $2,230,787 and $1,740,126, respectively.

(y)

Stock-based compensation

Stock-based compensation is accounted for based on the requirements of the share-based payment topic of Accounting Standards Codification (“ASC”) Topic 718, which requires recognition in the financing statements of the cost of employee and director services received in exchange for an award of equity instruments over the period the employee or director is required to perform the services in exchange for the award (presumptively, the vesting period). The ASC also requires measurement of the cost of employee and director services received in exchange for an award based on the grant-date fair value of the award.

For share-based payments to consultants and other third-parties, compensation expenses are determined at the “measurement date.” The expense is recognized over the vesting period of the award. Until the measurement date is reached, the total amount of compensation expense remains uncertain. The Company records compensation expense based on the fair value of the award at the reporting date. The awards to consultants and other third-parties are then revalued, or the total compensation is recalculated based on the then current fair value, at each subsequent reporting date. For the three and six months ended June 30, 2011, and 2010, stock based compensation expenses were nil.

(z)

Biological assets

Biological assets are purchased seeds that management believes will produce plants, that in-turn will produce seed products which when sold to their customers, will allow the Company’s customers to grow faster and better quality crops. The costs to purchase these seeds, cultivate the seedlings and resulting plants, fertilizer and other products used to grow the seedlings and resulting plants, labor to cultivate the seedlings and resulting plants, and the amortized portion of prepaid rent allocated to the land used to cultivate these biological assets are capitalized as biological assets until they become commercially viable.

When these biological assets become plants that are bearing fruits and seeds, amortization of the costs of these biological assets commences. This amortization is capitalized into inventory as work in process - biological assets. If these biological assets ultimately result in the cultivation of plants that produce seeds, which are deemed appropriate for internal breeding purposes, the planting costs until fruiting for these biological assets are then re-allocated into biological assets.

If management determines that biological assets are not growing in accordance to desired results, at such time, management impairs the biological assets to the extent that desired results are not achieved. Amortized expenses pertaining to biological assets are included in inventory costs for those plants to be sold and ultimately become a component of cost of goods sold. As of June 30, 2011 and December 31, 2010, the biological assets were $268,056 and $0, respectively.

(aa)

Recently issued accounting pronouncements

In June 2011, the Financial Accounting Standards Board (“FASB”) issued authoritative guidance that provides an entity the option of presenting total of comprehensive income, the components of net income, and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separate but consecutive statements. In both choices, an entity is required to present each component of net income along with total net income, each component of other comprehensive income along with a total for other comprehensive income, and a total amount for comprehensive income. The guidance eliminates the option of presenting the components of other comprehensive income as part of the statement of changes in shareholders’ equity. This guidance does not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. This guidance should be applied retrospectively. For public entities, the amendments are effective for fiscal years and interim periods within those years, beginning after December 15, 2011. Early adoption is permitted. The Company has not yet adopted this pronouncement and does not expect that its adoption will have a material impact on the Company’s financial statements.

In May 2011, FASB issued revised guidance on the “Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs.” The revised guidance specifies how to measure fair value and improve the comparability of fair value measurements presented and disclosed in financial statements prepared in accordance with U.S. GAAP, not requiring additional fair value measurements and not intending to establish valuation standards or affect valuation practices outside of financial reporting. The revised guidance is effective to all reporting entities that are required or permitted to measure or disclose the fair value of an asset, a liability, or an instrument classified in a reporting entity’s shareholders’ equity in the financial statements during interim and annual periods beginning after December 15, 2011. The Company has not early adopted the new guidance and is currently evaluating the impact on its consolidated financial statements of adopting this guidance.

In April 2011, FASB issued revised guidance on the “Reconsideration of Effective Control for Repurchase Agreement.” The revised guidance specifies the criterion pertaining to an exchange of collateral should not be a determining factor in assessing effective control, which should focus on a transferor’s contractual rights and obligations with respect to transferred financial assets if an entity enters into agreements to transfer financial assets that both entitle and obligate the transferor to repurchase or redeem the financial assets before their maturity. The revised guidance removes from the assessment of effective control (1) the criterion requiring the transferor to have the ability to repurchase or redeem the financial assets on substantially the agreed terms, even in the event of default by the transferee, and (2) the collateral maintenance implementation guidance related to that criterion. The revised guidance is effective prospectively to transactions or modifications of existing transactions that occur on or after the first interim or annual period beginning on or after December 15, 2011. The Company has not early adopted the new guidance and is currently evaluating the impact on its consolidated financial statements of adopting this guidance.

In December 2010, FASB issued authoritative guidance regarding when to perform Step 2 of the goodwill impairment test for reporting units with zero or negative carrying amounts. This guidance modifies Step 1 of the goodwill impairment test for reporting units with zero or negative carrying amounts. For those reporting units, an entity is required to perform Step 2 of the goodwill impairment test if it is more likely than not that a goodwill impairment exists. In determining whether it is more likely than not that goodwill impairment exists, an entity should consider whether there are any adverse qualitative factors indicating that impairment may exist. The qualitative factors are consistent with the existing guidance and examples, which require that goodwill of a reporting unit be tested for impairment between annual tests if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount. As a result, goodwill impairments may be reported sooner than under current practice. This guidance is effective for fiscal years, and interim periods within those years, beginning after December 15, 2010. The adoption of this guidance did not have a material impact on the Company’s financial statements.

In July 2010, FASB issued authoritative guidance regarding disclosures about the credit quality of financing receivables and the allowance for credit losses. This guidance requires a company to provide more information about the credit quality of its financing receivables in the disclosures to the financial statements, including aging information and credit quality indicators. Both new and existing disclosures must be disaggregated by portfolio segment or class. The disaggregation of information is based on both how a company develops its allowance for credit losses and it manages its credit exposure. This guidance is effective for interim and annual reporting periods after December 15, 2010. The adoption of this guidance did not have a material impact on the Company’s financial statements.

NOTE 4 – TRADE RECEIVABLES, NET

At June 30, 2011 and December 31, 2010 trade receivables consisted of the following:

	June 30,			December 31,
	2011			2010
	(Unaudited)
Trade receivables	$	3,938,343		$	3,447,251
Less: Allowance for doubtful accounts		(378,460	)		(371,139	)
	$	3,559,883		$	3,076,112

NOTE 5 – INVENTORIES

At June 30, 2011 and December 31, 2010, inventories consisted of the following:

	June 30,		December 31,
	2011		2010
	(Unaudited)
Raw materials	$	736,348	$	4,278,660
Finished goods		314,514		4,473,224
	$	1,050,862	$	8,751,884

NOTE 6 – CONSTRUCTION IN PROGRESS

The construction in progress at June 30, 2011 and December 31, 2010 were nil and $24,318. No interest was capitalized in construction in progress during the three and six months ended June 30, 2011.

NOTE 7 – PROPERTY, PLANT AND EQUIPMENT

At June 30, 2011 and December 31, 2010, the following are the details of the property, plant and equipment:

	June 30,			December 31,
	2011			2010
	(Unaudited)
Property and Plant	$	3,581,813		$	3,108,124
Operation Equipment		752,980			711,845
Office Equipment		80,503			76,067
Vehicle		152,719			132,368
		4,568,015			4,028,404
Accumulated Depreciation		(1,121,640	)		(977,173	)
Total	$	3,446,375		$	3,051,231

Accumulated depreciation as of June 30, 2011 and December 31, 2010 were $1,121,640 and $977,173, respectively. Depreciation expense for the six months ended June 30, 2011 and 2010 were $123,767 and $102,779, respectively. Depreciation expense for the three months ended June 30, 2011 and 2010 were $63,538 and $51,142, respectively.

NOTE 8 – INTANGIBLE ASSETS, NET

The Company's intangible assets are purchased intellectual property on seed varieties and exclusive use right of seed patent. Useful lives of intangible assets are determined with the valid period of seed patents or the exclusive use right. At June 30, 2011 and December 31, 2010, the balances of net intangible assets were $653,464 and $370,088, respectively. Amortization expense of intangible assets for the six months ended June 30, 2011 and 2010 were $55,918 and $11,851, respectively. Amortization expense of intangible assets for the three months ended June 30, 2011 and 2010 were $42,361 and $5,973, respectively.

Expected future amortizations for intangible assets are as follows:

For the remaining period of 2011	$	80,349
2012		160,697
2013		159,924
2014		78,698
2015		50,591
Thereafter		123,205
	$	653,464

NOTE 9 – PREPAID LEASES

The Company’s prepaid leases are prepayments for leased land. As of June 30, 2011 and December 31, 2010, details about prepaid leases were:

	June 30,			December 31,
	2011			2010
	(Unaudited)
Prepaid leases	$	7,206,465		$	6,827,609
Amortization of prepaid leases		(324,832	)		(21,354	)
		6,881,633			6,806,255
Less: Current portion of prepaid leases		(641,695	)		(559,498	)
Net prepaid leases	$	6,239,938		$	6,246,757

Amortization expense of prepaid leases for the six months ended June 30, 2011 and 2010 were $299,613 and $6,864, respectively. Amortization expense of prepaid leases for the three months ended June 30, 2011 and 2010 were $159,572 and $6,864, respectively.

NOTE 10 – SHORT-TERM LOAN

Short-term loans included in the consolidated balance sheets as of June 30, 2011 and December 31, 2010 consisted of:

	June 30,		December 31,
	2011		2010
	(Unaudited)
5.56% loan payable to Agriculture Development Bank of China, maturing on August 17, 2011, collateralized with buildings.	$	2,985,998	$	3,686,846

The interest expense for the six months ended June 30, 2011 and 2010 was $126,597 and $56,445, respectively. For the three months ended June 30, 2011 and 2010, the interest expense was $58,785 and $28,406, respectively.

NOTE 11 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expenses comprised of account payables, salary payables, and welfare payables. At June 30, 2011 and December 31, 2010, accounts payable and accrued expenses were $1,366,378 and $58,756, respectively.

NOTE 12 – EARNINGS PER SHARE

When calculating diluted earnings per share for common stock equivalents, the Earnings Per Share Topic, ASC 260, requires the Company to include the potential shares that would be outstanding if all outstanding stock options or warrants were exercised. This is offset by shares the Company could repurchase using the proceeds from these hypothetical exercises to obtain the common stock equivalent.

The following reconciles the components of the earnings per share computation:

	Income		Shares		Per Share
	(Numerator)		(Denominator)		Amount
For the six months ended June 30, 2011:
Net income
Basic earnings per share income available to common shareholders	$	6,936,194		12,958,031	$	0.54
Effect of dilutive securities:
Warrants		-		515,916	$	-
Diluted earnings per share income available to common shareholders	$	6,936,194		13,473,947	$	0.51

For the six months ended June 30, 2010 (as restated):
Net income
Basic earnings per share income available to common shareholders	$	5,822,390		12,017,940	$	0.48
Effect of dilutive securities:
Warrants		-		515,916	$	-
Diluted earnings per share income available to common shareholders	$	5,822,390		12,533,856	$	0.46

For the three and six months ended June 30, 2011 and June 30, 2010 (as restated), all options and warrants were included the calculation of diluted earnings.

NOTE 13 – SHAREHOLDERS’ EQUITY

On June 9, 2010, Fuer International approved a 1-for-64 reverse stock split prior to the Share Exchange. The reverse split did not result in any modification of the rights of shareholders, and had no effect on the shareholders' equity in the Company except for a transfer from stated capital to additional paid-in capital. The Company effected the reverse stock split in connection with the consummation of the transactions contemplated by that certain Share Exchange Agreement pursuant to which the Company acquired all of the issued and outstanding shares of stock of China Golden Holdings, Ltd.

On June 17, 2010, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with Allied Merit International Investment Inc. (the “Investor”) for the sale of an aggregate of 1,018,868 common shares (the “Investor Shares”), and warrants to purchase 873,315 common shares of the Company, for aggregate gross proceeds equal to $2,500,000 (the “Offering”). The warrants are exercisable at $2.58 per common share, have a three year term and a cashless exercise feature. In connection with the Offering, the Company also entered into a registration rights agreement (the “Registration Rights Agreement”) with the Investor, in which the Company agreed to file a registration statement (the “Registration Statement”) with the Securities and Exchange Commission (the “SEC”) within 60 calendar days of the closing date of the Offering to register for resale the Investor Shares and the shares underlying the warrants, and to cause the Registration Statement to become effective within 150 days of the Closing Date of the Offering. The Investor issued a written waiver of the registration right on November 15, 2010. As of June 30, 2011 and December 31, 2010, the warrants did not have intrinsic value.

As the parties in the abovementioned transaction were not related, the total amount of the proceeds was deemed as the fair value of the common shares and warrants issued. Common shares issued were valued at total proceeds minus the fair value of the warrants. Management is responsible for determining the fair value of the warrant, as of the grant date. The fair value of the warrants issued is estimated on the date of grant using the Black-Scholes option valuation model to be $849,852. The valuation was based on the assumptions noted in the following table.

Expected volatility	112.2	%
Expected dividends	0	%
Expected term (in years)	3
Risk-free rate	2.2	%

Balance of warrants issued and outstanding as of June 30, 2011 and December 31, 2010 are summarized as follows:

	Number of Warrants		Weighted Average Exercise Price
Balance at December 31, 2010		-	$	-
Issued		873,315		2.58
Exercised		-		-
Forfeited/		-		-
Warrants exercisable at June 30, 2011		873,315	$	2.58

The following table summarizes the shares of the Company's common stock issuable upon exercise of warrants outstanding at June 30, 2011:

Warrants Outstanding								Warrants Exercisable
Range of Exercise Price		Number Outstanding at June 30, 2011		Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price		Number Exercisable at June 30, 2011		Weighted Average Exercise Price
$	2.58		873,315		1.96	$	2.58		873,315	$	2.58

In connection with the warrants issued in connection with the Purchase Agreement, the warrants have a price adjustment feature if the Company should issue additional shares of common stock at a lower price than the exercise price in effect when such warrants were issued, at any time prior to the eighteen-month anniversary of the Purchase Agreement. If additional shares should be issued at a lower price, the Company might have account for these warrants in accordance with the Derivative and Hedging Topic of ASC 815. If the warrants are determined not to have a scope exception under ASC Section 815-10-15, and the warrants are determined not to be indexed to the Company’s common stock, these warrants may be reclassified from equity to a derivative liability for their future fair market value at the time the Company should issue common shares below the original per share exercise price of $2.58 for such warrants. The valuation of warrants, if they are deemed to be a derivative liability, would be valued at market. Under ASC 815, the warrants would be carried at fair value and adjusted during each reporting period subsequent to reclassification to a derivative liability from that of an equity instrument.

NOTE 14 – STATUTORY RESERVES

The Company is required to make appropriations to reserve funds, comprising the statutory surplus reserve, statutory public welfare fund and discretionary surplus reserve, based on after-tax net income determined in accordance with generally accepted accounting principles of the PRC (the “PRC GAAP”). Appropriation to the statutory surplus reserve should be at least 10% of the after tax net income determined in accordance with the PRC GAAP until the reserve is equal to 50% of the entities’ registered capital or members’ equity. Appropriations to the statutory public welfare fund are at a minimum of 5% of the after tax net income determined in accordance with PRC GAAP. Commencing on January 1, 2006, the new PRC regulations waived the requirement for appropriating retained earnings to the statutory public welfare fund. The Company has elected not to make discretionary surplus reserves since its establishment. For the six months ended June 30, 2011 and 2010, (as restated) appropriations to statutory reserves were both nil. The table below summarizes the statutory reserves:

	For the Six Months Ended
	June 30,
	2011			2010 (as restated)
Registered capital	$	6,608,427		$	6,608,427
Maximum reserve rate required		50	%		50	%
Maximum statutory reserved required by law		3,304,213			3,304,213
Statutory reserve		(1,682,673	)		(1,112,119	)
Unfunded statutory reserve	$	1,621,540		$	2,192,094

NOTE 15 – COMMITMENTS AND CONTINGENCIES

Substantially all of the Company’s assets and operations are located in the PRC. The Company is self-insured for all risks and carries no liability or property insurance coverage of any kind. The Company evaluated events occurring until the date the financial statements were issued and did not note any commitments or contingencies.

Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Our management, with concurrance from our Board of Directors, concluded that the financial statements included in our quarterly report on Form 10-Q for the quarter ended June 30, 2010, should be restated due to a cutoff error regarding timing of the accrual of shipping expenses in such period. As a result of these cut-off errors, operating expenses, income from operations, other income and expense, income before income tax and net income for the quarter ended June 30, 2010 were misstated. As a result of these changes, our operating expenses increased and enterprise income tax decreased for the quarter ended June 30, 2010 from what previously was reported. Our net income for the quarter ended June 30, 2010 also decreased as a result of these changes. As a result of this conclusion, certain amounts in the consolidated financial statements for the quarter ended June 30, 2010 were corrected from the amounts previously reported.

Throughout this Quarterly Report on Form 10-Q, all amounts presented from prior periods and prior period comparisons that have been revised reflect the balances and amounts on a restated basis.

FORWARD-LOOKING STATEMENTS

Statements included in this report that are not purely historical are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, or the Exchange Act, and Section 27A of the Securities Act of 1933, as amended. These statements include, but are not limited to, statements about our plans, objectives, expectations, strategies, intentions or other characterizations of future events or circumstances and are generally identified by the words “anticipates,” “believes,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “seeks,” “targets,” “would,” and similar expressions. Because these forward-looking statements are subject to a number of risks and uncertainties, our actual results could differ materially from those expressed or implied by these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, the factors discussed under the heading “Risk Factors” in Part II, Other Information below and in the reports we file with the U.S. Securities and Exchange Commission, or the SEC, from time to time. All forward-looking statements included in this report are based on information available to us on the date hereof. Our business and the associated risks may have changed since the date this report was originally filed with the SEC. We assume no obligation to update any such forward-looking statements.

Restatement of Previously Issued Unaudited Consolidated Financial Statements

As discussed in the explanatory note to this Form 10-Q, we have restated our previously issued unaudited consolidated financial statements and related disclosures for the quarter ended June 30, 2010 to properly record accrued shipping expenses and certain tax items.

We have concluded that United States generally accepted accounting principles, or US GAAP, required us to reclassify our accrued shipping expenses. This quarterly report on Form 10-Q for the quarter ended June 30, 2011, includes the corrections to our previously issued unaudited consolidated financial statements for the quarter ended June 30, 2010. Generally, for the quarter ended June 30, 2010, this financial statement restatement has resulted in:

•

An increase in our selling and marketing expenses and a corresponding decrease in our income from operations;

•

A decrease in our non-operating income; and

•

A decrease in our net income of $162,656 for the three months ended June 30, 2010, and $433,727 for the six months ended June 30, 2010.

Throughout this quarterly report on Form 10-Q, all amounts presented from prior periods and prior period comparisons that have been revised reflect the balances and amounts on a restated basis.

The specific line-item effect of the restatement on our previously issued unaudited consolidated financial statements as of and for the three months ended June 30, 2010, as originally filed with the SEC on Form 10-Q on August 16, 2010, are as follows:

Consolidated Balance Sheet as of June 30, 2010:

	Note	Previously reported		Correction of Errors			As Restated
ASSETS
Current Assets
Cash and cash equivalents		$	15,885,217				$	15,885,217
Restricted cash			220,904					220,904
Trade receivables, net			3,525,243					3,525,243
Other receivables, net			109,767					109,767
Inventories			847,373					847,373
Advances to suppliers			332,541					332,541
Biological assets			42,047					42,047
Current portion of prepaid leases			27,561					27,561
Total Current Assets			20,990,653		-			20,990,653

Property, plant and equipment, net			2,692,429					2,692,429
Intangibles, net			294,395					294,395
Prepaid leases			406,281					406,281
Total Assets		$	24,383,758		-		$	24,383,758

LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Short term debt		$	1,248,421				$	1,248,421
Accounts payable and accrued expenses	a		659,673	$	536,972			1,196,645
Advances from customers			34,608					34,608
Other payables			84,633					84,633
Income tax payable	b		984,705		(101,580	)		883,125
Total Liabilities			3,012,040		435,392			3,447,432

SHAREHOLDERS' EQUITY
Common stock, $0.001 par value; 20,000,000 shares authorized, 12,958,031 shares issued and outstanding as of June 30, 2010			12,958					12,958
Additional paid in capital			7,045,195					7,045,195
Statutory reserves	c		1,751,456		(639,337	)		1,112,119
Retained earnings	d		11,414,608		205,610			11,620,218
Accumulated other comprehensive income	e		1,147,501		(1,665	)		1,145,836
Total Shareholders' Equity			21,371,718		(435,392	)		20,936,326
Total Liabilities and Shareholders' Equity		$	24,383,758	$	-		$	24,383,758

Notes:

(a)

Accounts payable and accrued expenses was increased by $536,972, representing a correction of accrued shipping expense.

(b)

Current income tax payable was decreased by $101,579, related to under accrued shipping expenses.

(c)

Statutory reserves were decreased by $639,337, representing of a reverse of appropriation of statutory reserve.

(d)

Retained earnings was increased by $205,610, reflecting the factors stated above.

(e)

Foreign currency translation adjustments were decreased by $1,665, representing effects of adjustments stated above.

Consolidated Statement of Operations for the Six Months Ended June 30, 2010:

	Note	Previously reported			Reclassification			Correction of Errors			As Restated

Sales		$	18,943,542								$	18,943,542
Cost of goods sold			11,073,852									11,073,852
Gross profit			7,869,690									7,869,690

Operating and administrative expenses:
Sales and marketing	a		266,677					$	534,918			801,595
General and administrative			721,618									721,618
Total operating expenses			988,295						534,918			1,523,213

Income from operations			6,881,395									6,346,477

Other income (expenses):
Interest income			7,803									7,803
Interest expense			(56,445	)								(56,445	)
Other income, net			(23,910	)								(23,910	)
Non operating income (expenses)	b		500,922		$	(425,134	)					75,788
Other income (expenses), total			428,370			(425,134	)		(534,918	)		3,236

Income before income tax			7,309,765									6,349,713
Income tax expenses	b, c		1,053,648			(425,134	)		(101,191	)		527,323
Net income			6,256,117			-			(433,727	)		5,822,390

Other comprehensive income:
Foreign currency translation adjustments	d		76,968			(388	)		(1,277	)		75,303
Comprehensive income		$	6,333,085		$	(388	)	$	(435,004	)	$	5,897,693

Earnings per share
Basic		$	0.52		$	-		$	(0.04	)	$	0.48
Diluted		$	0.50		$	-		$	(0.03	)	$	0.46

Weighted average number of shares issued and outstanding
Basic			12,017,940									12,017,940
Diluted			12,533,856									12,533,856

Notes:

(a)

Sales and marketing expenses was increased by $534,918, representing a correction of accrued shipping expense.

(b)

Non operating income was decreased by $425,134, representing reclassification of adjusted enterprise income tax favor for 2009.

(c)

Current income tax expense was decreased by $101,191, related to under accrued shipping expenses.

(d)

Foreign currency translation adjustments were decreased by $388 and $1,277, representing effects of adjustments stated above.

Consolidated Statement of Operations for the Three Months Ended June 30, 2010:

	Note	Previously reported			Reclassification			Correction of Errors			As Restated

Sales		$	3,633,913								$	3,633,913
Cost of goods sold			2,081,809									2,081,809
Gross profit			1,552,104									1,552,104

Operating and administrative expenses:
Sales and marketing	a		143,626					$	217,039			360,665
General and administrative			436,580									436,580
Total operating expenses			580,206						217,039			797,245

Income from operations			971,898									754,859

Other income (expenses):
Interest income			6,038									6,038
Interest expense			(28,406	)								(28,406	)
Other income, net			(23,914	)								(23,914	)
Non operating income (expenses)	a, b		464,431		$	(425,212	)					39,219
Other income (expenses), total			418,149			(425,212	)		(217,039	)		(7,063	)

Income before income tax			1,390,047									747,796
Income tax expenses	c		(166,552	)		425,212			54,383			(313,043	)
Net income			1,223,495			-			(162,656	)		1,060,839

Other comprehensive income:
Foreign currency translation adjustments	d		75,005			199			796			76,000
Comprehensive income		$	1,298,500		$	199		$	(161,860	)	$	1,136,839

Earnings per share
Basic		$	0.10		$	-		$	(0.01	)	$	0.09
Diluted		$	0.10		$	-		$	(0.01	)	$	0.08

Weighted average number of shares issued and outstanding
Basic			12,095,881									12,095,881
Diluted			12,611,797									12,611,797

Notes:

(a)

Sales and marketing expenses was increased by $217,039, representing a correction of accrued shipping expense.

(b)

Non operating income was decreased by $425,212, representing reclassification of adjusted enterprise income tax favor for 2009.

(c)

Current income tax expense was decreased by $54,383 related to under accrued shipping expenses.

(d)

Foreign currency translation adjustments was increased by $199 and $796, representing adjustment stated above.

Consolidated Statement of Cash Flows for the Six Months Ended June 30, 2010:

	Note		Previously reported			Correction of Errors			As Restated
Cash flow from operating activities:
Net income		a	$	6,256,117		$	(433,727	)	$	5,822,390

Adjustments to reconcile net income to net cash provided by operating activities
Depreciation				102,779						102,779
Amortization		b		11,851			6,864			18,715
Non cash income		c		(425,134	)		425,134			-
Changes in current assets and liabilities
Trade receivables				(1,444,586	)					(1,444,586	)
Other receivables				274,208						274,208
Inventories				6,880,200						6,880,200
Advances to suppliers				2,340,067						2,340,067
Biological assets				(48,707	)					(48,707	)
Increase in prepaid leases				(439,047	)					(439,047	)
Accounts payable and accrued expenses		d		151,639			534,918			686,557
Advances from customers				(269,304	)					(269,304	)
Other payables				83,105						83,105
Income tax payables		e		809,833			(526,325	)		283,508
Net cash provided by operating activities				14,283,021			6,864			14,289,885

Cash flow from investing activities:
Purchase of property, plant and equipment				(44,540	)					(44,540	)
Purchase of intangible assets				(124,365	)					(124,365	)
Net cash used in investing activities				(168,905	)		-			(168,905	)

Cash flow from financing activities:
Proceeds from issuance of common stock				2,500,000						2,500,000
Repayment of short term loans				(951,024	)					(951,024	)
Net cash providede by financing activities				1,548,976			-			1,548,976

Foreign currency translation adjustment		f		66,700			(6,864	)		59,836
Net increase in cash and cash equivalents				15,729,792						15,729,792
Cash and cash equivalents - beginning of period				155,425						155,425
Cash and cash equivalents - end of period			$	15,885,217		$	-		$	15,885,217

Supplemental disclosure of cash flow information
Interest paid			$	56,257					$	56,257
Income taxes paid			$	243,815					$	243,815

Notes:

(a)

Net income was decreased by $433,727, representing a correction of accrued shipping expense and adjustment of overstated enterprise income tax.

(b)

Amortization was increased by $6,864, representing correction of amortization for prepaid leases.

(c)

Non cash income was increased by $425,134, representing reclassification adjustment for tax favor for 2009 as discussed above.

(d)

Change in accounts payable and accrued expenses was increased by $534,918, reflecting a correction of accrued shipping expense

(e)

Change in income tax payable was decreased by $526,345, reflecting reclassification of tax favor for 2009 and correction of over accrued enterprise income tax.

(f)

Foreign currency translation adjustment was decreased by $177 and $796, representing adjustment stated above.

Overview

We are a leading Chinese agricultural material company providing quality hybrid corn seeds, soybean seeds, rice seeds and fertilizer product to farmers in northeastern China, which is the most important agriculture region in the country. Through our vast network of over 1,000 distributors, we distribute our products to farmers located in Heilongjiang, Jilin, and northeastern Inner Mongolia and to the rest of China. Our seed products are bred with our exclusively contracted breeders in Heilongjiang, Jilin, and northeastern Inner Mongolia. Following our purchase in 2005 of a humic fertilizer patent from China Institute of Agriculture, and we have developed a series of products that adapt to different environment and soil conditions. In 2007, we invented cold proof additives for seeds, which we launched as a product in 2010. With our focus on product quality, we believe we have successfully elevated our brand reputation and attained a solid customer base. We have been certified under International Organization for Standardization, or ISO, 9001 for quality management systems and ISO 14001 for environmental management.

Factors Affecting our Results of Operations

Our results of operations are primarily affected by the following factors:

Pressures on China’s food supply. China’s food supply is impacted by decreased amounts of arable land in China as a result of urbanization, desertification, soil pollution, and other factors. China’s population is expected to keep rising, reaching approximately 1.5 billion people by 2033. With urban residents in China consuming more meat products than rural residents per capita, increased urbanization has driven meat production and, accordingly, feedstock such as corn. We expect these factors to drive the use of fertilizer and high-yield hybrid grain seeds in order to maintain China’s food supply.

Acceptance of genetically modified seeds. Although genetic modification techniques have been used in seed production for several years, some believe genetically modified plants may impact gene stability of surrounding natural plants and the health of creatures that eat them. Currently, both the EU and the United States have not approved genetically modified crops for humans consumption. Although two varieties of genetically modified corn seed have received limited approvals from PRC government authorities, commercial sales are not permitted. Even if such sales are permitted, it may take several years for genetically modified grain to be accepted by customers. For instance, many farmers in China use seeds from the output of their previous year rather than acquire modern seeds.

Chain store program distribution network. We have launched a chain store program in order to control our distribution channel and enhance brand awareness. As of December 31, 2010 we had over 43 branded retail stores, but as of March 31, 2011 we expanded to over 234 branded retail stores. We believe branded stores enable us to provide better sales services and launch more accurate marketing campaigns. We expect these efforts to result in increased expenses associated with expansion, particularly sales and marketing expenses necessary to build market share and awareness of our high quality products.

Ability to generate high-quality seeds. We believe that our success depends on our ability to develop state of the art seeds that produce high yields of quality crops. For example, during 2010 and the first month of 2011, our new corn varieties, Fudan Nos. V, VI, and VII, were approved and registered in Heilongjiang and Inner Mongolia. In field tests, our new corn varieties had higher yields than comparable products, which we believe presents an attractive value proposition for farmers. We also believe that producing such seeds requires investment in research and development. For example, in March 2010 we entered into two five-year agreements to lease 9.33 acres of farm land, where we have established a research field for hybrid field crops, vegetables and fruits. In addition, in April 2010 we entered into agreements to lease 100 hectares of farm land for 20 years, and in December 2010 we entered into two agreements to lease 1,000 hectares of farm land for 12 years. We plan to use this farm land to increase our cultivation experience with high-end seeds developed by advanced research approaches, such as genetic modification and the molecular marker aided selection method.

Seasonality. Our business is affected by seasonal factors. Field crops are planted in early May in Heilongjiang, Jilin and the northeastern part of Inner Mongolia, and are harvested during October. Our sales cycles tend to correlate to the agriculture cycle, as we tend to sell more seed products from December to April, and more fertilizers, herbicides, germicides and pesticides from April to June. In recent years, we significantly increased seasonal advertisement and marketing events in the fourth quarters to attract customers. In addition, we plan our seed breeding and fertilizer production during the second quarter, which requires capital expenditures that may drive short-term borrowing activities in order to acquire raw seeds.

Acquisition costs. We believe that the significant fragmentation in China among seed companies and providers of fertilizers, pesticides, germicides and herbicides creates opportunities for us to expand our sales and product lines by acquiring quality companies in target regions. Our acquisition plans would result in corresponding increases in expenses in order to attract and retain qualified talent, implement strategic advertising campaigns, and finance our expansion.

Results of Operations

The following table sets forth certain information regarding our results of operations.

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2011			2010			2011			2010
	($ in thousands)						($ in thousands)
Sales	$	5,856		$	3,634		$	28,713		$	18,944
Cost of goods sold		3,706			2,082			18,132			11,074
Gross profit		2,150			1,552			10,581			7,870
Operating and administrative expenses:
Sales and marketing		386			361			1,392			802
General and administrative		479			436			971			722
Income from operations		1,285			755			8,218			6,346
Other income (expenses), total		(47	)		(7	)		(52	)		3
Income before income tax		1,238			748			8,166			6,349
Income tax expenses		137			(313	)		1,230			527
Net income	$	1,101		$	1,061		$	6,936		$	5,822

For the three months ended June 30, 2011 compared to June 30, 2010

Sales

Our sales consist primarily of revenues generated from sales of corn seeds, rice seeds, soybean seeds, fertilizers and agricultural chemical products. Sales increased by approximately $2.22 million, or 61.14%, from approximately $3.64 million for the three months ended June 30, 2010 to approximately $5.86 million for the three months ended June 30, 2011. This increase was primarily attributable to our intensified marketing activities, the ongoing expansion of our market areas and distribution network throughout northeastern China, and increased demand for our seed products and strong market acceptance of our products.

The following table sets forth information regarding the sales of our principal products during the three months ended June 30, 2011 and 2010:

	For the Three Months Ended June 30, 2011							For the Three Months Ended June 30, 2010
	Quantity		Amount		% of			Quantity		Amount		% of
Product name	(Kg’000)		($’000)		Sales			(Kg’000)		($’000)		Sales
Corn Seeds		1,607	$	1,954		33.4	%		1,203	$	1,239		34.1	%
Soybean Seeds		145		233		4.0	%		158		165		4.6	%
Rice Seeds		7		7		0.1	%		60		50		1.4	%
Vegetable Seeds		12		613		10.5	%		-		-		-
Fertilizers		1,304		2,823		48.1	%		2,325		1,688		46.4	%
Plant Regulators		119

Fuer International Inc. 10-Q