UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

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

For the Quarterly Period Ended: March 31, 2012

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 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 May 16, 2011, there were 12,598,031 shares of common stock, par value $0.001 per share, outstanding

PART I – FINANCIAL INFORMATION:

Item 1.	Financial Statements:	3

	Balance Sheets as of March 31 2012 (Unaudited) and December 31, 2011 (Audited)	3

	Unaudited Statements of Operations and Comprehensive (Loss) Income for the Three Months Ended March 31, 2012 and 2011	4

	Unaudited Statements of Cash Flows for the Three Months Ended March 31, 2012 and 2011	5

	Notes to Financial Statements (Unaudited)	6

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	25

Item 4.	Controls and Procedures	25

PART II – OTHER INFORMATION:

Item 1.	Legal Proceedings	26

Item 1A.	Risk Factors	26

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	26

Item 3.	Defaults Upon Senior Securities	26

Item 4.	(Removed and Reserved)	26

Item 5.	Other Information	26

Item 6.	Exhibits	26

	Signatures	27

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements.

FUER INTERNATIONAL INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	March 31,		December 31,
	2012		2011
	(Unaudited)		(Audited)
ASSETS
Current Assets
Cash	$	7,927,633	$	3,848,413
Trade receivables, net		13,217,394		1,296,296
Advances to employees		202,292		445,648
Inventories		4,495,828		8,674,347
Advances to suppliers and prepaid expenses		897,437		5,527,356
Current portion of prepaid leases		658,722		660,637
Total Current Assets		27,399,306		20,452,697

Property, plant and equipment, net		3,343,521		3,392,800
Intangibles, net		593,375		589,883
Long term portion of prepaid leases		5,926,948		6,109,134
Total Assets	$	37,263,150	$	30,544,514

LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities
Accounts payable and accrued expenses	$	2,303,008	$	337,782
Advances from customers		45,436		994,935
Other payables		85,232		85,480
Income tax payable		2,606,879		1,154,109
Total Liabilities		5,040,555		2,572,306

SHAREHOLDERS' EQUITY
Common stock, $0.001 par value; 20,000,000 shares authorized, 12,958,032 shares issued and outstanding as of March 31, 2012 and December 31, 2011 respectively.		12,958		12,958
Additional paid in capital		7,046,495		7,046,495
Statutory reserves		2,522,656		2,275,230
Retained earnings		19,846,795		15,752,651
Accumulated other comprehensive income		2,793,691		2,884,874
Total Shareholders' Equity		32,222,595		27,972,208
Total Liabilities and Shareholders' Equity	$	37,263,150	$	30,544,514

The accompanying notes are an integral part of the financial statements

FUER INTERNATIONAL INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATION AND COMPHREHENSIVE INCOME

(UNAUDITED)

	For the Three Months Ended March 31,
	2012			2011
Sales	$	24,536,281		$	22,856,848
Cost of goods sold		17,329,762			14,426,216
Gross profit		7,206,519			8,430,632

Operating and administrative expense:
Sales and marketing		765,977			1,005,820
General and administrative		640,209			491,668
Total operating expense		1,406,186			1,497,488
Income from operations		5,800,333			6,933,144

Other income (expense):
Interest income		908			2,890
Interest expense		(78	)		(67,812	)
Non operating Income (expense)		(101	)		60,303
Other income (expense), total		729			(4,619	)

Income before income tax		5,801,062			6,928,525
Income tax expense		1,459,492			1,093,358
Net income		4,341,570			5,835,167

Other comprehensive income:
Foreign currency translation adjustments		(91,183	)		(130,113	)
Comprehensive income	$	4,250,387		$	5,705,054

Earnings per share
Basic	$	0.34		$	0.45
Diluted	$	0.32		$	0.43

Weighted average number of shares issued and outstanding
Basic		12,958,031			12,958,031
Diluted		13,473,947			13,473,947

The accompanying notes are an integral part of the financial statements

FUER INTERNATIONAL INC. AND SUBSIDIARIES

CONSLIDATED STATEMENTS OF CASH FLOWS

(UNAUDITED)

	For the Three Months Ended March 31,
	2012			2011
Cash flow from operating activities:
Net income	$	4,341,570		$	5,835,167
Adjustments to reconcile net income to net cash provided by operating activities
Depreciation		66,338			60,229
Amortization of intangible assets and prepaid leases		207,280			153,598
Allowances for trade receivables		44,938			-
Changes in current assets and liabilities
Trade receivables		(11,997,441	)		(8,686,057	)
Advances to employees		242,621			(234,359	)
Inventories		4,162,999			5,646,760
Advances to suppliers		4,624,591			1,052,602
Accounts payable and accrued expenses		1,970,674			2,789,660
Advances from customers		(948,809	)		-
Other payables		-			(273,424	)
Income tax payables		1,459,492			1,047,631
Net cash provided by operating activities		4,174,253			7,391,807

Cash flow from investing activities:
Purchase of property plant, and equipment		(26,804	)		(242,077	)
Purchase of intangible assets		(47,637	)		-
Net cash used in investing activities		(74,441	)		(242,077	)

Cash flow from financing activities:
Net cash provided by financing activities		-			-

Effect of exchange rate on cash		(20,592	)		(52,340	)
Net increase in cash and cash equivalents		4,079,220			7,097,390
Cash and cash equivalents - beginning of period		3,848,413			2,454,583
Cash and cash equivalents - ending of period	$	7,927,633		$	9,551,973

Supplemental disclosure of cash flow information
Interest paid	$	78		$	67,812
Income taxes paid	$	-		$	45,574

The accompanying notes are an integral part of the financial statements

FUER INTERNATIONAL INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 entity (“VIE”), where Fuer International is deemed the primary beneficiary. Fuer International, its consolidated subsidiaries and VIEs are collectively referred to herein as the “Company”, “we” and “us”.

Fuer International (formerly known as Forex365 Inc.) was incorporated in Nevada on February 8, 1984. On July 28, 2010, we completed a name change from “Forex365, Inc,” to “Fuer International Inc,” under the consent of the holders of approximately 92.58% of the outstanding shares of Common Stock.

China Golden was incorporated in the British Virgin Islands on November 30, 2009 as a limited liability company (a BVI company). The Company is engaged in the business of production and distribution of corn seeds, rice seeds, soybean seeds, humic fertilizer and plant additives. 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 Qiqiahr 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.

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 (the “Shareholders”), who together owned shares constituting 100% of the issued and outstanding common shares of China Golden (the “China Golden Shares”). Pursuant to the terms of the Exchange Agreement, the Shareholders transferred to the Company all of the China Golden Shares in exchange for the issuance of 11,550,392 shares (the “Shares”) of our common stock (the “Share Exchange”). As a result of the Share Exchange, China Golden became our wholly-owned subsidiary and the Shareholders acquired approximately 96.47% of our issued and outstanding stock.

The effect of the Share Exchange is such that effectively a reorganization of the entities has occurred for accounting purposes and is 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.

Name	Domicile and Date of Incorporation	Paid-in Capital		Percentage of Effective Ownership	Principal Activities
Fuer International Inc. (formerly known as “Forex365 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, See description below	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. As a result, the Company’s subsidiaries, Deli and Qiqihar Fuer, entered into a seriesof exclusive contractual agreements (the Contractual Agreements) on March 25, 2010 in the anticipation that this will protect the Company’s shareholders from foreign ownership restrictions.

Based on these Contractual Agreements, the Company consolidates the 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 operational services, including advice and strategic planning, as well as consulting services related to the technological research and development of the 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 that is equal to all of Qiqihar Fuer’s profits as defined in the Exclusive Option Agreement. The Agreement is valid for 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 breaches 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 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 the 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 shall last for 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 shall borrow RMB 10,000,000 from Deli, only for purpose of increasing the paid-in capital of Qiqihar Fuer. In addition, shareholders of Qiqihar Fuer agree to (1) enter into the aforementioned contractual agreements with Deli; (2) appoint directors as nominated by Deli; (3) keep the value of its assets. Also included in this agreement, unless consented by Deli, Qiqihar Fuer should not: (1) purchase and dispose of any assets; enter into any material agreements with any third party within its operating activities; (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 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 – 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 US 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 consolidated financial statements in accordance with US 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 as of March 31, 2012 and for the three months ended March 31, 2012 and 2011 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 disclosures normally included in financial statements prepared in accordance with US GAAP 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 audited consolidated financial statements and notes thereto for the years ended December 31, 2011 and 2010. The results of operations for the three months ended March 31, 2012 and 2011 are not necessarily indicative of the operating results to be expected for the full year ended December 31, 2012, or that which was achieved in the year ended December 31, 2011.

(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, Fuer have been consolidated in the Company’s financial statements.

Based on various VIE agreements, the Company is able to excise control over Qiqhar Fuer; and have the exclusive right to obtain full of the financial interests such as obtaining periodic income through Exclusive Business Cooperation Agreements and obtaining the net assets of Qiqihar Fuer through purchase of their equities at essentially 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 and fertilizers herbicides. Our revenue is generated in our distribution to farmers, sales through our Company owned retail establishments and through our branded retail stores. Our revenue is derived exclusively from the sales of field crop seeds, fertilizers and herbicides. All Company’s sales and operations are conducted in the PRC with emphasis in the northeast of China.

(e)

Use of estimates

The preparation of the consolidated financial statements in conformity with US GAAP 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 lives 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 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 the 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 were published by People’s Bank of the People’s Republic of China.

		2012		2011
Balance sheet items, except for the registered and paid-up capital and retained earnings as of March 31, 2012 and December 31, 2011	US$	1=RMB 6.3122	US$	1=RMB 6.6215

Amounts included in the statements of operations, and statements of cash flows for the three months ended March 31, 2012 and 2011	US$	1=RMB 6.2976	US$	1=RMB 6.5832

For the three months ended March 31, 2012 and 2011, a foreign currency translation adjustments loss of $91,183 and a gain of $130,113, 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 balance sheets for cash, accounts receivable, other receivable, accounts payable, other payable, and amounts due from related parties approximate their fair market value based on the short-term maturity of these instruments. As of March 31, 2012, the Company did not identify any assets or liabilities that are 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

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 to be cash equivalents. The Company maintains cash 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 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 our total sales for the three months ended March 31, 2012 and 2011.

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 believes it is not exposed to any risks on 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 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, customer’s historical payment history, its current credit-worthiness and current economic trends. Accounts are written off after exhaustive efforts at collection. As of March 31, 2012 and December 31, 2011, the Company had an allowance for doubtful accounts of $277,696 and $233,538, respectively.

(k)

Advances to employees

Advances to employees are rendered to facilitate the timely implementation of operating activities, such as advertisements, promotions and seed breeding. The amounts advanced under such arrangements totaled $202,292 and $445,648 as of March 31, 2012 and December 31, 2011, respectively. The Company has not experienced any losses with advances to employees during its operating history, and, accordingly, has made no allowances for advances to employees.

(l)

Inventories

Inventories, consisting of raw materials and finished goods acquired from third party vendors, are stated at the lower of cost or market, 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 our distributors and branded retail establishments. Inventories are accounted on a 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 March 31, 2012 and December 31, 2011, 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 meant to ensure preferential pricing and delivery. The amounts advanced under such arrangements totaled $897,437 and $5,527,356 as of March 31, 2012 and December 31, 2011, 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 the Statements of Operations 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 the amount that is to be amortized within one year is recorded as current portion of prepaid leases. As China’s regulations prohibit companies from acquiring land use rights 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 expense using the straight line method during the contract period, varying from 5 to 12 years

The operating lease expense for the three months ended March 31, 2012 and 2011 amounted to $164,856 and $140,041, 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 months ended March 31, 2012 and 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 their 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 months ended March 31, 2012 and 2011 has been minimal. The Company has not accrued any amount with respect to such potential customer credits as of March 31, 2012 and December 31, 2011 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.

(t)

Shipping expense

Shipping costs are classified into selling and marketing expense. For the three months ended March 31, 2012 and 2011, shipping expense totaled $613,909 and $589,558, respectively.

(u)

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 March 31, 2012 and 2011, the costs of these payments are charged to general and administrative expense in the same period and amounted to $47,617 and $58,132, respectively.

(v)

Advertising

Advertising is expensed as incurred and is included in selling and marketing expense on the accompanying consolidated Statement of Operations. For the three months ended March 31, 2012 and 2011, advertising expense amounted to $44,172 and $305,618, respectively.

(w)

Accumulated other comprehensive income

Comprehensive income is comprised of net income and all changes to the Statements of Shareholders’ Equity, except those amounts due to investments by shareholders, changes in paid-in capital and distributions to shareholders. Comprehensive income for the three months ended March 31, 2012 and 2011 include net income and unrealized gains from foreign currency translation adjustments.

(x)

Related parties

Parties are considered to be related to the Company if the parties that, directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. The Company discloses all related party transactions. All transactions are recorded at fair value of the goods or services exchanged. Property purchased from a related party is recorded at the cost to the related party and any payment to or on behalf of the related party in excess of the cost is reflected as a distribution to related party.

(y)

Stock-based compensation

Stock-based compensation is accounted for based on the requirements of the Share-Based Payment topic of ASC 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 Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“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.

Pursuant to ASC Topic 505-50, for share-based payments to consultant and other third-parties, compensation expenses is 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.

(z)

Recent adopted accounting pronouncements

In January 2011, the FASB issued ASU No. 2011-01- Receivables (Topic 310): Deferral of the Effective Date of Disclosures about Troubled Debt Restructurings in Update No. 2010-20. The amendments in this update temporarily delay the effective date of the disclosures about troubled debt restructurings in ASU No. 2010-20, Receivables (Topic 310): Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses, for public entities. The delay is intended to allow the FASB time to complete its deliberations on what constitutes a troubled debt restructuring. The effective date of the new disclosures about troubled debt restructurings for public entities and the guidance for determining what constitutes a troubled debt restructuring will then be coordinated. This deferral is expected not to have a material impact on the Company’s consolidated financial statements.

In January 2011, the FASB issued ASU No. 2011-02- Receivables (Topic 310): A Creditor’s Determination of Whether a Restructuring Is a Troubled Debt Restructuring. The amendments in this update provide additional guidance to assist creditors in determining whether a restructuring of a receivable meets the criteria to be considered a troubled debt restructuring. For public companies, the new guidance is effective for interim and annual periods beginning on or after June 15, 2011, and applies retrospectively to restructurings occurring on or after the beginning of the fiscal year of adoption within those annual periods. Early application is permitted. The adoption of the provisions in ASU 2011-02 did not have a material impact on the Company’s consolidated financial statements.

In May 2011, the FASB issued ASU No. 2011-04 – Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S.GAAP and IFRSs. The amendments in this update intend to converge requirements for how to measure fair value and for disclosing information about fair value measurements in US GAAP with International Financial Reporting Standards. For public entities, this ASU is effective for interim and annual periods beginning after December 15, 2011. The adoption of the provisions in ASU 2011-04 did not have a material impact on the Company’s condensed consolidated financial statements.

In June 2011, the FASB issued ASU No. 2011-05 – Comprehensive Income (Topic 220): Presentation of Comprehensive Income. The amendments in this update require (i) that all non-owner changes in stockholders’ equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements (the current option to present components of other comprehensive income (“OCI”) as part of the statement of changes in stockholders’ equity is eliminated); and (ii) presentation of reclassification adjustments from OCI to net income on the face of the financial statements. For public entities, the amendments in this ASU are effective for years, and interim periods within those years, beginning after December 15, 2011. The amendments in this update should be applied retrospectively. Early adoption is permitted. The adoption of the provisions in ASU 2011-05 did not have material impact on the Company’s condensed consolidated financial statements.

Other accounting standards that have been issued or proposed by FASB that do not require adoption until a future date are not expected to have a material impact on the consolidated financial statements upon adoption.

NOTE 3 – TRADE RECEIVABLES

As of March 31, 2012 and December 31, 2011 accounts receivable consisted of the following:

	March 31,			December 31,
	2012			2011
	(Unaudited)			(Audited)
Trade receivables	$	13,495,090		$	1,529,834
Less: Allowance for doubtful accounts		(277,696	)		(233,538	)
	$	13,217,394		$	1,296,296

NOTE 4 – INVENTORIES

As of March 31, 2012, and December 31, 2011, inventories consisted of the following:

	March 31,		December 31,
	2012		2011
	(Unaudited)		(Audited)
Raw materials	$	692,007	$	4,307,063
Finished goods		3,803,821		4,367,284
	$	4,495,828	$	8,674,347

NOTE 5 – PROPERTY, PLANT AND EQUIPMENT

As of March 31, 2012 and December 31, 2011, the following are the details of the property and equipment:

	March 31,			December 31,
	2012			2011
	(Unaudited)			(Audited)
Property and Plant	$	3,634,744		$	3,645,312
Operations Equipment		82,433			82,672
Office Equipment		805,754			791,097
Vehicles		166,170			156,834
		4,689,101			4,675,915
Accumulated Depreciation		(1,345,580	)		(1,283,115	)
Total	$	3,343,521		$	3,392,800

Depreciation expense for the three months ended March 31, 2012 and 2011 were $66,338 and $60,229, respectively.

NOTE 6 – INTANGIBLE ASSETS, NET

The Company's intangible assets are purchased intellectual property on seed varieties and have a 10 years useful life. As of March 31, 2012 and December 31, 2011, the balances of net intangible assets were $593,375 and $589,883, respectively. Amortization expense of intangible assets for the three months ended March 31, 2012 and 2011 were $42,424 and $13,557, respectively.

Expected future amortization for intangible assets is as follows:

2012	$	126,976
2013		168,510
2014		85,337
2015		56,557
2016		36,820
Thereafter		119,175
	$	593,375

NOTE 7 – LONG-TERM PREPAID EXPENSES

Long-term prepaid expenses primarily consist of prepaid rental expenses for six parcels of land. The prepaid rental expenses are being amortized using the straight-line method over the lease terms.

On March 30, 2010, the Company entered into an agreement with unrelated individuals to lease farm land of totaling 9.33 acres for five years. Subject to the agreement, five years of future rent totaling $38,048 was paid upon the commencement of the lease.

On April 2, 2010, the Company entered into an agreement with a certain farm to lease farm land of 100 hectares for 20 years, Subject to the agreement, total rent for the leasing period amounted to $417,235 was fully prepaid on the inception of the lease

On December 10, 2010, the Company entered into two agreements with certain farms to lease farm land of totaling 1,000 acres for 12 years. Subject to the agreement, total rent for the leasing period totaling $6,372,326 was paid upon the commencement of the lease.

The Company’s prepaid leases are prepayments for leased land. As of March 31, 2012 and December 31, 2011, details about prepaid leases were:

	March 31,			December 31,
	2012			2011
	(Unaudited)			(Audited)
Prepaid leases	$	6,750,145		$	7,433,675
Amortization of prepaid leases		(164,475	)		(663,904	))
		6,585,670			6,769,771
Less: Current portion of prepaid leases		(658,722	)		(660,637	)
Long term portion of prepaid leases	$	5,926,948		$	6,109,134

Amortization expenses of prepaid leases for the three months ended March 31, 2012 and 2011 was $164,856 and $140,041, respectively.

NOTE 8 – ACCOUNTS PAYABLE AND ACCRUED EXPENSES

Accounts payable and accrued expense comprised of accounts payable, salary payables, and welfare payables. At March 31, 2012 and December 31, 2011, accounts payables and accrued expenses were $2,303,008 and $337,782, respectively.

NOTE 9 – 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 calculate common stock equivalents.

The following reconciles the components of the EPS computation:

	Income		Shares		Per Share
	(Numerator)		(Denominator)		Amount
For the three months ended March 31, 2012:
Net income
Basic EPS income available to common shareholders	$	4,341,570		12,958,031	$	0.34
Effect of dilutive securities:
Warrants		-		515,916		-
Diluted EPS income available to common shareholders	$	4,341,570		13,473,947	$	0.32

For the three months ended March 31, 2011:
Net income
Basic EPS income available to common shareholders	$	5,835,168		12,958,031	$	0.45
Effect of dilutive securities:
Warrants		-		515,916		-
Diluted EPS income available to common shareholders	$	5,835,168		13,473,947	$	0.43

For the three month ended March 31, 2012 and 2011, all options and warrants were included the calculation of diluted earnings.

NOTE 10 – SHAREHOLDERS’ EQUITY

On June 9, 2010 Fuer International approved a 1 for 64 reverse stock split prior to the Share Exchange. The reverse split does not result in any modification of the rights of shareholders, and has no effect on shareholders' equity except for a transfer from stated capital to additional paid-in capital. The Company effected the amendments in connection with the consummation of the transactions contemplated by that certain Share Exchange Agreement pursuant to which the Registrant 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 life time 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 we 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 have the Registration Statement become effective within 150 days of the Closing Date of the Offering. The investor issued a written waiver of the registration rights on November 15, 2010.

As the parties in the above mentioned transaction were not related, the total amount of the proceeds was deemed to be 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	%

Balances of warrants issued and outstanding as of March 31, 2012 and December 31, 2011 are summarized as follows:

	Number of Warrants		Weighted Average Exercise Price
Balance of warrants issued and outstanding at December 31, 2010		-	$	-
Issued		873,315		2.58
Exercised		-		-
Forfeited		-		-
Balance of warrants issued and outstanding at December 31, 2011		873,315		2.58
Issued		-		-
Exercised		-		-
Forfeited		-		-
Balance of warrants issued and outstanding at March 31, 2012		873,315	$	2.58

The following table summarizes the shares of the Company's common stock issuable upon exercise of warrants outstanding at March 31, 2012:

Warrants Outstanding								Warrants Exercisable
Range of Exercise Price		Number Outstanding at March 31, 2011		Weighted Average Remaining Contractual Life (Years)		Weighted Average Exercise Price		Number Exercisable at March 31, 2011		Weighted Average Exercise Price
$	2.58		873,315		1.21	$	2.58		873,315	$	2.58

In connection with the warrants granted under 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 granted, at any time prior to the eighteen month anniversary of the Securities Purchase Agreement dated June 15, 2010. 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 to not 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 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 fair market value and adjusted during each reporting period subsequent to reclassification to a derivative liability from that of an equity instrument.

NOTE 11 – 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 (“PRC GAAP”). Appropriation to the statutory surplus reserve should be at least 10% of the after tax net income determined in accordance with 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. Appropriations are made based on annual net income after the end of each fiscal year of PRC enterprises. Commencing on January 1, 2006, the new PRC regulations waived the requirement for appropriating retained earnings to the statutory public welfare fund. Fuer elected not to made discretionary surplus reserves since its establishment. For the three months ended March 31, 2012 and 2011, retained earnings that are restricted for appropriation to statutory reserves were $247,426 and $583,516, respectively. The table below summarizes the statutory reserves:

	For the Three Months Ended
	March 31,
	2012			2011
Registered capital of Chinese operating entity	$	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 reserves		(2,522,656	)		(1,682,673	)
Unfunded statutory reserves	$	781,557		$	1,621,541

NOTE 12 – COMMITMENTS AND CONTINGENCIES

Substantially all of the Group’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 occurred until the date the financial statements were issued and did not note any commitments.

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

The following discussion and analysis of financial condition and results of operations should be read in conjunction with the Unaudited Financial Statements and Notes thereto included elsewhere in this report and the Consolidated Financial Statements and Notes thereto included in our annual report on Form 10-K for the fiscal year ended December 31, 2011.

FORWARD-LOOKING STATEMENTS

Certain statements made in this report about our expectation, beliefs, plans objectives, prospects, financial condition, assumptions or future events or performance are not historical facts and forward-looking statements. These forward-looking statements involve known or unknown risks, uncertainties and other factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. In some cases you can identify forward-looking statements by terminology such as “may,” “should,” “potential,” “continue,” “expects,” “anticipates,” “intends,” “plans,” “believes,” “estimates,” and similar expressions. These statements are based on our current beliefs, expectations, and assumptions and are subject to a number of risks and uncertainties. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. These forward-looking statements are made as of the date of this report, and we assume no obligation to update these forward-looking statements whether as a result of new information, future events, or otherwise, other than as required by law. In light of these assumptions, risks, and uncertainties, the forward-looking events discussed in this report might not occur and actual results and events may vary significantly from those discussed in the forward-looking statements.

Overview

We are a leading Chinese agricultural material company providing quality hybrid corn seeds, soybean seeds, rice seeds and fertilizer products to farmers in northeastern China, which is the most important agriculture region in the country. Through our 1,052 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.

Historical Developments

Since establishment, we have endeavored to develop new products. In 2005, we purchased a humic fertilizer patent from the China Institute of Agriculture, and have developed a series of products based on the patent that adapt to different environmental and soil conditions in different areas of northeastern China. In 2007, we participated in the China Spark Program, a plan for developing new agricultural techniques and products lead by the Ministry of Science and Technology of PRC, and invented cold proof additives for seeds. The product was launched in 2010.

During the past 7 years, we have diligent monitored product quality, successfully elevated our brand reputation and attained a solid customer base. We were granted “the Most Respected Enterprise Award” in 2007 by the China Academy of Humic Acid Industry. In 2008, we were certified under ISO 9001 and 14001.

On December 10 2009, the Company was recognized as a “High-tech Enterprise” by the state government, which entitled us to a favorable enterprise income tax treatment for the three years ended in 2011.

On December 2, 2010, we were awarded "the Best Enterprise Award" at the Third National Humic Acid Industry Award Assembly for the "Black Gold Cup" Selection in Beijing.

On October 25, 2010, we were granted one of the “Top Enterprise of the Seed Industry” awards by the Ministry of Agriculture of the People’s Republic of China, and noted to be one of the Top 5 humic fertilizer providers by the China Humic Acid Industry Association.

Factors Affecting our Results of Operations

Shrinking Arable Land and Growing Population

China is facing great stress upon its food supply. Arable land in China is shrinking as a result of construction of buildings and basic facilities, desertification, soil pollution, and urbanization. Nevertheless, the Chinese population is expecting to keep rising until 2033, reaching 1.5 billion people. As a result, China has to lean on extensive use of fertilizer and high yield hybrid grain seeds to maintain sufficient food supply.

Great Potential in the Seeds Market

Farmers in China use a great portion of seeds from the output of the previous year for the need in the next year. According to National Bureau of Statistics of China, in 2008, only 38.5% of seeds used were supplied by seeds companies, compared to world average of 70% and over 90% in developed countries, which creates a potential market of $4 billion.

Low Industry Concentration and Abundant Acquisition Opportunities

At present, seed products are supplied by over 9,000 seeds providers, a great majority of which are low scale and do not control up to date seed patents. Seeds market concentration is far below the usual level of concentration for industrial markets in developed countries. Historically, the government of China has raised entry barriers for seeds companies by means of certain registered capital threshold, which has created great merger and acquisition opportunities. We believe this trend will continue in the future.

Adverse Attitude toward Genetically Modified Seeds

Though years have passed since genetic modification techniques were adopted in seed production, safety of genetically modified grain is still unproved. It is estimated that the cultivation of genetically modified plants could impact the gene stability of surrounding natural plants, and the health of creatures that eat them. At present, both the EU and the United States have not approved genetically modified crops edible for humans. Although two varieties of genetically modified corn seed was granted Safety Certificates from Committee of Food Safety of the Ministry of Agriculture of the PRC, they still await for further approvals for commercial selling, as clarified by the state authority. It may still take years for genetically modified grain to be accepted by customers.

Ongoing Urbanization and Growing Disposable Income Boost Demand For Meat and Corn.

In China, urban residents consume more meat products than rural residents per capita. With urbanization in the past decade, meat output has increased with compound annual growth rate of 1.17% from 2000 to 2007. Corn is the most widely used among grains for feeding poultry and livestock, for it accumulates more carbohydrate with more efficient photosynthesis process. Therefore grain production increased with compound annual growth rate of 4.63% in the same period. It is reasonable that corn cultivation will continue growing in the future as China’s urbanization rate and disposable income grow.

Seasonality

Our business is affected by the seasonal factors. Field crops are planted in early May in Heilongjiang, Jilin and the northeastern part of Inner Mongolia, and are harvested during October. To adapt to the agriculture circle, we sell our seed product from December through April, and most of our fertilizers and herbicides germicides and pesticides from April to June. During the past years, we launched our advertisement and marketing events in the fourth quarters to attract our customers.

Our seed breeding plans and fertilizer production plans are made during the second quarter of each year. We incur short term loans as a supplemental source of cash for purchasing raw seeds harvested. We repay the loans during the third quarter of each year when we maintain a larger balance of cash. We believe the cash generated from sales of our product and our short term loans would be sufficient to sustain our business.

Results of Operations

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

	For the Three Months Ended March 31,
	2012		2011
	($ in thousands)
Sales	$	24,536	$	22,857
Cost of goods sold		17,330		14,426
Gross profit		7,206		8,431
Operating and administrative expenses:
Sales and marketing		766		1,006
General and administrative		640		492
Income from operations		1,406		6,933
Other income (expenses), total		1		(5)
Income before income tax		5,801		6,928
Income tax expenses		1,459		1,093
Net income	$	4,342	$	5,835

For the three months ended March 31, 2012 compared to March 31, 2011

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 $1.68 million, or 7.35%, from approximately $22.86 million for the three months ended March 31, 2011 to approximately $24.54 million for the same period in 2012. 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. In addition, our inventories decreased by $4.18 million, or 48.17%, from $8.67 million as of December 31, 2011 to $4.50 million as of March 31, 2012. This decrease was primarily attributable to seasonality factors as discussed above.

The following table sets forth information regarding the sales of our principal products during the three months ended March 31, 2012 and 2011, respectively:

	For the 3 months ended March 31, 2012							For the 3 months ended March 31, 2011
	Quantity		Amount		% of			Quantity		Amount		% of
Product name	(Kg’000)		($’000)		Sales			(Kg’000)		($’000)		Sales
Corn Seeds		2,861	$	4,555		18.6	%		7,520	$	9,100		39.8	%
Soybean Seeds		3,277		3,369		13.7	%		5,205		6,738		29.5	%
Rice Seeds		15,230		15,902		64.8	%		7,139		6,501		28.4	%
Vegetable Seeds		-		-		-	%		3		12		0.1
Fertilizers		108		279		1.1	%		197		231		1.0	%
Plant Regulators		226		431		1.8	%		181		275		1.2	%
		21,702	$	24,536		100.0	%		20,245	$	22,857		100.0	%

The fluctuations in average sales price per kilogram of corn seeds, soybean seeds and rice seeds, as reflected in the following table, are primarily driven by increases in the prices of grians and demand for the products. The changes in the average selling prices of fertilizers and plant additives are generally caused by an increase in sales of high margin products. The following table shows sales price per kilogram by product for the three months ended March 31, 2012 and 2011 and the percentage change in the sales price per kilogram.

	Average Price				Percentage
	Per Kilogram				Change
Product	2012		2011
Corn Seeds	$	1.59	$	1.21		31	%
Soybean Seeds	$	1.03	$	1.29		(20)	%
Rice Seeds	$	1.04	$	0.91		14	%
Vegetable Seeds	$	-	$	4.00		(100)	%
Fertilizers	$	2.57	$	1.17		120	%
Plant Regulators	$	1.19	$	1.52		26	%

Cost of Goods Sold

Our costs of goods sold consists primarily of the cost of raw seeds and direct and indirect manufacturing costs, including production overhead costs, shipping and handling costs for the products sold. Cost of goods sold increased $2.90 million, or 20.13%, from $14.43 million for the three months ended March 31, 2011 to $17.33 million for the three months ended March 31, 2012. This increase was primarily attributable to the increase in sales volume and increased price in raw materials.

Operating and Administrative Expenses

Our total operating expenses consist primarily of sales and marketing expenses and general and administrative expenses. Our total operating expenses decreased by $0.09 million, or 6.10%, from $1.50 million for the three months ended March 31, 2011 to $1.41 million for the three months ended March 31, 2012.

Sales and Marketing. Our sales and marketing expenses consist primarily of transportation expenses, advertising expenses, year-end bonus for sales team, and other overhead expenses incurred by the Company’s sales and marketing personnel. Sales and marketing expenses decreased approximately $0.24 million, or 23.85%, from $1.01 million for the three months ended March 31, 2011 to $0.77 million for the three months ended March 31, 2012. This increase was primarily attributable to (i) a decrease of approximately $0.13 million, or 17.44%, in shipping expense, which is primarily due to less sales volume; (ii) a decrease of approximately $0.28 million, or 86.17% in advertisement expense as we launched TV advertisement campaigns in 2011 in Heilongjiang and Jilin provinces and increased in spending for advertisement in Jilin Province, to enhance our brand awareness and increase our market share. Sales and marketing expenses are likely to increase as we continue expanding our sales volume throughout China, and launching more advertisement campaign seeking to increase our market share and awareness of our high quality products.

General and Administrative. Our general and administrative expenses consist primarily of salary, and allowances for receivables, and professional service fees. General and administrative expenses increased approximately $0.15 million, or 30.21%, from $0.49 million for the three months ended March 31, 2011 to approximately $0.64 million for the three months ended March 31, 2012. This increase was primarily attributable to an increase in amortization for prepaid leases of approximately $0.05 million from $0.15 million for the three months ended March 31, 2011 to approximately $0.20 million for the three months ended March 31, 2012. General and administrative expenses are likely to increase as we continue to expand our operations in China, hire new employees and appoint directors to improve our corporate governance, and rent more land for raw seed breeding.

Income from Operations

As a result of the foregoing, our income from operations decreased by $1.13 million, or 16.34%, from approximately $6.93 million for the three months ended March 31, 2011 to approximately $5.80 million for the three months ended March 31, 2012.

Other Income (Expense)

Our other income (expense) consists primarily of interest income, interest and finance costs, and other income and expense accounts. Other income increased approximately by $0.01 million, which is attributable to the decrease in interest expenses.

Income Tax Expense

We are subject to PRC enterprise income taxes. Our income tax expense increased by approximately $0.37 million, or 33.49%, from approximately $1.09 million for the three months ended March 31, 2011 to approximately $1.46 million for the three months ended March 31, 2012.

Cumulative Currency Translation Adjustments

Our principal country of operations is the PRC and our functional currency is the Renminbi, and our reporting currency is the U.S. dollar. All translation adjustments resulting from the translation of our financial statements into U.S. dollars (“USD”) are reported as a cumulative currency translation adjustment. The period-to-period variations in foreign currency translation adjustments were primarily due to changes in exchange rate between the Renminbi and the U.S. dollar.

Liquidity and Capital Resources

Our summary cash flow information is as follows:

	For the Three Months Ended March 31,
	2012			2011
	Unaudited			Unaudited
	($ in thousands)
Net cash provided by operating activities	$	4,174		$	7,392
Net cash used in investing activities	$	(74	)	$	(242	)
Net cash provided by financing activities	$	-		$	-

Net Cash Provided by Operating Activities

Net cash provided by operating activities decreased by approximately $3.22 million for the three months ended March 31, 2012 as compared to the three months ended March 31, 2011, which is due to i) a decrease of approximately $1.49 million in net income attributable to the factors discussed above; ii) a decrease of approximately $3.31 million in changes in trade receivables due to our sales peak in March, 2012; iii) a decrease of approximately $1.48 million in changes in inventories as we received more delivery of raw seeds since our production capacity and distribution is improved and more storage capacity was allocated for the raw seeds; and iv) a decrease of approximately $0.95 million in changes in advances from customers.

We had retained earnings of approximately $19.85 million and $15.75 million as of March 31, 2012 and December 31, 2011, respectively. As of March 31, 2012, we had cash of approximately $7.93 million, total current assets of approximately $27.40 million, and a working capital surplus of approximately $22.36 million. We have financed our activities to date principally from cash derived from our operations in the previous year. We maintain a large balance of non-cash current assets because our collection process of trade receivables. We expect to collect most of the trade receivables in the coming quarter, and believe the cash flow provided by operating activities in the same period will be sufficient to sustain our operations.

Net Cash Used in Investing Activities

Net cash used in investing activities decreased approximately $0.17 million, from approximately $0.24 million for the three months ended March 31, 2011 to approximately $0.07 million for the three months ended March 31, 2012. This decrease was primarily attributable to less investment in plant and equipment. Net cash used in investing activities primarily relates to expenditures associated with our equipment and purchase of a new product patent.

Net Cash Provided by Financing Activities

Net cash provided by financing activities were nil for the three months ended March 31, 2012 and 2011.

On June 17, 2010, we 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.

On November 19, 2010, we have entered into a loan agreement with Heilongjiang Branch of Agriculture Development Bank of China for loan of approximately $3.69 million with an annualized interest rate of 5.56%. The Loan is due on August 17, 2011.

Tax Favor

On January 2010, we were nominated as a High-tech Enterprise by the PRC Government. This honor entitled us to a favorable enterprise income tax rate of 15% for three years ending in 2014. We believe the favorable tax rate will enhance our profitability and cash flow, which will boost our expansion.

Contingencies

Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company’s management and legal counsel assess such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company’s legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought.

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, would be disclosed. Loss contingencies considered to be remote by management are generally not disclosed unless they involve guarantees, in which case the guarantee would be disclosed.

Critical Accounting Policies

The consolidated financial statements include the financial statements of us, our subsidiaries and VIE. All transactions and balances among us and our subsidiaries and VIE have been eliminated upon consolidation. Certain amounts included in or affecting our consolidated financial statements and related disclosures must be estimated, requiring us to make certain assumptions with respect to values or conditions that cannot be known with certainty at the time the financial statements are prepared. These estimates and assumptions affect the amounts we report for assets and liabilities and our disclosure of contingent assets and liabilities at the date of our financial statements. We routinely evaluate these estimates, utilizing historical experience, consulting with experts and other methods we consider reasonable in the particular circumstances. Nevertheless, actual results may differ significantly from our estimates. Any effects on our business, financial position or results of operations resulting from revisions to these estimates are recorded in the period in which the facts that give rise to the revision become known.

Estimate of the useful lives of property and equipment and biological assets – We must estimate the useful lives and residual values of our property and equipment. We must also review property and equipment and biological assets for possible impairment whenever events and circumstances indicate that the carrying value of those assets may not be recovered from the estimated future cash flows expected to result from their use and eventual disposition. We recognized no impairments in the three months ended March 31, 2012 and 2011.

Estimate of the useful lives of intangible assets - Intangible assets, which are purchased seeds variety rights, are amortized using the straight-line method over their estimated period of benefit, normally 10 years. We must review the marketability of the seed varieties for possible impairment whenever events and circumstances imply that carrying value of such assets may not be recovered from the estimated future cash flow result from sales of such seeds products or possible disposition. We recognized no impairments in the three months ended March 31, 2012 and 2011.

Inventory – We value inventories at the lower of cost or market value. We determine the cost of inventories using the weighted average cost method and include any related production overhead costs incurred in bringing the inventories to their present location and condition. We must determine whether we have any excessive, slow moving, obsolete or impaired inventory. We perform this review quarterly, which requires management to estimate the future demand of our products and market conditions. We make provisions on the value of inventories at period end equal to the difference between the cost and the estimated market value. If actual market conditions change, additional provisions may be required. In addition, we may write off some provisions if we later sell some of the subject inventory. Our inventory balances varied greatly from quarter to quarter due to seasonality of our business, since seeds are purchased during November to February and was sold from December to April. Seeds can be kept for more than two years before they expire or become less effective in germination.

Revenue recognition – Revenue from the sale of goods is recognized on the transfer of risks and rewards of ownership, which is generally upon shipment. All sales are FOB shipping point.. We render neither sales return nor rebates to our customers, thus revenue would reflect the actual sales we are entitled to.

Please refer to the notes to the financial statements included elsewhere in this filing for a more complete listing of all of our critical accounting policies.

Recently Adopted Accounting Pronouncement

Statutory Reserves

In accordance with the laws and regulations of the PRC, after payments of the PRC income taxes, a wholly-owned Foreign Invested Enterprises income, shall be allocated to the statutory reserves since January 1, 2006. The public welfare fund reserve was limited to 50 percent of the registered capital. Statutory Reserve funds are restricted for offset against losses, expansion of production and operation or increase in registered capital of the respective company, which is made by the end of each calendar year. This reserve is not transferable to the Company in the form of cash dividends, loans or advances. These reserves are therefore not available for distribution except in liquidation. As of March 31, 2012 and December 31, 2011, the Company has $2,522,656 and $2,275,230, respectively, in these non-distributable reserve funds.

Off Balance Sheet Arrangements

As of March 31, 2012 and December 31, 2011, we have no off balance sheet arrangements.

Outstanding Indebtedness

As of March 31, 2012 and December 31, 2011, we had no outstanding indebtedness.

Contractual Obligations

We did not enter into any material contractual obligations during the three months ended March 31, 2012. The Company has no material contractual obligations not fully recorded on our Consolidated Balance Sheets or fully disclosed in the Notes to our Consolidated Financial Statements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this Item.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed pursuant to the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules, regulations and related forms, and that such information is accumulated and communicated to our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

In connection with the preparation of this Report, management, under the supervision and with the participation of the Chief Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures. Based on that evaluation and the identification of certain material weaknesses in internal control over financial reporting, such as a lack of segregation of duties, which we view as an integral part of our disclosure controls and procedures, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were not effective as of March 31, 2012. We are in the process of evaluating and remedying the material weaknesses identified by our Chief Executive Officer and Chief Financial Officer. Nevertheless, based on a number of factors, including the performance of additional procedures by management designed to ensure the reliability of our financial reporting, we believe that the consolidated financial statements in this Report fairly present, in all material respects, our financial position, results of operations, and cash flows as of the dates, and for the periods, presented, in conformity with US GAAP.

Changes in Internal Controls

There have been no changes in our internal controls over financial reporting during the quarter ended March 31, 2012 that have materially affected or are reasonably likely to materially affect our internal controls. Our Board of directors and management is working on our internal control deficiencies and material weaknesses by recruiting staff and finance department personnel with expertise on accounting and internal controls, and are working on improving our corporate governance.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

To the best knowledge of our officers and sole director, the Company is not a party to any legal proceeding or litigation.

Item 1A. Risk Factors.

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this Item. See the “Risk Factors” of the Company’s Form 10-K filed with the Securities and Exchange Commission on March 30, 2012 (“Form 10-K”), which identifies and discloses certain risks and uncertainties including, without limitation, those “Risk Factors” included in Item 501 of the Form 8-K.

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

None

Item 3. Defaults Upon Senior Securities.

None

Item 4. (Removed and Reserved).

None

Item 5. Other Information.

None

Item 6. Exhibits.

For a list of exhibits filed with this report, refer to the Index to Exhibits.

Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Dated: May 10, 2012

FUER INTERNATIONAL, INC.

By: /s/ _Zhang Li

Zhang Li

Chief Executive Officer

INDEX TO EXHIBITS


EXHIBIT
NUMBER		DESCRIPTION OF DOCUMENT

31.1		Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2		Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1		Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.2		Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

Fuer International Inc. 10-Q