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

For the quarterly period ended: ~~September 30,~~March ~~2014~~31, 2015

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

For the transition period from ______to______.

	DEYU AGRICULTURE CORP.
	(Exact name of registrant as specified in its charter)

Nevada		333-160476		80-0329825
(State or other jurisdiction of incorporation or organization)		(Commission File No.)		(I.R.S. Employer Identification No.)

Unit 1010, Block B, Huizhi Building,

No.9 Xueqing Road,

Haidian District, Beijing, PRC

Zip Code: 100085

(Address of principal executive offices) (zip code)

86-10-8273-2870

(Issuer Telephone number)

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 x 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 (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x 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 filer. See definition of “accelerated filer” and “large accelerated filer” in Rule 12b-2 of the Exchange Act (Check one):

Large Accelerated Filer ¨ Accelerated Filer ¨ Non-Accelerated Filer ¨ Smaller Reporting Company x

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

As of ~~November~~May 1013, ~~2014~~2015, there were 11,~~031~~044,~~807~~328 shares outstanding of the registrant’s common stock.

DEYU AGRICULTURE CORP.

FORM 10-Q

~~September 30~~March 31, ~~2014~~ 2015

INDEX

PART I
ITEM 1.	FINANCIAL STATEMENTS	3
ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	26
ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	3837
ITEM 4.	CONTROLS AND PROCEDURES	3938
PART II
ITEM 1.	LEGAL PROCEEDINGS	4038
ITEM 1A.	RISK FACTORS	4038
ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	4038
ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	4038
ITEM 4.	MINE SAFETY DISCLOSURES	4038
ITEM 5.	OTHER INFORMATION	4038
ITEM 6.	EXHIBITS	4139
SIGNATURES		4442

Item 1. Financial Statements

DEYU AGRICULTURE CORP. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

Assets	September 30, 2014		December 31, 2013
	March 31, 2015		December 31, 2014
	(Unaudited)		(Audited)
Assets
Current Assets
Cash and cash equivalents	$	1828,~~052,428~~736	$	~~979~~1,~~282~~012,743
Restricted cash		16,292		16,519
Accounts receivable, net		21,538,376		21,536,525
Accounts receivable, net		19,620,338		32,326,897
Inventory		9,440,799		9,815,931
Inventory		12,649,607		15,318,224
Advance to supplier		1,065,685		732,976
Advance to supplier		2,857,938		4,363,298
Prepaid expenses		755,439		939,429
Prepaid expenses		1,297,754		1,161,302
Other current assets		434,162		254,817
Other current assets		96,118		159,948
Total Current Assets		34,063,197		34,292,421
Total Current Assets		37,590,475		54,325,470
Property, plant, and equipment, net		16,556,964		17,020,127
Property, plant, and equipment, net		17,539,040		19,251,051
Construction-in-progress		373,624		353,963
Construction-in-progress		913,864		-
Long-term Investment		58,719		58,666
Long-term Investment		59,303		60,129
Intangible assets, net		7,408,510		7,459,320
Intangible assets, net		7,610,459		7,827,809
Total Assets	$	58,461,014	$	59,184,497
Total Assets	$	63,713,141	$	81,464,459
Liabilities and Equity
Current Liabilities
Short-term loan	$	7,~~362~~275,~~333~~367	$	7,~~464~~268,~~856~~801
Accounts payable		5,~~557~~911,~~383~~285		84,~~538~~355,~~544~~395
Advance from customers		21,~~005~~973,~~274~~975		1,~~990~~972,~~479~~193
Accrued expenses		1,~~179~~506,~~203~~531		1,~~002~~406,~~885~~519
Tax payable		~~130~~89,~~232~~240		73107,~~790~~228
Construction payable		580,873		-
Preferred stock dividends payable		320,737		212,094
Preferred stock dividends payable		107,701		247,614
Due to related parties		13,971		13,958
Due to related parties		14,110		14,306
Other current liabilities		288,775		293,456
Other current liabilities		233,775		282,179
Total Current Liabilities		17,379,881		15,629,644
Total Current Liabilities		17,170,884		19,614,653
Equity
Series A convertible preferred stock, $.001 par value, 10,000,000 shares
Series A convertible preferred stock, $.001 par value, 10,000,000 shares authorized, 1,960,132 and 1,894,992 shares outstanding, respectively		1,960		1,895
authorized, 1,907,513 and 2,182,628 shares outstanding, respectively		1,908		2,183
Common stock, $.001 par value; 75,000,000 shares authorized, 11,044,328 and 11,044,328 shares outstanding, respectively		11,044		11,044
Common stock, $.001 par value; 75,000,000 shares authorized,
Additional paid-in capital		21,670,317		21,670,346
11,031,807 and 10,618,266 shares outstanding, respectively		11,032		10,618
Other comprehensive income		6,540,097		6,515,733
Additional paid-in capital		21,669,749		21,225,146
Retained earnings		12,825,966		15,325,116
Other comprehensive income		6,985,054		7,897,730
Total Stockholders' Equity		41,049,384		43,524,134
Retained earnings		17,842,097		32,681,588
Noncontrolling Interests		31,749		30,719
Total Stockholders' Equity		46,509,840		61,817,265
Total Equity		41,081,133		43,554,853
Noncontrolling Interests		32,417		32,541
Total Liabilities and Equity	$	58,461,014	$	59,184,497
Total Equity		46,542,257		61,849,806
Total Liabilities and Equity	$	63,713,141	$	81,464,459

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

DEYU AGRICULTURE CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (UNAUDITED)

	For The Three Months Ended						~~For The Nine Months Ended~~
	September 30,						September 30,
	March 31,
	2014			2013			2014			2013
	2015			2014
	(Unaudited)			(Unaudited)			~~(Unaudited)~~			~~(Unaudited)~~
Net revenue
Normal inventory	$	3732,~~819~~208,~~996~~047		$	6812,~~339~~152,~~368~~145		$	~~66,935,029~~		$	~~209,117,183~~
Damaged corn		-			-3,421,175			~~3,421,175~~			-
Total Net Revenue		3732,~~819~~208,~~996~~047			6815,~~339~~573,~~368~~320			~~70,356,204~~			~~209,117,183~~
Cost of goods sold
Normal inventory		(3530,~~067~~459,~~741~~475	)		(6411,~~342~~553,~~240~~198	)		~~(61,985,481~~	)		~~(190,705,629~~	)
Damaged corn		-			-(9,328,942	)		~~(9,328,942~~	)		-
Total Cost of Goods Sold		(3530,~~067~~459,~~741~~475	)		(6420,~~342~~882,~~240~~140	)		~~(71,314,423~~	)		~~(190,705,629~~	)
Gross Profit (loss)		21,~~752~~748,~~255~~572			3(5,~~997~~308,~~128~~820	)		~~(958,219~~	)		~~18,411,554~~
Selling expenses		(32,~~156~~900,~~574~~531	)		(61,~~207~~098,~~310~~652	)		~~(6,455,802~~	)		~~(14,340,936~~	)
General and administrative expenses		(1,~~562~~125,~~640~~862	)		(42,~~980~~678,~~266~~029	)		~~(6,250,903~~	)		~~(9,884,504~~	)
Loss on impairment of assets		-			(6,586,425	)		-			(6,586,425	)
Total Operating Expenses		(4,026,393	)		(3,776,681	)
Total Operating Expenses		(4,719,214	)		(17,774,001	)		(12,706,705	)		(30,811,865	)
Operating income (loss)		(2,277,821	)		(9,085,501	)
Operating loss		(1,966,959	)		(13,776,873	)		(13,664,924	)		(12,400,311	)
Interest income		2,393			1,080
Interest income		2,557			19,476			4,516			33,148
Interest expense		(187,971	)		(195,653	)
Interest expense		(200,978	)		(190,183	)		(591,660	)		(593,464	)
Non-operating income (loss)		128,468			47,265
Non-operating income (loss)		28,547			(1,107,683	)		96,509			(2,307,679	)
Total Other Expenses		(57,110	)		(147,308	)
Total Other Expenses		(169,874	)		(1,278,390	)		(490,635	)		(2,867,995	)
Income (loss) before income taxes		(2,334,931	)		(9,232,809	)
Loss before income taxes		(2,136,833	)		(15,055,263	)		(14,155,559	)		(15,268,306	)
Income taxes		(56,448	)		(83,249	)
Income taxes		(188,581	)		(54,501	)		(372,440	)		(580,054	)
Income before extraordinary items		(2,391,379	)		(9,316,058	)
Net loss		(2,325,414	)		(15,109,764	)		(14,527,999	)		(15,848,360	)
Net income		(2,391,379	)		(9,316,058	)
Net income attributable to noncontrolling interest		297			194			604			3,998
Net income (loss) attributable to noncontrolling interest		36			159
Net loss attributable to Deyu Agriculture Corp.		(2,325,117	)		(15,109,570	)		(14,527,395	)		(15,844,362	)
Net income (loss) attributable to Deyu Agriculture Corp.		(2,391,343	)		(9,315,899	)
Preferred stock dividends		(107,~~242~~807	)		(~~122~~102,~~691~~349	)		~~(312,096~~	)		~~(356,114~~	)
Net loss available to common stockholders		(2,432,359	)		(15,232,261	)		(14,839,491	)		(16,200,476	)
Net income (loss) available to common stockholders		(2,499,150	)		(9,418,248	)
Foreign currency translation gain (loss)		~~510~~(1,~~193~~358,387	)		~~141~~(1,~~382~~445,198	)		~~(912,196~~	)		~~1,475,116~~
Comprehensive loss		(1,922,166	)		(15,090,879	)		(15,751,687	)		(14,725,360	)
Comprehensive income (loss)		(3,857,537	)		(10,863,446	)
Other comprehensive income (loss) attributable to noncontrolling interests		~~(335~~756	)		(9281	)		~~(480~~	)		~~9,773~~
Comprehensive loss attributable to Deyu Agriculture Corp.	$	(1,922,501	)	$	(15,090,971	)	$	(15,752,167	)	$	(14,715,587	)
Comprehensive income (loss) attributable to Deyu Agriculture Corp.	$	(3,856,781	)	$	(10,863,527	)
Net loss attributable to common stockholders per share - basic	$	(0.22	)	$	(1.43	)	$	(1.36	)	$	(1.52	)
Net income (loss) attributable to common stockholders per share - basic	$	(0.23	)	$	(0.87	)
Net loss attributable to common stockholders per share - diluted		(0.22	)		(1.43	)		(1.36	)		(1.52	)
Net income (loss) attributable to common stockholders per share - diluted		(0.23	)		(0.87	)
Weighted average number of common shares outstanding - basic		11,~~031~~044,~~807~~328			10,~~618~~793,~~266~~738			~~10,951,418~~			~~10,627,497~~
Weighted average number of common shares outstanding - diluted		11,~~031~~044,~~807~~328			10,~~618~~793,~~266~~738			~~10,951,418~~			~~10,627,497~~

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

DEYU AGRICULTURE CORP. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

	For The Nine Months Ended
	For The Three Months Ended
	September 30,
	March 31,
	2014			2013
	2015			2014
	(Unaudited)			(Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) available to common stockholders	$	(142,~~839~~499,~~491~~150	)	$	(169,~~200~~418,~~476~~248	)
Adjustments to reconcile net income (loss) to net cash
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
provided by operating activities:
Depreciation & amortization		532,589			602,646
Depreciation & amortization		1,594,215			1,766,231
Loss on impairment of asset valuation		-
Loss of impairment of assets		-			6,586,425
Bad debt expenses		59,008			825,993
Bad debt expenses		1,215,379			1,330,398
Share-based compensation		-			585
Write-off of allowance for doubtful accounts		(834,253	)		-
Preferred stock dividends accrued		107,807			102,349
Share-based compensation		1,779			43,187
Noncontrolling interests		(36	)		(159	)
Preferred stock dividends accrued		312,096			356,114
Common stocks issued for services		-			(57,200	)
Noncontrolling interests		(604	)		(3,998	)
Decrease (increase) in current assets:
Accounts receivable		112,~~849,714~~600			62,~~894~~889,~~009~~940
Related-parties trade receivable		43,625			357,671
Inventories		381,722			9,101,545
Inventories		2,446,714			9,326,772
Advance to suppliers		(330,076	)		(203,851	)
Advance to suppliers		1,438,661			781,438
Prepaid expense and other current assets		(74,419	)		593,903
Prepaid expense and other current assets		(159,695	)		(724,623	)
Increase (decrease) in liabilities:
Accounts payable		(21,~~850~~542,~~469~~749	)		(13,~~136~~801,~~732~~786	)
Advance from customers		~~41,935~~-			(~~312~~2,~~946~~094	)
Accrued expense and other liabilities		~~192~~111,~~647~~798			(~~864~~99,~~448~~669	)
Net cash provided by operating activities		452,253			8,141,822
Net cash (used in) operating activities		(165,408	)		(591,154	)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of machinery and equipment		(~~44,692~~312	)		~~(532,353~~-	)
Construction and remodeling of factory and warehouses		(~~331~~19,~~430~~227	)		~~(100,169~~-	)
Net cash used in investing activities		(376,122	)		(632,522	)
Net cash (used in) investing activities		(19,539	)		-
CASH FLOWS FROM FINANCING ACTIVITIES
Net proceeds (repayment) of short-term loans from related parties		-			(155,~~021,616~~715	)
Net repayment from short-term loans from bank and others		-			(8,480,651	)
Net cash provided by (used in) financing activities		-			55,715
Cash released from restriction for credit line of bank loans		-			807,515
EFFECT OF EXCHANGE RATE CHANGE ON CASH AND CASH EQUIVALENTS		940			(37,483	)
Net cash provided by (used in) financing activities		-			(8,694,752	)
NET (DECREASE) INCREASE IN CASH & CASH EQUIVALENTS		(184,007	)		609,396
EFFECT OF EXCHANGE RATE CHANGE ON CASH AND CASH EQUIVALENTS		(2,985	)		(18,432	)
CASH & CASH EQUIVALENTS, BEGINNING BALANCE		1,012,743			979,282
NET (DECREASE) INCREASE IN CASH & CASH EQUIVALENTS		73,146			(1,203,884	)
CASH & CASH EQUIVALENTS, ENDING BALANCE	$	828,736		$	1,588,678
CASH & CASH EQUIVALENTS, BEGINNING BALANCE		979,282			4,937,279
CASH & CASH EQUIVALENTS, ENDING BALANCE	$	1,052,428		$	3,733,395
SUPPLEMENTAL DISCLOSURES:
Income tax paid	$	~~316~~74,~~739~~425		$	~~775~~55,~~198~~306
Interest paid	$	~~324~~100,~~214~~103		$	~~605~~105,~~843~~272
NONCASH INVESTING AND FINANCING ACTIVITIES:
Construction completed and transferred to property, plant, and equipment	$	-		$	767,494
Construction transferred to land use rights	$	-		$	1,045,640

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

DEYU AGRICULTURE CORP. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1. NATURE OF BUSINESS AND BASIS OF FINANCIAL STATEMENT PREPARATION

Deyu Agriculture Corp. (the “Company”), formerly known as Eco Building International, Inc., was incorporated under the laws of the State of Nevada on December 23, 2008. We completed the acquisition of City Zone Holdings Limited (“City Zone”), an agricultural products distributor in the Shanxi Province of the People’s Republic of China (the “PRC”) engaged in procuring, processing, marketing, and distributing various grain and corn products, by means of a share exchange effective April 27, 2010. As a result of the share exchange, City Zone became our wholly-owned subsidiary. We currently conduct our business primarily through operating PRC subsidiaries, including JinzhongDeyu Agriculture Trading Co., Ltd. (“JinzhongDeyu”), JinzhongYuliang Agriculture Trading Co., Ltd. (“JinzhongYuliang”), JinzhongYongcheng Agriculture Trading Co., Ltd. (“JinzhongYongcheng”), Shanxi Taizihu Food Co., Ltd. (“Taizihu”), Shanxi Huichun Bean Products Co., Ltd. (“Huichun” and together with Taizihu, the “Taizihu Group”) and Detian Yu Biotechnology (Beijing) Co., Ltd. (“Detian Yu”) and Detian Yu’s subsidiaries.

On May 11, 2010, our Board of Directors adopted a resolution to change our name to "Deyu Agriculture Corp." and FINRA declared the name change effective on June 2, 2010.

Reverse Acquisition

On April 27, 2010, we entered into a Share Exchange Agreement (“Share Exchange”) pursuant to which we issued 8,736,932 shares of our common stock, par value $ 0.001 per share, to Expert Venture Limited (“Expert Venture”), a company organized under the laws of the British Virgin Islands, and the other shareholders of City Zone (the “City Zone Shareholders”). As a result of the Share Exchange, City Zone became our wholly-owned subsidiary and City Zone Shareholders acquired a majority of our issued and outstanding shares of common stock.

As a result, the Share Exchange has been accounted for as a reverse acquisition using the purchase method of accounting, whereby City Zone is deemed to be the accounting acquirer (the legal acquiree) and we are to be the accounting acquiree (legal acquirer). The financial statements before the date of the Share Exchange are those of City Zone with our results being consolidated from the date of the Share Exchange. The equity section and earnings per share have been retroactively restated to reflect the reverse acquisition and no goodwill has been recorded.

City Zone was incorporated in the British Virgin Islands (“BVI”) on July 27, 2009 under the BVI Business Companies Act of 2004. In November 2009, pursuant to the restructuring plan set out below, City Zone became the holding company of a group of companies comprising Most Smart International Limited ("Most Smart"), Redsun Technology (Shenzhen) Co. Limited (“Shenzhen Redsun”), Shenzhen JiRuHai Technology Co., Ltd. ("Shenzhen JiRuHai"), Detian Yu, JinzhongDeyu, JinzhongYongcheng and JinzhongYuliang.

Restructuring

In November 2009, pursuant to a restructuring plan intended to ensure compliance with PRC rules and regulations, City Zone, through a series of acquisitions and wholly-owned subsidiaries, acquired 100% of the equity interests in JinzhongDeyu, JinzhongYuliang, and JinzhongYongcheng. The former shareholders and key management of JinzhongDeyu, JinzhongYongcheng, and JinzhongYuliang became the ultimate controlling parties and key management of City Zone. This restructuring has been accounted for as a recapitalization of JinzhongDeyu, JinzhongYongcheng and JinzhongYuliang with no adjustment to the historical basis of the assets and liabilities of these companies, while the historical financial positions and results of operations are consolidated as if the restructuring occurred as of the beginning of the earliest period presented in our accompanying consolidated financial statements. For the purpose of a consistent and comparable presentation, the consolidated financial statements have been prepared as if City Zone had been in existence since the beginning of the earliest and throughout the whole periods covered by these consolidated financial statements.

Consolidation Scope:

Details of our subsidiaries subject to consolidation are as follows:

	Domicile and			Percentage
	Date of	Registered		of
Name of Subsidiary	Incorporation	Capital		Ownership			Principal Activities
City Zone Holdings Limited ("City Zone")	British Virgin Islands, July 27, 2009	$	20,283,581		100	%	Holding company of Most Smart

Most Smart International Limited ("Most Smart")	Hong Kong, March 11, 2009	$	1		100	%	Holding company of Shenzhen Redsun

Redsun Technology (Shenzhen) Co., Ltd. ("Shenzhen Redsun")	The PRC, August 20, 2009	$	30,000		100	%	Holding company of Shenzhen JiRuHai, Taizihu and Huichun

Shenzhen JiRuHai Technology Co., Ltd.("Shenzhen JiRuHai")	The PRC, August 20, 2009	$	14,638		100	%	Holding company of Beijing Detian Yu

Detian Yu Biotechnology (Beijing) Co., Ltd. ("Detian Yu")	The PRC, November 30, 2006	$	7,637,723		100	%	Wholesale distribution of simple-processed and deep-processed packaged food products and staple food. Holding company of the following first five entities.

JinzhongDeyu Agriculture Trading Co., Ltd. ("JinzhongDeyu")	The PRC, April 22, 2004	$	1,492,622		100	%	Organic grains preliminary processing and wholesale distribution.

JinzhongYongcheng Agriculture Trading Co., Ltd. ("JinzhongYongcheng")	The PRC, May 30, 2006	$	1,025,787		100	%	Corns preliminary processing and wholesale

JinzhongYuliang Agriculture Trading Co., Ltd. ("JinzhongYuliang")	The PRC, March 17, 2008	$	13,963,243		100	%	Corns preliminary processing and wholesale distribution.

Tianjin Guandu Food Co., Ltd. ("Tianjin Guandu") *	The PRC, June 21, 2011	$	1,544,497		100	%	Wholesale distribution of simple-processed and deep-processed packaged food products and staple food.

HebeiYugu Grain Co., Ltd. ("HebeiYugu")	The PRC, July 25, 2011	$	1,563,824		70	%	Wholesale distribution of grain products and operating or acting as an agent of import & export business for grain products.

Shanxi Taizihu Food Co., Ltd. (“Taizihu”)	The PRC, July 27, 2003	$	1,208,233		100	%	Producing and selling fruit beverages and soybean products.

Shanxi HuiChun Bean Products Co., Ltd. (“Huichun”)	The PRC, September 2, 2007	$	2,636,192		100	%	Producing and selling fruit beverages and soybean products.

Jilin Jinglong Agriculture Development Limited (“Jinglong”)	The PRC, October 10, 2012	$	3,152,138		99	%	Procurement, storage and sales of corn and grain.

Tianjin Guandu completed the deregistration procedure with the Tianjin Industrial and Commercial Bureau on May 28, 2014.

NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

The unaudited consolidated financial statements include the financial statements of Deyu Agriculture Corp. and its subsidiaries. All significant intercompany account balances and transactions have been eliminated in consolidation. Results of operations of companies purchased are included from the dates of acquisition.

These accompanying consolidated financial statements have been prepared in accordance with US GAAP. The Company’s functional currency is the Chinese Yuan, or Renminbi (“RMB”); however, the accompanying consolidated financial statements have been translated and presented in United States Dollars (“USD”).

On April 27, 2010, as a result of the consummation of the Share Exchange, we changed our fiscal year end from May 31 to December 31 to conform to the fiscal year end of City Zone.

Use of estimates

The preparation of the consolidated financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management makes its estimates based on historical experience and various other assumptions and information that are available and believed to be reasonable at the time the estimates are made. Therefore, actual results could differ from those estimates under different assumptions and conditions.

Cash and cash equivalents

Cash and cash equivalents consist of cash on hand, cash in banks and all highly liquid investments with original maturities of three months or less.

As of September 30, 2014, the balance of restricted cash of $16,292 represents a pledge for a bank loan of $14,663 (RMB90, 000) obtained from Bank of Communications Gongzhufen Sub-branch on December 15, 2013.

Accounts receivable

Accounts receivable are recorded at net realizable value consisting of the carrying amount less allowance for doubtful accounts, as needed. We assess the collectability of accounts receivable based primarily upon the creditworthiness of the customer as determined by credit checks and analysis, as well as the customer’s payment history. Management reviews the composition of accounts receivable and analyzes historical bad debts, customer concentrations, customer credit worthiness, current economic trends, and changes in customer payment patterns to evaluate the adequacy of these reserves. While management uses the best information available upon which to base estimates, future adjustments to the allowance may be necessary if economic conditions differ substantially from the assumptions used for the purposes of analysis. The ~~Company~~balance ~~wrote off $834,253~~ of allowance for doubtful accounts ~~for the period ended September 30, 2014~~ as ~~a result~~ of ~~incentives~~March ~~offered to customers for accelerating collections of accounts receivable. The balance of allowance for doubtful accounts As of September 30~~31, ~~2014~~2015 and December 31, ~~2013~~2014 was $1,~~328~~353,~~272~~ 571 and $~~984~~1,~~717~~337,364 respectively.

Inventories

The Company's inventories are stated at the lower of cost or market. Cost is determined on a moving-average basis. Costs of inventories include purchase and related costs incurred in delivering products to their present location and condition. Market value is determined by reference to selling prices after the balance sheet date or to management’s estimates based on prevailing market conditions. Management periodically evaluates the composition of its inventories at least quarterly to identify slow-moving and obsolete inventories to determine if a valuation allowance is required. The balance of reserve for inventory valuation Asas of ~~September~~March 3031, ~~2014~~2015 and December 31, 2014 ~~2013~~ was $~~142~~140,~~107~~709 and $4140,~~603~~582,~~929,~~ respectively.

Property, plant, and equipment

Property, plant, and equipment are stated at cost less accumulated depreciation. Expenditures for maintenance and repairs are charged to earnings as incurred; in addition, renewals and betterments are capitalized. When property, plant, and equipment are retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts, and any gain or loss is included in operations.

Depreciation is computed using the straight-line method over the estimated useful lives of the assets as follows:

	Useful Life (in years)
Automobiles		5
Buildings		10-30
Office equipment		5
Machinery and equipment		5-10
Furniture & fixtures		5

Construction-in-progress

Construction-in-progress consists of amounts expended for the construction of a new factory park, and the cost of the portion of the land use right that the new factory park occupied. Construction-in-progress is not depreciated until such time as the assets are completed and put into service. Once factory park construction is completed, the cost accumulated in construction-in-progress will be transferred to property, plant, and equipment.

Long-lived assets

The Company applies the provisions of FASB ASC Topic 360 (ASC 360), "Property, Plant, and Equipment" which addresses financial accounting and reporting for the impairment or disposal of of long-lived assets. The Company periodically evaluates the carrying value of long-lived assets to be held and used in accordance with ASC 360, at least on an annual basis. ASC 360 requires the impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying amounts. In that event, a loss is recognized based on the amount by which the carrying amount exceeds the fair market value of the long-lived assets. Loss on long-lived assets to be disposed of is determined in a similar manner, except that fair market values are reduced for the cost of disposal. As of ~~September~~March 3031, ~~2014~~2015 and December 31, ~~2013~~2014, the ~~balance~~ balance of impairment of construction-in-progress was $~~729~~772,~~937~~788 and $~~740~~772,~~102~~091, respectively.

Intangible assets

For intangible assets subject to amortization, an impairment ~~loss~~ loss is recognized if the carrying amount of the intangible asset is not recoverable and exceeds fair value. The carrying amount of of the intangible asset is considered not recoverable if it exceeds the sum of the undiscounted cash flows expected to result ~~from~~ from the use of the assets. As of ~~September~~March 3031, ~~2014~~2015 and December 31, ~~2013~~2014, the balance of impairment of intangible assets was $6,~~901~~833,~~090~~ 181 and $6,~~675~~557,~~073~~755, respectively.

Fair value measurements

FASB ASC 820, “Fair Value Measurements” (formerly SFAS No. 157) defines fair value for certain financial and nonfinancial assets and liabilities that are recorded at fair value, establishes a framework for measuring fair value and expands disclosures about fair value measurements. It requires that an entity measure its financial instruments to base fair value on exit price, maximize the use of observable units and minimize the use of unobservable inputs to determine the exit price. It establishes a hierarchy which prioritizes the inputs to valuation techniques used to measure fair value. This hierarchy increases the consistency and comparability of fair value measurements and related disclosures by maximizing the use of observable inputs and minimizing the use of unobservable inputs by requiring that observable inputs be used when available. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the assets or liabilities based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The hierarchy prioritizes the inputs into three broad levels based on the reliability of the inputs as follows:

· Level 1 – Inputs are quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. Valuation of these instruments does not require a high degree of judgment as the valuations are based on quoted prices in active markets that are readily and regularly available. · Level 2 – Inputs other than quoted prices in active markets that are either directly or indirectly observable as of the measurement date, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. · Level 3 – Valuations based on inputs that are unobservable and not corroborated by market data. The fair value for such assets and liabilities is generally determined using pricing models, discounted cash flow methodologies, or similar techniques that incorporate the assumptions a market participant would use in pricing the asset or liability.

Level 2 – Inputs other than quoted prices in active markets that are either directly or indirectly observable as of the measurement date, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 – Valuations based on inputs that are unobservable and not corroborated by market data. The fair value for such assets and liabilities is generally determined using pricing models, discounted cash flow methodologies, or similar techniques that incorporate the assumptions a market participant would use in pricing the asset or liability.

This guidance applies to other accounting pronouncements that ~~require~~ require or permit fair value measurements. On February 12, 2008, the FASB finalized FASB Staff Position (FSP) No. 157-2, Effective ~~Date~~ Date of FASB Statement No. 157 (ASC 820). This Staff Position delays the effective date of SFAS No. 157 (ASC 820) for nonfinancial assets and liabilities to fiscal years beginning after November 15, 2008 and interim periods within those fiscal years, except for those items that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). The adoption of SFAS No. 157 (ASC 820) had no effect on the Company's financial position or results of operations for the ~~nine~~three months ended ~~September~~March 3031, ~~2014~~2015.

We also analyze all financial instruments with features of both liabilities and equity under ASC 480-10 (formerly SFAS 150, “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity”) and ASC 815-40 (formerly EITF 00-19, “Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock”). We have determined ASC 480-10 (formerly SFAS 150) and ASC 815-40 (formerly EITF 00-19) had no material effect on our financial position or results of operations for the ~~nine~~three months ended ~~September~~March 3031, ~~2014~~2015.

Revenue recognition

The Company’s revenue recognition policies are in compliance with the SEC Staff Accounting Bulletin No. 104 (“SAB 104”). The Company recognizes product revenue when the following fundamental criteria are met: (i) persuasive evidence of an arrangement exists, (ii) delivery has occurred, (iii) our price to the customer is fixed or determinable and (iv) collection of the resulting accounts receivable is reasonably assured. The Company recognizes revenue for product sales upon transfer of title to the customer. Customer purchase orders and/or contracts are generally used to determine the existence of an arrangement. Shipping documents and the completion of any customer acceptance requirements, when applicable, are used to verify product delivery or that services have been rendered. The Company assesses whether a price is fixed or determinable based upon the payment terms associated with the transaction and whether the sales price is subject to refund or adjustment.

The Company’s revenue is recognized net of value-added ~~tax~~ tax (VAT), reductions to revenue for estimated product returns, and sales discounts based on volume achieved in the same period ~~that~~ that the related revenue is recorded. The estimates are based on historical sales returns, analysis of credit memo data and other ~~factors~~ factors known at the time. The sales discounts for the ~~nine~~three months ended ~~September~~March 3031, ~~2014~~2015 and ~~2013~~2014 were not material.

We offer a right of exchange on our grain products sold through our relationships with grocery store networks. The consumer who purchases the product may exchange it for the same kind and quantity of product originally purchased. In accordance with FASB ASC 605-15-25-1 and 605-15-15-2, these are not considered returns for revenue recognition purposes. The returns of our products for the ~~nine~~three months ended ~~September~~March 3031, ~~2014~~2015 and ~~2013~~2014 were not material.

Advertising costs

The Company expenses the cost of advertising as incurred or, as as appropriate, the first time the advertising takes place. Advertising costs for the ~~nine~~three months ended ~~September~~March 3031, ~~2014~~2015 and ~~2013~~ 2014 were $~~335~~76,715 ~~326~~ and $~~219~~30,~~415~~185, respectively.

Research and development

The Company expenses its research and development costs as incurred. Research and development expenses for the ~~nine~~three months ended ~~September~~March 3031, ~~2014~~2015 and ~~2013~~2014 were not material.

Stock-based compensation

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

The Company has fully adopted the provisions of FASB ASC 718 and related interpretations as provided by SAB 107. As such, compensation cost is measured on the date of grant as the fair value of the share-based payments. Such compensation amounts, if any, are amortized over the respective vesting periods of the option grant.

Income taxes

The Company accounts for income taxes in accordance with FASB ASC Topic 740, “Income Taxes.” ASC 740 requires a company to use the asset and liability method of accounting for income taxes, whereby deferred tax assets are recognized for deductible temporary differences, and deferred tax liabilities are recognized for taxable temporary differences. Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion, or all of, the deferred tax assets will not be realized. Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

Under ASC 740, a tax position is recognized as a benefit only if if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. The adoption had no material effect on the Company’s consolidated financial statements for the ~~nine~~three months ended ~~September~~March 3031, ~~2014~~2015.

Foreign currency translation and comprehensive income

U.S. GAAP requires that recognized revenue, expenses, gains, and losses be included in net income. Certain statements, however, require entities to report specific changes in assets and liabilities, such as gain or loss on foreign currency translation, as a separate component of the equity section of the balance sheet. Such items, along with net income, are components of comprehensive income. The functional currency of the Company is RMB. The unit of RMB is in Yuan. Translation gains are classified as an item of other comprehensive income in the stockholders’ equity section of the consolidated balance sheet.

Statement of cash flows

In accordance with FASB ASC Topic 230, “Statement of Cash Flows,” cash flows from the Company’s operations is calculated based upon the local currencies. As a result, amounts related to assets and liabilities reported on the consolidated statement of cash flows will not necessarily agree with changes in the corresponding balances on the consolidated balance sheets.

Recent pronouncements

In February 2013, the FASB issued ASU 2013-02, “Comprehensive Income (Topic 220): Reporting of Amounts Reclassified out of Accumulated Other Comprehensive Income.” This ASU does not change the current requirements for reporting net income or other comprehensive income in financial statements. However, this guidance requires an entity to provide information about the amounts reclassified out of accumulated other comprehensive income by component. In addition, an entity is required to present, either on the face of the statement where net income is presented or in the notes, significant amounts reclassified out of accumulated other comprehensive income by the respective line items of net income but only if the amount reclassified is required under U.S. GAAP to be reclassified to net income in its entirety in the same reporting period. For other amounts that are not required under U.S. GAAP to be reclassified in their entirety to net income, an entity is required to cross-reference to other disclosures required under U.S. GAAP that provide additional detail about those amounts. For public entities, the guidance is effective prospectively for reporting periods beginning after December 15, 2012. For nonpublic entities, the guidance is effective prospectively for reporting periods beginning after December 15, 2013. Early adoption is permitted. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial position and results of operations.

In July 2013, the FASB issued ASU 2013-11, “Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists.” An unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset. To the extent a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position or the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. The assessment of whether a deferred tax asset is available is based on the unrecognized tax benefit and deferred tax asset that exist at the reporting date and should be made presuming disallowance of the tax position at the reporting date. For public entities, the guidance is effective prospectively for reporting periods beginning after December 15, 2013. For nonpublic entities, the guidance is effective prospectively for reporting periods beginning after December 15, 2014. Early adoption is permitted. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial position and results of operations.

In December 2013, the FASB issued ASU 2013-12, “Definition of a Public Business Entity”. The Board has decided that it should proactively determine which entities would be within the scope of the Private Company Decision-Making Framework: A Guide for Evaluating Financial Accounting and Reporting for Private Companies (Guide). This will aim to minimize the inconsistency and complexity of having multiple definitions of, or a diversity in practice as to what constitutes, a nonpublic entity and public entity within U.S. generally accepted accounting principles (GAAP) on a going-forward basis. This Update addresses those issues by defining public business entity. The Accounting Standards Codification includes multiple definitions of the terms nonpublic entity and public entity. The amendment in this Update improves U.S. GAAP by providing a single definition of public business entity for use in future financial accounting and reporting guidance. The amendment does not affect existing requirements. There is no actual effective date for the amendment in this Update. However, the term public business entity will be used in Accounting Standards Updates which are the first Updates that will use the term public business entity. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial position and results of operations.

In May 2014, the FASB issued ASU 2014-9, “Revenue from Contracts with Customers”. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. An entity should disclose sufficient information to enable users of financial statements to understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. For a public entity, the amendments in this Update are effective for annual reporting periods beginning after December 15, 2016, including interim periods within that reporting period. Early application is not permitted. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial position and results of operations.

In August 2014, the FASB issued ASU 2014-15, “Presentation of Financial Statements—Going Concern (Subtopic 205-40)”. In connection with preparing financial statements for each annual and interim reporting period, an entity’s management should evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the entity’s ability to continue as a going concern within one year after the date that the financial statements are issued (or within one year after the date that the financial statements are available to be issued when applicable). The amendments in this Update are effective for the annual period ending after December 15, 2016, and for annual periods and interim periods thereafter. Early application is permitted. The adoption of this standard is not expected to have a material impact on the Company’s consolidated financial position and results of operations.

1112

NOTE 53. ACCOUNTS RECEIVABLE

Accounts receivable consisted of the following:

	September 30,			December 31,
	March 31,			December 31,
	2014			2013
	2015			2014
Accounts receivable	$	2022,~~948~~891,~~611~~946		$	3322,~~311~~873,~~614~~889
Less: Allowance for doubtful accounts		(1,~~328~~353,~~272~~570	)		(~~984~~1,~~717~~337,364	)
Accounts receivable, net	$	1921,~~620~~538,~~338~~376		$	3221,~~326~~536,~~897~~525

NOTE 64. INVENTORY

Inventory consisted of the following:

	September 30,			December 31,
	March 31,			December 31,
	2014			2013
	2015			2014
Raw materials	$	1833,~~007,597~~605		$	1751,~~020,486~~095
Work in process		125,751			49,717
Finished goods		7,255,555			8,125,176
Finished goods		10,786,885			17,752,203
Supplies		1,492,348			1,080,242
Supplies		871,481			1,099,747
Reserve for inventory valuation		-140,709			-140,582
Reserve for inventory valuation		(142,107	)		(4,603,929	)
Total Inventory	$	9,440,799		$	9,815,931
Total Inventory	$	12,649,607		$	15,318,224

The balance of reserve for inventory valuation as of ~~September 30~~March 31, 2015 ~~2014~~ and December 31, ~~2013~~2014 was $142, 107 and $4,603,929 respectively.

NOTE 75. PREPAID EXPENSES

Prepaid expenses consisted of the following:

	September 30,		December 31,
	March 31,		December 31,
	2014		2013
	2015		2014
Deductible value-added taxes (VAT)	$	~~982~~533,~~060~~903	$	~~356~~637,~~876~~612
Prepaid rent		~~304~~198,~~349~~138		~~368~~290,~~827~~190
Prepaid other expenses		1123,~~345~~398		~~435~~11,~~599~~627
Total	$	1755,~~297,754~~439	$	1939,~~161,302~~429

NOTE 86. PROPERTY, PLANT, AND EQUIPMENT

Property, plant, and equipment consisted of the following:

	September 30,			December 31,
	March 31,			December 31,
	2014			2013
	2015			2014
Automobiles	$	1,~~032~~022,~~168~~012		$	1,~~046~~021,~~542~~089
Buildings		16,~~767~~589,~~156~~468			1716,~~480~~587,~~188~~178
Office equipment		~~997~~987,~~600~~783			1986,~~012,007~~892
Machinery and equipment		8,~~789~~890,~~228~~087			8,~~386~~869,~~357~~381
Furniture and fixtures		~~112~~111,~~827~~717			~~114~~111,~~398~~615
Total cost		27,~~698~~601,~~979~~067			2827,~~039~~576,~~492~~155
Less: Accumulated depreciation		(1011,~~159~~044,~~939~~103	)		(810,~~788~~556,~~441~~028	)
Property, plant, and equipment, net	$	1716,~~539~~556,~~040~~964		$	1917,~~251~~020,~~051~~127

The buildings owned by the Company located in Jinzhong and Quwo in Shanxi Province, China are used for production, warehousing and offices for our corn and grains business.

As of ~~September~~March 3031, ~~2014~~2015, $5.7 million (RMB 35.2 million) of buildings, machinery and equipment owned by the Taizihu Group were pledged as collateral for short-term bank loans.

Depreciation expense for the ~~nine~~three months ended ~~September~~March 3031, ~~2014~~ 2015 and ~~2013~~2014 was $1475,~~484,373~~699 and $1537,~~474~~485,~~093,~~ respectively.

1213

NOTE 97. CONSTRUCTION-IN-PROGRESS

Construction-in-progress amounted to $~~913~~373, 624 ~~864~~ as of ~~September 30~~March 31, ~~2014~~2015 was mainly represents the cost of the ~~construction~~water ofpurification system, building and workshop decoration of a new bean-based products production line in Huichun.

NOTE 108. INTANGIBLE ASSETS

Intangible assets consisted of the following:

	September 30,			December 31,
	March 31,			December 31,
	2014			2013
	2015			2014
Land use rights	$	14,~~497~~354,~~039~~385		$	14,~~698~~341,~~916~~429
Software-ERP System and B2C platform		1,~~066~~056,~~678~~180			1740,~~081,531~~945
Less: Accumulated amortization		(1,~~052,~~168,874	)		(~~955~~1,~~448~~110,323	)
Impairment loss		(6,~~901~~833,~~090~~181	)		(6,~~997~~512,~~190~~731	)
Total	$	7,~~610~~408,~~459~~510		$	7,~~827~~459,~~809~~320

According to government regulations of the PRC, the PRC Government owns all land. The Company owns the land use rights of farmland and industrial land.

~~JingzhongDeyu,~~JinzhongDeyu is one of the Company-owned land use rights of the 17,000 acres of farmlands in Jinzhong, Shanxi Province. There is no active market for trading of land use rights of those farmlands and the Company could not assess the fair market value of the land use rights based on quoted prices in active markets. The Company assessed fair value of the land use rights based on discounted cash flow and determined that it was less than the carrying value. The balance of impairment of farmland use rights as of ~~September 30~~March 31, ~~2014~~2015 and December 31, ~~2013~~ 2014 was $5,~~842~~784,~~113~~625 and $5,~~832~~819,~~800~~359, respectively. As of ~~September~~March 3031, ~~2014~~2015, the original value of the land use rights of the farmland was $7,~~597~~708,~~915~~000 and was written-down to $1,~~755~~923,~~802~~375.

The Company determined the Software-ERP system (“ERP”) and B2C platform owned by ~~JingzhongDeyu~~JinzhongDeyu for retail sales of the Grain Division was not applicable for its current business operations due to the reduction of retail sales. The balance of impairment of ERP system and B2C platform as of ~~September~~March 3031, ~~2014~~2015 and December 31, ~~2013~~2014 was $1,~~058~~048,~~977~~ 556 and $1738,~~073~~396,~~724,~~ respectively. As of ~~September~~March 3031, ~~2014~~2015, the carrying value of ERP system and B2C platform was $1,~~058~~048,~~977~~556 and was written down to $0.

The Company leases and has obtained a certificate of right of use on 11,667 square meters with the PRC Government in Jinzhong, Shanxi Province where JinzhongDeyu's buildings and production facility are located. The term of the right is four to five years and is automatically renewed upon expiration. The right was fully amortized as of December 31, 2010 using the straight-line method. On June 18, 2012, the Company received the extended land use right certificate and the term of the right was extended to March 14, 2037.

Huichun leases and has obtained a certificate of right to use on 100,000 square meters of industrial land with the PRC Government in Quwo County, Shanxi Province where Taizihu Group’s buildings and production facility are located. The term of the right is 50 years from October 28, 2008 to October 27, 2058. The amortization of the land use right was commenced in October 2008 using the straight-line method over 50 years.

As of ~~September~~March 3031, ~~2014~~2015, $3,~~160~~896,~~802~~101 (RMB 19 million) of the land use right owned by Taizihu Group was pledged as collateral for short-term bank loans.

Amortization expense of the intangible assets for the ~~nine months~~three months ended ~~September~~March 3031, ~~2014~~2015 and ~~2013~~2014 was $~~109~~57,~~842~~548 and $~~292~~65,~~138~~161, respectively.

NOTE 11. SHORT-TERM LOANS

Short-term loans consisted of the following:

	September 30,		December 31,
	2014		2013
Bank loan payable to Agriculture Development Bank of China, bearing
interest at the prime rate based on six-month to one-year loan interest rate released by
The People's Bank of China.
The actual interest rates as of September 30, 2014 and December 31, 2013 were 6.00% and the past-due interest rate was 7.8%.
The term of the loan started from August 14, 2012 with maturity
date on August 13, 2013. The loan was obtained by Taizihu and
pledged by its buildings and land use right.
On July 31, 2013 the loan was repaid for $65,359 (or RMB400,000).
As of September 30, 2014, the loan balance was $2,378,625 (or RMB14,600,000.00).
As of the date of this filing, the Company has been in negotiation with the lender on renewal of the loan. The Company is not currently able to predict the probability of the success on the renewal and will repay the loan immediately if the loan cannot be renewed.	$	2,378,625	$	2,411,748
Bank loan payable to Agriculture Development Bank of China, bearing
interest at the prime rate, based on six-month to one-year loan interest rate released by
The People's Bank of China.
The actual interest rates as of September 30, 2014 and December 31, 2013 were 6.0% and the past-due interest rate was 7.8%.
The term of the loan started from September 18, 2012 with maturity
date on September 17, 2013. The loan was obtained by Taizihu and
pledged by its buildings and land use right.
As of the date of this filing, the Company has been in negotiation with the lender on renewal of the loan. The Company is not currently able to predict the probability of the success on the renewal and will repay the loan immediately if the loan cannot be renewed.		1,466,276		1,486,694
Bank loan payable to Jinzhong City Yuci District Rural Credit Union Co., Ltd.,
bearing interest at a fixed rate of prime rate plus 145% of prime
rate, of which prime rate was based on six-month to one-year loan
interest rate released by The People's Bank of China. The
actual interest rates as of September 30, 2014 were 14.688%..
The term of the loan started from September 12, 2014 with maturity
date on September 11, 2015. The loan was obtained by Jinzhong Yongcheng and
guaranteed by Yuci Jinmao Food Processing Factory, a related party,
for a period of two years starting from September 12, 2015.		1,384,816		-
Bank loan payable to Jinzhong City Yuci District Rural Credit Union Co., Ltd.,
bearing interest at a fixed rate of prime rate plus 145% of prime
rate, of which prime rate was based on six-month to one-year loan
interest rate released by The People's Bank of China. The
actual interest rates as of September 30, 2014 were 14.688%.
The term of the loan started from September 12, 2014 with maturity
date on September 11, 2015. The loan was obtained by Jinzhong Yuliang and
guaranteed by Yuci Jinmao Food Processing Factory, a related party,
for a period of two years starting from September 12, 2015.		1,384,816		-
Bank loan payable to Agriculture Development Bank of China, bearing
interest at the prime rate, based on six-month to one-year loan interest rate released by the People's Bank of China.
The actual interest rate as of September 30, 2014 was 6.0% and the past-due interest rate was 7.8%.
The term of the loan started from January 4, 2013 with maturity
date on January 3, 2014. The loan was obtained by Taizihu and
pledged by its buildings and land use right.		733,138		743,347
As of the date of this filing, the Company has been in negotiation with the lender on renewal of the loan. The Company is not currently able to predict the probability of the success on the renewal and will repay the loan immediately if the loan cannot be renewed.
Bank loan payable to Bank of Communications Gongzhufen subbranch, bearing
interest at a fix rate of prime rate, of which prime rate was based on one-year loan
interest rate released by The People's Bank of China. The
actual interest rate as of September 30, 2014 was 6.310%.
The term of the loan started from December 15, 2013 with maturity
date on December 16, 2014. The loan was obtained by Detian Yu.		14,663		14,867
Bank loan payable to Jinzhong City Yuci District Rural Credit Union Co., Ltd.,
bearing interest at a fixed rate of prime rate plus 130% of prime
rate, of which prime rate was based on six-month to one-year loan
interest rate released by The People's Bank of China.
The term of the loan started from September 6, 2013 with maturity
date on August 22, 2014. The loan was obtained by Jinzhong Yongcheng and
guaranteed by Yuci Jinmao Food Processing Factory, a related party,
for a period of two years starting from August 23, 2014.		-		1,404,100
The loan was paid off on September 11, 2014.
Bank loan payable to Jinzhong City Yuci District Rural Credit Union Co., Ltd.,
bearing interest at a fixed rate of prime rate plus 130% of prime
rate, of which prime rate was based on six-month to one-year loan
interest rate released by The People's Bank of China.
The term of the loan started from September 6, 2013 with maturity
date on August 22, 2014. The loan was obtained by Jinzhong Yongcheng and
guaranteed by Yuci Jinmao Food Processing Factory, a related party,
for a period of two years starting from August 23, 2014.		-		1,404,100
The loan was paid off on September 11, 2014.
Total	$	7,362,333	$	7,464,856

NOTE 129. ~~ACCRUED~~SHORT-TERM ~~EXPENSES~~ LOANS

Short-term loans consisted of the following:

	March 31,		December 31,
	2015		2014

Bank loan payable to Agriculture Development Bank of China, bearing interest at the prime rate based on six-month to one-year loan interest rate released by The People's Bank of China. The actual interest rates as of March 31, 2015 and December 31, 2014 were 6.00%. The term of the loan started from August 14, 2012 with maturity date on August 13, 2013. The loan was obtained by Taizihu and pledged by its buildings and land use right. On July 31, 2013 the loan was repaid for $65,359 (or RMB400,000). As of March 31, 2015, the loan balance was $2,355,219 (or RMB14,600,000). As of the date of this filing, the Company has been in negotiation with the lender on renewal of the loan. The Company is not currently able to predict the probability of the success on the renewal and will repay the loan immediately if the loan cannot be renewed.	$	2,355,219	$	2,353,093

Bank loan payable to Agriculture Development Bank of China, bearing interest at the prime rate, based on six-month to one-year loan interest rate released by The People's Bank of China. The actual interest rates as of March 31, 2015 and December 31, 2014 were 6.0%. The term of the loan started from September 18, 2012 with maturity date on September 17, 2013. The loan was obtained by Taizihu and pledged by its buildings and land use right. As of the date of this filing, the Company has been in negotiation with the lender on renewal of the loan. The Company is not currently able to predict the probability of the success on the renewal and will repay the loan immediately if the loan cannot be renewed.		1,451,847		1,450,537

Bank loan payable to Jinzhong City Yuci District Rural Credit Union Co., Ltd., bearing interest at a fixed rate of prime rate plus 145% of prime rate, of which prime rate was based on six-month to one-year loan interest rate released by The People's Bank of China. The actual interest rates as of March 31, 2015 were 14.688%. The term of the loan started from September 12, 2014 with maturity date on September 11, 2015. The loan was obtained by Jinzhong Yongcheng and guaranteed by Yuci Jinmao Food Processing Factory, a related party, for a period of two years starting from September 17, 2015.		1,371,189		1,369,951

Bank loan payable to Jinzhong City Yuci District Rural Credit Union Co., Ltd., bearing interest at a fixed rate of prime rate plus 145% of prime rate, of which prime rate was based on six-month to one-year loan interest rate released by The People's Bank of China. The actual interest rates as of March 31, 2015 were 14.688%. The term of the loan started from September 12, 2014 with maturity date on September 11, 2015. The loan was obtained by Jinzhong Yuliang and guaranteed by Yuci Jinmao Food Processing Factory, a related party, for a period of two years starting from September 17, 2015.		1,371,189		1,369,951

Bank loan payable to Agriculture Development Bank of China, bearing interest at the prime rate, based on six-month to one-year loan interest rate released by The People's Bank of China. The actual interest rate as of March 31, 2015 was 6.0%. The term of the loan started from January 4, 2013 with maturity date on January 3, 2014. The loan was obtained by Taizihu and pledged by its buildings and land use right. As of the date of this filing, the Company has been in negotiation with the lender on renewal of the loan. The Company is not currently able to predict the probability of the success on the renewal and will repay the loan immediately if the loan cannot be renewed.		725,923		725,269

Total	$	7,275,367	$	7,268,801

NOTE 10. ACCRUED EXPENSES

Accrued expenses consisted of the following:

	September 30,		December 31,
	March 31,		December 31,
	2014		2013
	2015		2014
Accrued VAT and other taxes	$	~~305~~434,~~928~~339	$	~~261~~422,~~714~~049
Accrued payroll		~~184~~176,~~922~~194		~~167~~179,~~046~~117
Others		~~688~~895,~~354~~999		~~574~~805,~~125~~353
Total	$	1,~~179~~506,~~203~~531	$	1,~~002~~406,~~885~~519

NOTE 1311. INCOME TAXES

United States

Deyu Agriculture Corp. is incorporated in the State of Nevada in in the United States of America and is subject to the U.S. federal and state taxation. No provision for income taxes have been ~~made~~ made as the Company has no taxable income in the U.S. The applicable income tax rate for the Company for the ~~nine~~three months ended ~~September~~ 30March 31, ~~2014~~2015 and ~~2013~~2014 was 34%. No tax benefit has been realized since a 100% valuation allowance has offset deferred tax asset resulting from the net operating losses.

British Virgin Islands

City Zone, a wholly-owned subsidiary of the Company, is incorporated in the BVI and, under the current laws of the BVI, is not subject to income taxes.

Hong Kong

Most Smart, a wholly-owned subsidiary of the Company, is incorporated in Hong Kong. Most Smart is subject to Hong Kong taxation on its activities conducted in Hong Kong and income arising in or derived from Hong Kong. No provision for income taxes have been made as Most Smart has no taxable income in Hong Kong.

People’s Republic of China

Under the Enterprise Income Tax (“EIT”) Law of the PRC, the standard EIT rate is 25%. The PRC subsidiaries of the Company are subject to PRC income taxes on an entity basis on income arising in or derived from the tax jurisdiction in which they operate. According to the Tax Pronouncement [2008] No. 149 issued by the State Administration of Tax of the PRC, the preliminary processing industry of agricultural products is entitled to EIT exemption starting January 1, 2008. Three of the Company’s wholly-owned subsidiaries located in the Shanxi Province, China, including JinzhongDeyu, JinzhongYongcheng and JinzhongYuliang, are subject to the EIT exemption. All other subsidiaries are subject to the 25% EIT rate.

The provision for income taxes on income consisted of the following for the ~~nine~~three months ended ~~September~~March 3031, ~~2014~~2015 and ~~2013~~2014:

	For the Nine Months Ended
	For The Three Months Ended
	September 30,
	March 31,
	2014		2013
	2015		2014
Current income tax expense (benefit)
U.S.	$	-	$	-
PRC		~~372~~56,~~440~~448		~~580~~83,~~054~~249
Total current expense (benefit)	$	~~372~~56,~~440~~448	$	~~580~~83,~~054~~249
Deferred income tax expense (benefit)
U.S.	$	-	$	-
PRC		-		-
Income tax expense (benefit)	$	~~372~~56,~~440~~448	$	~~580~~83,~~054~~249

The following is a reconciliation of the statutory tax rate to to the effective tax rate for the ~~nine~~three months ended ~~September~~March 3031, ~~2014~~2015 and ~~2013~~2014:

	For The Nine Months Ended
	For The Three Months Ended
	September 30,
	March 31,
	2014			2013
	2015			2014
Expected U.S. income tax expense		34.0	%		34.0	%
Increase (decrease) in taxes resulting from:
Tax-exempt income		-3332.39	%		-2733.80	%
Foreign tax differential		0.12	%		-20.20	%
Change in valuation allowance		3.4.6	%		-110.2	%
Intercompany elimination		0.0	%		30.40	%
Other		-63.85	%		0.01	%
Income tax expense		-2.64	%		-30.89	%

Significant components of the Company’s net deferred tax assets Asas of ~~September~~March 3031, ~~2014~~2015 and December 31, ~~2013~~2014 are presented in the following table:

	September 30,			December 31,
	March 31,			December 31,
	2014			2013
	2015			2014
Deferred tax assets
Net operating loss carryforwards (NOL)	$	5,~~648~~741,~~497~~096		$	5,~~090~~696,~~602~~456
Share-based compensation		407,099			~~435~~407,~~844~~099
Others		~~439~~438,~~084~~203			~~440~~438,~~331~~122
Total		6,~~494~~586,~~680~~398			56,~~966~~541,~~777~~677
Less: Valuation allowance		(6,~~494~~586,~~680~~398)	)		(56,~~966~~541,~~777~~677	)
Total deferred tax assets, net	$	-		$	-

As of ~~September~~March 3031, ~~2014~~2015, the Company accrued a 100% valuation ~~allowance~~ allowance on its deferred tax assets based on the assessment on the probability of future reversion.

1516

NOTE 1412. NET INCOME (LOSS) PER SHARE

Reconciliation of the basic and diluted net income (loss) per share was as follows:

	Amounts			Shares		Per Share
	(Numerator)			(Denominator)		Amount
For the Nine Months ended Nine 30, 2014:
For the Three Months Ended March 31, 2015:
Net income (loss) attributable to common stockholders - basic	$	(142,~~839~~499,~~491~~150	)		1011,~~951~~044,~~418~~328	$	(10.3623	)
Preferred dividends applicable to convertible preferred stocks		-			-
Net income (loss) attributable to common stockholders - diluted	$	(142,~~839~~499,~~491~~150	)		1011,~~951~~044,~~418~~328	$	(10.3623	)
For the Nine Months ended September 30, 2013:
For the Three Months Ended March 31, 2014:
Net income attributable to common stockholders - basic	$	16(9,~~200~~418,~~476~~248	)		10,~~627~~793,~~497~~738	$	(10.5287	)
Preferred dividends applicable to convertible preferred stocks		-			-
Net income attributable to common stockholders - diluted	$	16(9,~~200~~418,~~476~~248	)		10,~~627~~793,~~497~~738	$	(10.5287	)

NOTE 1513. SHAREHOLDERS’ EQUITY

Reverse Acquisition and Private Placement

On April 27, 2010, we completed the acquisition of City Zone by means of a Share Exchange with (i) City Zone, (ii) the City Zone Shareholders and (iii) our principal shareholders (see NOTE 1). Pursuant to the terms of the Share Exchange, Expert Venture and the other City Zone Shareholders transferred to us all of the shares of City Zone in exchange for the issuance of 8,736,932 shares of our common stock so that Expert Venture and the other minority shareholders of City Zone shall own at least a majority of our outstanding shares.

Our directors approved the Share Exchange and the transactions contemplated thereby. The directors of City Zone also approved the Share Exchange and the transactions contemplated thereby.

As a result of the Share Exchange, we acquired 100% of the equity interests of City Zone, the business and operations of which now constitute our primary business and operations through its wholly-owned PRC subsidiaries. Specifically, as a result of the Share Exchange:

· We issued 8,736,932 shares of our common stock to the City Zone Shareholders; · The ownership position of our shareholders who were holders of common stock immediately prior to the Share Exchange changed from 100% to 9.5% (fully diluted) of our outstanding shares; and · City Zone Shareholders were issued our common stock constituting approximately 65.71% of our fully diluted outstanding shares.

The ownership position of our shareholders who were holders of common stock immediately prior to the Share Exchange changed from 100% to 9.5% (fully diluted) of our outstanding shares; and

City Zone Shareholders were issued our common stock constituting approximately 65.71% of our fully diluted outstanding shares.

Immediately after the Share Exchange, we entered into a securities purchase agreement (the “Purchase Agreement”) with certain accredited investors (the “Investors”) for the issuance and sale in a private placement of 1,866,174 Units at $4.40 per Unit, with each Unit consisting of one share of Series A convertible preferred stock, par value $ 0.001 per share (the “Investor Shares”) and a warrant to purchase 0.4 shares of our common stock with an exercise price of $ 5.06 per share (the “Warrants”). We initially received gross proceeds from the sale of the 1,866,174 Investor Shares and Warrants to purchase up to 746,479 shares of our common stock of $8,211,166 (the “Private Placement”).

In connection with the Private Placement, we also entered into a registration rights agreement (the “Registration Rights Agreement”) with the Investors, in which we agreed to file a registration statement (the “Registration Statement”) with the Securities and Exchange Commission (the “SEC”) to register for resale the Investor Shares, within 60 calendar days of April 27, 2010, and use our best efforts to have the Registration Statement declared effective within 180 calendar days of April 27, 2010. On October 21, 2010, the SEC declared the Registration Statement effective and no liquidated damages were incurred.

In connection with the Private Placement, Maxim Group, LLC acted as our financial advisor and placement agent (the “Placement Agent” or “Maxim”). The Placement Agent received a cash fee equal to 7% of the gross proceeds of the Private Placement. Maxim also received warrants to purchase 171,911 shares of our common stock at a price per share of $4.84 (the “Placement Agent Warrants”). Pursuant to the original placement agreement entered into by and between Detian Yu and the Placement Agent on January 27, 2010 (the “Original Placement Agreement”), we engaged the Placement Agent to act as the exclusive agent to sell the Units in this offering on a “commercially reasonable efforts basis.” The Placement Agent also received a cash corporate finance fee equally to 1% of our gross proceeds raised in the offering, payable at the time of each closing; five (5) year warrants to purchase that number of shares of Series A convertible preferred stock equal to 5% of the aggregate number of shares of Series A convertible preferred stock underlying the Units issued pursuant to the offering; and a non-refundable cash retainer of $25,000 payable upon the execution of the retainer agreement. We also agreed to pay for all of the reasonable expenses the Placement Agent incurred in connection with the offering.

On May 10, 2010, we closed on the second and final round of the Private ~~private~~Placement ~~placement offering~~ for the issuance and sale of 589,689 Units, consisting of 589,689 shares of Series A convertible ~~preferred~~ preferred stock and 235,883 five-year Series A Warrants with an exercise price of $ 5.06 per share, to certain Investors for total ~~gross~~ gross proceeds of $2,594,607.

We raised an aggregate amount of $10,805,750 in the offering in in two closing events. As of the final closing, we had 9,999,999 shares of common stock issued and outstanding. In connection with the offering, we issued a total of 2,455,863 shares of Series A convertible preferred shares and 982,362 Series A Warrants to ~~the~~ ~~investors~~the Investors. Additionally, the Placement Agent received 171,911 warrants.

1617

Common Stock

As of the final closing of the Private Placement, we had 9,999,999 shares of common stock issued and outstanding. Between the final closing of the Private Placement and ~~September 30~~March 31, ~~2014~~2015, an aggregate of 964,329 shares of Series A convertible preferred stock were converted into 964,329 shares of common stock, and 80,000 shares of common ~~stocks~~ stock were issued. As of ~~September~~March 3031, ~~2014~~2015, the total number of shares of common stock issued and outstanding was 11,~~031~~044,~~807~~ 328 shares.

Series A Convertible Preferred Stock

Holders of Series A convertible preferred stock (“Series A Preferred”) are entitled to receive cumulative dividends in preference to the holders of our common stock at an annual rate of 5% of the applicable per Series A Preferred original purchase price (the “Dividend Preference” and the “Dividends”). If, after the Dividend Preference has been fully paid or declared and set apart, the Company shall make any additional distributions, then the holders of Series A Preferred shall participate with the holders of common stock on an as-converted basis with respect to such distributions. Dividends are payable in cash or shares of Series A Preferred, at the Company’s option.

Upon any liquidation, dissolution or winding up of the Company, the holders of Series A Preferred will be entitled to receive, out of the assets of the Company available for distribution to its shareholders, an amount equal to $4.40 per share (the “Liquidation Preference Amount”), before any payment shall be made or any assets distributed to the holders of the common stock (the “Liquidation Preference”).

Each holder of Series A Preferred will have the right, at the option of the holder at any time on or after the issuance of the Series A Preferred, without the payment of additional consideration, to convert the Series A Preferred into a number of fully paid and nonassessable shares of common stock equal to: (i) the Liquidation Preference Amount of such share divided by (ii) the Conversion Price in effect as of the date of the conversion in accordance with the Certificate of Designations of the Series A Preferred.

For a period of two (2) years following the issuance of the Series A Preferred, the conversion price of Series A Preferred was subject to adjustment for issuances of common stock (or securities convertible or exchangeable into shares of common stock) at a purchase price less than the conversion price of the Series A Preferred. The Series A Preferred does not contain any repurchase or redemption rights.

Current accounting standards require that we evaluate the terms and conditions of convertible preferred stock to determine (i) if the nature of the hybrid financial instrument, based upon its economic risks, is more akin to an equity contract or a debt contract for purposes of establishing classification of the embedded conversion feature and (ii) the classification of the host or hybrid financial instrument. Based upon a review of the terms and conditions of the Series A Preferred, the Company has concluded that the financial instrument is more akin to an equity financial instrument. The major consideration underlying this conclusion is that the Series A Preferred is a perpetual financial instrument with no stated maturity or redemption date, or other redemption that is not within the Company’s control. Other considerations in support of the equity conclusion included the voting rights and conversion feature into common shares. While the cumulative dividend feature may, in some instances, be likened to a debt-type coupon, the absence of a stated maturity date was determined to establish the cumulative dividend as a residual return, which does not obviate the equity nature of the financial instrument. Further, there are no cash redemption features that are not within the control of our management. As a result, classification in shareholders’ equity is appropriate for the Series A Preferred.

As of ~~September~~March 3031, ~~2014~~2015, an aggregate of 964,329 shares of ~~Series~~ Series A Preferred were converted into 964,329 shares of common stock and an aggregate of ~~403~~468,~~458~~598 shares of Series A Preferred were issued as dividends to the shareholders of Series A Preferred. As of ~~September~~March 3031, ~~2014~~2015, the total number of shares of Series A Preferred issued and outstanding was 1,~~907~~960,~~513~~132 shares.

For the ~~nine~~three months ended ~~September~~March 3031, ~~2014~~2015 and ~~2013~~2014, the ~~Company~~ Company recorded $~~312~~107,~~096~~807 and $~~356~~102,349 ~~114~~ in preferred dividend expenses, respectively.

1718

Series A Warrants

We issued Series A Warrants to the Investors and the Placement Agent having strike prices of $5.06 and $4.84, respectively, and they expire five (5) years from the original date of issuance. The strike prices are subject to adjustment only for changes in our capital structure, but allow for cashless exercise under a formula that limits the aggregate issuable common shares. There are no redemption features embodied in the warrants and they have met the conditions provided in current accounting standards for equity classification.

There were 982,362 Series A Warrants sold together with the Series A Preferred to the Investors, each of which:

(a)

entitles the holder to purchase one (1) share of common stock;

(b)

are exercisable at any time after consummation of the transactions contemplated by the Purchase Agreement and shall expire on the date that is five years following the original issuance date of the Series A Warrants;

(c)

are exercisable, in whole or in part, at an exercise price of $5.06 per share of common stock; and

(d)

are exercisable only for cash (except that there will be a cashless exercise option if, after twelve months from the Issue Date, (i) the Per Share Market Value of one share of common stock is greater than the Warrant Price (at the date of calculation) and (ii) a registration statement under the Securities Act providing for the resale of the common stock issuable upon exercise of Warrant Shares is not in effect, in lieu of exercising the Series A Warrant by payment of cash).

~~Aggregate~~The Series A Warrants expired on April 27, 2015. Aggregate gross proceeds from the two (2) closing events amounted to $10,805,750. Direct financing costs totaled $1,742,993, of which $1,555,627 was paid in cash and the balance of $187,366 represents the fair value of warrants linked to 171,911 shares of our common stock that were issued to Maxim. The proceeds and the related direct financing costs were allocated to the Series A Preferred and the Series A Warrants (classified in paid-in capital) based upon their relative fair values. The following table summarizes the components of the allocation:

	Paid-in
	Series A			Capital
	Preferred			Warrants			Total
Fair values of financial instruments	$	10,248,092		$	1,039,978		$	11,288,070

Gross proceeds	$	9,810,227		$	995,523		$	10,805,750
Direct financing costs		(1,581,550	)		(161,443	)		(1,742,993	)
Fair value of placement agent warrants		-			187,366			187,366
	$	8,228,677		$	1,021,446		$	9,250,123

Fair value considerations:

Our accounting for the sale of Series A Preferred and Series A Warrants, and the issuance of the Series A Warrants to Maxim required the estimation of fair values of the financial instruments on the financing inception date. The development of fair values of financial instruments requires the selection of appropriate methodologies and the estimation of often subjective assumptions. We selected the valuation techniques based upon consideration of the types of assumptions that market participants would likely consider in exchanging the financial instruments in market transactions. The Series A Preferred was valued based upon a common stock equivalent method, enhanced by the cumulative dividend feature. The dividend feature was valued as the estimated cash flows of the dividends discounted to present value using an estimated weighted average cost of capital. The warrants were valued using a Black-Scholes-Merton Valuation Technique because it embodies all of the requisite assumptions (including trading volatility, estimated terms and risk free rates) necessary to fair value these instruments.

These fair values were necessary to develop relative fair value calculation for allocations of certain elements of the financing arrangement, principally proceeds and the related direct financing costs. The following tables reflect assumptions used to determine the fair value of the Series A Preferred:

			Series A			Series A
	Fair Value		Preferred			Preferred
	Hierarchy		April 27,			May 10,
	Level		2010			2010
Indexed common shares				1,866,174			589,689

Components of fair value:
Common stock equivalent value			$	6,631,403		$	2,083,094
Dividend feature				659,821			209,439
			$	7,291,224		$	2,292,533

Significant assumptions:
Common stock price		3		3.55			3.53
Horizon for dividend cash flow projection		3		2.00			2.00
Weighted average cost of capital ("WACC")		3		15.91	%		15.55	%

1819

Fair value hierarchy of the above assumptions can be categorized as follows:

(1) Level 1 inputs are quoted prices in active markets for identical assets and liabilities, or derived ~~there from~~therefrom. There were no level 1 inputs.

(2)

Level 2 inputs are significant other observable inputs. There were no level 2 inputs.

(3)

Level 3 inputs are unobservable inputs. Inputs for which any parts are level 3 inputs are classified as level 3 in their entirety.

Stock price- Given that management did not believe our trading market price was indicative of the fair value of our common stock at the measurement date, the common stock price value was derived implicitly from an iterative process based upon the assumption that the consideration of the Private Placement was the result of an arm’s length transaction. The Private Placement was composed of shares of Series A Preferred and Series A Warrants which were both indexed to our common stock; accordingly, we used an iterative process to determine the value of our common stock in order for the fair value of the Series A Preferred and Series A Warrants to equal the amount of consideration received in the Private Placement.

Dividend horizon- We estimated the horizon for dividend payment at 2 years.

WACC- The rates utilized to discount the cumulative dividend cash flows to their present values were based on a weighted average cost of capital of 18.94 % and 18.60 %, as of April 27, 2010 and May 10, 2010, respectively. This discount rate was determined after consideration of the rate of return on debt capital and equity that typical investors would require in an investment in companies similar in size and operating in similar markets as Deyu Agriculture Corp. The cost of equity was determined using a build-up method which begins with a risk free rate and adds expected risk premiums designed to reflect the additional risk of the investment. Additional premiums or discounts related specifically to us and the industry are also added or subtracted to arrive at the final cost of equity rate. The cost of debt was determined based upon available financing terms.

Significant inputs and assumptions underlying the model calculations related to the warrant valuations are as follows:

The following tables reflect assumptions used to determine the fair value of the Series A Warrants:

	Fair Value		April 27, 2010						May 10, 2010
	Hierarchy		Investor			Agent			Investor			Agent
	Level		warrants			warrants			warrants			Warrants

Indexed shares				746,479			130,632			235,883			41,279
Exercise price				5.06			4.84			5.06			4.84

Significant assumptions:
Stock price		3		3.55			3.55			3.53			3.53
Remaining term		3		5 years			5 years			5 years			5 years
Risk free rate		2		2.39	%		2.39	%		2.24	%		2.24	%
Expected volatility		2		45.25	%		45.25	%		45.47	%		45.47	%

1920

Fair value hierarchy of the above assumptions can be categorized as follows:

(1)

There were no Level 1 inputs.

(2)

Level 2 inputs include:

• Risk-free rate- This rate is based on publicly-available yields on zero-coupon U.S. Treasury securities with remaining terms to maturity consistent with the remaining contractual term of the Series A Warrants. • Expected volatility- We did not have a historical trading history sufficient to develop an internal volatility rate for use in the model. As a result, we have used a peer approach wherein the historical trading volatilities of certain companies with similar characteristics as ours and who had a sufficient trading history were used as an estimate of our volatility. In developing this model, no one company was weighted more heavily than another.

•

Expected volatility- We did not have a historical trading history sufficient to develop an internal volatility rate for use in the model. As a result, we have used a peer approach wherein the historical trading volatilities of certain companies with similar characteristics as ours and who had a sufficient trading history were used as an estimate of our volatility. In developing this model, no one company was weighted more heavily than another.

(3)

Level 3 inputs include:

• Stock price- Given that management did not believe our trading market price was indicative of the fair value of our common stock at the measurement date, the stock price was determined implicitly from an iterative process based upon the assumption that the consideration of the Private Placement was the result of an arm’s length transaction. ~~• Remaining term- We do not have a history to develop the expected term for our warrants. Accordingly, we have used the contractual remaining term in our calculations.~~

~~The~~• ~~following~~Remaining isterm- We do not have a ~~summary~~history ofto develop the ~~status~~expected ~~and~~term ~~activity~~for ofour warrants ~~outstanding~~. AsAccordingly, ofwe ~~September~~have ~~30,~~used ~~2014:~~the contractual remaining term in our calculations.

Outstanding Warrants
Exercise Price		Number of Warrants		Average Remaining Contractual Life
$	5.06		982,362	0.57 years
$	4.84		171,911	0.57 years
	Total		1,154,273

The following is a summary of the status and activity of warrants outstanding as of March 31, 2015:

NOTE 16. SHARE-BASED COMPENSATION

Outstanding Warrants
Exercise Price		Number of Warrants		Average Remaining Contractual Life
$	5.06		982,362	0.07 years
$	4.84		171,911	0.07 years
	Total		1,154,273

As of September 30, 2014, the Company had one share-based compensation plan as described below. The compensation cost that had been charged against income for the plan was $1,779and $43,779 for the nine months ended September 30, 2014 and 2013, respectively. The related income tax benefit recognized was $605 and $14,885 for the nine months ended September 30, 2014 and 2013, respectively. A 100 % valuation allowance was assessed against the deferred tax assets derived from such tax benefit as of September 30, 2014 and 2013.

	Number of Warrants
Outstanding as of December 31, 2014		1,154,273
Granted		-
Forfeited		-
Exercised		-
Outstanding as of March 31, 2015		1,154,273

20NOTE 14. SHARE-BASED COMPENSATION

As of March 31, 2015, the Company had one share-based compensation plan as described below. The compensation cost that had been charged against income for the plan was $nil and $585 for the three months ended March 31, 2015 and 2014, respectively. The related income tax benefit recognized was $nil and $199 for the three months ended March 31, 2015 and 2014, respectively. A 100 % valuation allowance was assessed against the deferred tax assets derived from such tax benefit as of March 31, 2015 and 2014.

On November 4, 2010, the Company’s Board of Directors approved the Company’s 2010 Share Incentive Plan. On November 8, 2010, a total of 931,000 non-qualified incentive stock options were approved by our Board of Directors and granted under the Plan to executives, key employees, independent directors, and consultants at an exercise price of $4.40 per share and on December 15, 2010, 40,000 non-qualified incentive stock shares were approved by our Board of Directors and granted under the Plan to a consultant at an exercise price of $4.40 per share, of which shall vest as follows:

33 1/3% of the option grants vested one (1) month after the date of grant;

33 1/3% of the option grants vested twelve (12) months after the date of grant; and

33 1/3% of the option grants ~~will~~vested ~~vest~~ twenty-four (24) months after the date of grant.

On March 8, 2012, the Company’s Board of Directors increased the number of shares allocated to and authorized for use under the Plan from 1,000,000 shares to the maximum number of shares allowable pursuant to the terms of the Plan and granted 420,000 options under the Plan to independent directors, officers and key employees of the Company, of which included some new options and those re-granted after such options were forfeited by other former employees as a result of their resignations from the Company in accordance with the terms of their option agreements. All of the granted options vest as follows:

50 % of the options granted vested six (6) months after the date of the grant; and

50 % of the options granted vested twelve (12) months after the date of the grant.

On November 23, 2012, our Board of Directors allocated to and authorized to re-grant 150,000 options to a director of the Company after such options were forfeited by other former employees as a result of their resignations from the Company in accordance with the terms of their option agreements. All of the granted options vest as follows:

33 1/3% of the option grants vested one (1) month after the date of grant;

33 1/3% of the option grants vested twelve (12) months after the date of grant; and

33 1/3% of the option grants ~~will~~vested ~~vest~~ twenty-four (24) months after the date of grant.

The fair value of each option award was estimated on the date of grant using a Black-Scholes option pricing model that uses the assumptions noted in the following table. The model is based on the assumption that it is possible to set up a perfectly hedged position consisting of owning the shares of stock and selling a call option on the stock. Any movement in the price of the underlying stock will be offset by an opposite movement in the options value, resulting in no risk to the investor. This perfect hedge is riskless and, therefore, should yield the riskless rate of return. As the Black-Scholes option pricing model applies to stocks that do not pay dividends, we made an adjustment developed by Robert Merton to approximate the option value of a dividend-paying stock. Under this adjustment method, it is assumed that the Company’s stock will generate a constant dividend yield during the remaining life of the options.

The following tables reflect assumptions used to determine the fair value of the option award:

Options granted on November 8, 2010:

Exercisable Period	12/8/2010 - 11/8/2020		11/8/2011 - 11/8/2020		11/8/2012 - 11/8/2020
Risk-free Rate (%)		1.12		1.27		1.46
Expected Lives (years)		5.04		5.50		6.00
Expected Volatility (%)		46.10		44.49		43.04
Expected forfeitures per year (%)		0.00-55.00		0.00-55.00		0.00-55.00
Dividend Yield (%)		0.00		0.00		0.00

Options granted on December 15, 2010:

Exercisable Period	1/15/2011 - 12/15/2020		12/15/2011 - 12/15/2020		12/15/2012 - 12/15/2020
Risk-free Rate (%)		2.15		2.32		2.50
Expected Lives (years)		5.04		5.50		6.00
Expected Volatility (%)		46.15		44.52		43.09
Expected forfeitures per year (%)		0.00		0.00		0.00
Dividend Yield (%)		0.00		0.00		0.00

Options granted on March 8, 2012:

Exercisable Period	09/08/2012 - 03/08/2020		03/08/2013 - 03/08/2020
Risk-free Rate (%)		0.94		1.00
Expected Lives (years)		5.25		5.49
Expected Volatility (%)		45.91		45.22
Expected forfeitures per year (%)		0.00		0.00
Dividend Yield (%)		0.00		0.00

2122

Options granted on November 23, 2012:

Exercisable Period	12/23/2012 - 11/8/2020		11/23/2013 - 11/8/2020		11/23/2014 - 11/8/2020
Risk-free Rate (%)		0.53		0.60		0.68
Expected Lives (years)		4.02		4.48		4.98
Expected Volatility (%)		37.43		46.48		46.45
Expected forfeitures per year (%)		0.00		0.00		0.00
Dividend Yield (%)		0.00		0.00		0.00

Fair value hierarchy of the above assumptions can be categorized as follows:

(1)

There were no Level 1 inputs.

(2)

Level 2 inputs include:

Risk-free rate- This rate is based on continuous compounding of publicly-available yields on U.S. Treasury securities with remaining terms to maturity consistent with the expected term of the options at the dates of grant.

(3)

Level 3 inputs include:

Expected lives- The expected lives of options granted were derived from the output of the option valuation model and represented the period of time that options granted are expected to be outstanding.

Expected forfeitures per year- The expected forfeitures are estimated at the dates of grant and will be revised in subsequent periods pursuant to actual forfeitures, if significantly different from the previous estimates.

The estimates of fair value from the model are theoretical values of stock options and changes in the assumptions used in the model could result in materially different fair value estimates. The actual value of the stock options will depend on the market value of the Company’s common stock when the stock options are exercised.

A summary of option activity under the Plan as of ~~September 30,~~March ~~2014~~31, 2015, and changes during the ~~nine~~three months ended ~~September~~March 3031, ~~2014~~2015 are presented below:

						Weighted-
				Weighted-		Average
				Average		Remaining		Aggregate		~~Aggregate~~
				Exercise		Contractual		Intrinsic		~~Intrinsic~~
Options	Shares			Price		Term		Value		~~Value~~
Outstanding as of January 1, 2014		750,000		$	3.14
Outstanding as of January 1, 2015		750,000		$	3.14
Granted		-		$	-
Exercised		-		$	-
Forfeited		(80,000	)	$	4.40
Outstanding As of September 30, 2014		670,000		$	2.99		3.38 years			$	537,202
Outstanding as of March 31, 2015		670,000		$	2.99	3.12 Years		$	537,202
Exercisable As of September 30, 2014		620,000		$	2.88		3.40 years			$	533,629
Exercisable as of March 31, 2015		670,000		$	2.99	2.91 Years		$	537,202
Vested and expected to vest (1)		670,000		$	2.99	3.12 Years	~~3.38 years~~

(1) Includes vested shares and unvested shares after a forfeiture rate is applied.

AAs ~~summary~~ of ~~the~~March ~~status~~31, of2015, the Company’s unvested shares were asall ~~of September 30, 2014, and changes during the six months ended September 30, 2014, is presented below:~~vested.

			Weighted-
			Average
			Grant-
			Date Fair
Unvested Shares	Shares		Value
Unvested as of January 1, 2014		50,000	$	3,573
Granted		-		-
Vested		-		-
Forfeited		-		-
Unvested As of September 30, 2014		50,000	$	3,573

22NOTE 15. RELATED PARTY TRANSACTIONS

NOTE 17. RELATED PARTY TRANSACTIONS

Due to related parties

	September 30,		December 31,
	March 31,		December 31,
	2014		2013
	2015		2014
Due to Mr. He Hao	$	1413,~~110~~971	$	1413,~~306~~958
Total	$	1413,~~110~~971	$	1413,~~306~~958

Mr. Hao He is the former shareholder of Huichun and Taizihu.

Guarantees

As of ~~September~~March 3031, ~~2014~~2015, YuciJinmao Food Processing Factory, of which the legal representative is JunlianZheng, the wife of Junde Zhang, the Vice President of the Company, provided guarantees on short-term loans obtained by JinzhongYongcheng and JinzhongYuliang.

23NOTE 16. SEGMENT REPORTING

~~NOTE~~The 18Company defined reportable segments according to ASC Topic 280. ~~SEGMENT~~The ~~REPORTING~~segments, including Corn Division, Grain Division and Bulk Trading Division, are identified primarily based on the structure of allocating resources and assessing performance of the group.

The ~~Company~~Corn ~~defined~~Division ~~reportable~~is ~~segments~~in ~~according~~the tobusiness ~~ASC~~of ~~Topic~~purchasing corn from farmers, ~~280~~simple processing and distributing to agricultural product trading companies through wholesale. The ~~segments,~~business ~~including~~of ~~corn~~the ~~division,~~Grain ~~grain~~Division is ~~division~~conducted by processing and ~~bulk~~distributing ~~trading~~grains ~~division,~~and ~~are~~other ~~identified~~products. ~~primarily~~The ~~based~~business onof the ~~structure~~Bulk Trading Division is conducted ofby ~~allocating~~bulk ~~resources~~purchasing and ~~assessing~~the ~~performance~~sale of ~~the~~raw ~~group~~grain.

The corn division is in the business of purchasing corn from farmers, simple processing and distributing to agricultural product trading companies through wholesale. The business of the grain division is conducted by processing and distributing grains and other products. The business of the bulk trading division is conducted by bulk purchasing and the sale of raw grain.

For the three months ended	Corn			Grain			Bulk Trading
March 31, 2015	Division			Division			Division			Others			Total
Revenues from external customers	$	25,458,653		$	6,749,394		$	-					$	32,208,047
Loss on inventory valuation reserve														-
Intersegment revenues		-			-			-			-			-
Interest revenue		1,780			559			-			54			2,393
Interest expense		(100,103	)		(87,868	)		-			-			(187,972	)
Net interest (expense) income		(98,323	)		(87,309	)		-			54			(185,578	)
Depreciation and amortization		(133,973	)		(348,696	)		(1,106	)		(48,814	)		(532,589	)
Noncontrolling interest		-			-			-			36			36
Segment net profit (loss)		(2,025,927	)		52,521			(3,617	)		(414,356	)		(2,391,379	)

For the Nine months ended

Corn

Grain

Bulk Trading

For the three months ended

Corn

Grain

Bulk Trading

September 30, 2014

Division

Others

Total

March 31, 2014

Division

Others

Total

Revenues from external customers

458,~~417~~330,~~926~~537

246,~~354~~652,~~578~~924

~~583~~589,~~700~~859

7015,~~356~~573,~~204~~320

Loss on inventory valuation reserve

Intersegment revenues

Interest revenue

~~2,215~~694

~~1,964~~214

~~187~~117

~~149~~55

41,~~516~~080

Interest expense

(~~322~~105,~~108~~050

)

(~~268~~90,~~895~~382

)

(~~657~~221

)

(~~591~~195,~~660~~653

)

Net interest (expense) income

(~~319~~104,~~893~~356

)

(~~266~~90,~~931~~168

)

~~187~~117

(~~507~~166

)

(~~587~~194,~~145~~573

)

Depreciation and amortization

(~~423~~148,~~680~~572

)

(1401,~~014,046~~585

)

(31,~~490~~176

)

(~~152~~51,~~999~~313

)

(1602,~~594,215~~646

)

Noncontrolling interest

~~604~~159

Segment net profit (loss)

(117,~~398~~744,~~376~~170

)

(~~444~~257,~~052~~527

)

(~~487~~678,~~235~~789

)

(2635,~~198,336~~572

)

(149,~~527~~316,~~999~~058

)

For the three months ended	Corn			Grain			Bulk Trading
September 30, 2014	Division			Division			Division			Others			Total
Revenues from external customers	$	28,624,331		$	9,195,665		$	-		$	-		$	37,819,996
Loss on inventory valuation reserve		-			-			-			-			-
Intersegment revenues		-			-			-			-			-
Interest revenue		1,019			1,439			36			63			2,557
Interest expense		(111,864	)		(88,894	)		-			(219	)		(200,978	)
Net interest (expense) income		(110,846	)		(87,455	)		36			(157	)		(198,421	)
Depreciation and amortization		(133,413	)		(258,928	)		(1,164	)		(51,113	)		(444,618	)
Noncontrolling interest		-			-			-			297			297
Segment net profit (loss)		(1,897,211	)		249,617			260,104			(937,924	)		(2,325,414	)

For the Nine months ended	Corn			Grain			Bulk Trading
September 30, 2013	Division			Division			Division			Others			Total
Revenues from external customers	$	118,737,234		$	32,675,928		$	57,704,021		$	-		$	209,117,183
Loss on inventory valuation reserve
Intersegment revenues		-			-			-			-			-
Interest revenue		7,397			2,640			6,490			16,621			33,148
Interest expense		(319,356	)		(226,329	)		(47,779	)					(593,464	)
Net interest (expense) income		(311,959	)		(223,689	)		(41,289	)		16,621			(560,316	)
Depreciation and amortization		(363,886	)		(1,238,322	)		(3,025	)		(160,998	)		(1,766,231	)
Noncontrolling interest		-			-			-			3,998			3,998
Segment net profit (loss)		(4,324,670	)		(1,285,227	)		376,918			(10,615,381	)		(15,848,360	)

For the three months ended	Corn			Grain			Bulk Trading
September 30, 2013	Division			Division			Division			Others			Total
Revenues from external customers	$	47,613,504		$	9,936,614		$	10,789,250		$	-		$	68,339,368
Loss on inventory valuation reserve		-			-			-			-			-
Intersegment revenues					-			-			-			-
Interest revenue		1,398			552			1,189			16,337			19,476
Interest expense		(109,853	)		(83,772	)		3,442			-			(190,183	)
Net interest (expense) income		(108,455	)		(83,220	)		4,631			16,337			(170,707	)
Depreciation and amortization		(104,800	)		(407,962	)		(1,169	)		(56,578	)		(570,509	)
Noncontrolling interest		-			-			-			194			194
Segment net profit (loss)		(4,863,957	)		(3,033,318	)		(230,797	)		(6,981,692	)		(15,109,764	)

Since April 2014, our grain business includes direct exporting the organic bean-based products to countries including the U.S., Australia, Canada, Israel, and Denmark. The export businesses were denominated in US Dollar. All long-lived assets are located in China. The following tables set forth our three major customers in each segment:

	For the Nine Months Ended
	For The Three Months Ended March 31,
	September 30,
	2015			2014
Corn Division :	~~2014~~			~~2013~~
Guangdong Wen’s poultry Co., Ltd.		5.4	%		0.6	%
Neijiang Zhengda Co., Ltd.		11.0	%		3.3%
Chengdu Zhengda Co., Ltd.		5.3	%		3.7	%
Chengdu longqing Feed Co., Ltd.		6.7	%		1.8%
Shuangliu Zhengda Co., Ltd.		4.5	%		2.1	%
Chengdu Jindou Animal Nitrition Food Co., Ltd.		6.5	%		4.2	%
Top Three Customers as % of Total Gross Sales:		1524.2	%		69.3	%
Grain Division :
Deyufang Innovation Food (Beijing) Co., Ltd.		6656.57	%		5182.40	%
Ethical Food SA		1412.93	%		04.0	%
Jingzhong Shengde Grain Trading Co., Ltd.		2.2	%		0.0	%
Jinzhong Shengde Trading Food Co., Ltd.		5.7	%		0.3	%
Top Three Customers as % of Total Gross Sales		8374.7	%		5186.43	%
Bulk Trading Division :
Yuci Kaiwang Grain and Oil Wholesale Department		19.0	%		7.7	%
n/a		n/a			n/a
Shenzhen XinJiawang Agricultural By-products development Co. Ltd.		25.3	%		4.2	%
n/a		n/a			n/a
Shanxi Helifeihua Trading Co., Ltd.		48.3	%		12.5	%
n/a		n/a			n/a
Top Three Customers as % of Total Gross Sales:		920.60	%		240.40	%

NOTE 1917. CONCENTRATION OF CREDIT RISK

As of ~~September~~March 3031, ~~2014~~2015 and December 31, ~~2013~~2014 , all of the Company’s cash balances in banks were maintained within the PRC where no rule or regulation currently in place to provide obligatory insurance for bank deposits in the event of bank failure. However, the Company has not experienced any losses in such accounts and believes it is not exposed to such risks on its cash balances in banks.

For the ~~nine~~three months ended ~~September~~March 3031, ~~2014~~2015 and ~~2013~~2014, the sales generated from overseas countries were $3831, ~~633,~~463 ~~391~~ and $0, respectively. Accounts receivable as of ~~September~~March 3031, ~~2014~~2015 and December 31, ~~2013~~2014 that were due from customers located outside of China were $~~285~~552, ~~915~~997 and $0, respectively.

For the ~~nine~~three months ended ~~September~~March 3031, ~~2014~~2015, sales revenue ~~generated~~ generated from Deyufang Innovation Food (Beijing) Co., Ltd. accounted for 2311.09% of the Company's consolidated gross revenue, while ~~there~~ there was no single customer that accounted for greater than 10% of the Company's consolidated gross revenue for the ~~nine~~three months ended March ~~September~~31 ~~30 2013~~2014. As of ~~September~~March 3031, ~~2014~~2015 ~~the~~and ~~account receivable due from Deyufang Innovation Food (Beijing) Co.~~2014, ~~Ltd. accounted for 11.9% of the Company’s consolidated accounts receivable, while~~ no single customer accounted for greater than 10% of the Company’s consolidated accounts receivable ~~as of December 31, 2013~~.

NOTE 2018. COMMITMENTS AND CONTINGENCIES

Lease Commitments

The Company leases railroad lines, warehouses and offices under operating leases. Future minimum lease payments under operating leases with initial or remaining terms of one year or more are as follows:

As of September 30,	Operating Leases
As of March 31,	Operating Leases
2015	$	233,670
2016	$	204,657
2016		173,021
2017		169,705
2017		171,391
2018		169,705
2018		171,391
2019		169,705
2019		171,391
2020		169,705
Thereafter		~~954~~860,~~736~~488
	$	1,~~875~~743,~~600~~965

NOTE 2119. SUBSEQUENT EVENTS

Management has considered all events occurring through the date which the financial statements were available to be issued. All subsequent events requiring recognition as of ~~September~~March 3031, ~~2014 have~~2015 have been incorporated into the accompanying consolidated and combined financial statements, and those requiring disclosure have ~~been~~ been fully disclosed in accordance with FASB ASC Topic 855, “Subsequent Events”.

The Series A Warrants expired on April 27, 2015.

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

Forward-Looking Statements

In this Quarterly Report on Form 10-Q, unless otherwise indicated, the words “we”, “us”, “our”, “Deyu” or the “Company”) refer to Deyu Agriculture Corp. and all entities owned or controlled by Deyu Agriculture Corp., except where it is made clear that the term only means the parent or a subsidiary company. References in this report to the “PRC” or “China” are to the People’s Republic of China.

This report contains forward-looking statements. The words “anticipated”, “believe”, “expect”, “plan”, “intend”, “seek”, “estimate”, “project,”, “could”, “may” and similar expressions are intended to identify forward-looking statements. These statements include, among others, information regarding future operations, future capital expenditures, and future net cash flow. Such statements reflect our management’s current views with respect to future events and financial performance and involve risks and uncertainties, including, without limitation, the current economic downturn adversely affecting demand for the our products; our reliance on our major customers for a large portion of our net sales; our ability to develop and market new products; our ability to raise additional capital to fund our operations; our ability to accurately forecast amounts of supplies needed to meet customer demand; market acceptance of our products; exposure to product liability and defect claims; fluctuations in the availability of raw materials and components needed for our products; protection of our intellectual property rights; changes in the laws of the PRC that affect our operations; inflation and fluctuations in foreign currency rates and various other matters, many of which are beyond our control. Should one or more of these risks or uncertainties occur, or should underlying assumptions prove to be incorrect, actual results may vary materially and adversely from those anticipated, believed, estimated or otherwise indicated. Consequently, all of the forward-looking statements made in this report are qualified by these cautionary statements and there can be no assurance of the actual results or developments.

Summary of our Business

We are a vertically integrated producer, processor, marketer and distributor of organic and other agricultural products made from corn and grains operating in Shanxi Province in the People's Republic of China. We have a nationwide sales network covering manufacturers, grain traders, wholesalers, distributors and retail stores. Our facilities include modern warehouses with storage capacity of over 100,000 tons and sophisticated production lines with annual production capacity of over ~~105~~108,000 and 700,000 tons for grain products and corn, respectively.

Our business operations are mainly conducted through our wholly-owned PRC subsidiaries, JinzhongDeyu Agriculture Trading Co. Limited (“JinzhongDeyu”), JinzhongYuliang Agriculture Trading Co. Limited (“Yuliang”), Shanxi Taizihu Food Co. Ltd. (“Taizihu”) and Shanxi Huichun Bean Products Co., Ltd (“Huichun”). Yuliang focus on processing and distributing our corn and corn byproducts. Our grain processing, distribution and bulk trading business are mainly conducted through JinzhongDeyu, Taizihu and Huichun.

A brief description of our products is set forth below, by division:

• Corn Division –acquires unprocessed corn for value-added processing such as cleaning, drying packaging, etc. the main consumers for this division range from livestock feed companies to corn oil/corn starch manufacturing companies as well as governmental procurement agencies in China.

• Grain Division –acquires unprocessed grains including millet, green bean, soy bean, black rice and many other varieties of grains traditionally grown and consumed in China for value-added processing such as peeling, cleaning, grinding, packaging, etc. The Grain Division also produces and distributes deep processed food products, such as bean based products, fruit vinegars and juices, noodles and other grain products. We sell our processed grain products to wholesalers, distributors, institutional clients, etc.

• Bulk Trading Division –conducts bulk trading through procuring and wholesales of rice, flour, wheat, kidney beans, green beans and other agricultural products. The majority customers of this division include food manufacturers, grain trading companies, wholesalers and governmental procurement agencies in China.

We have adopted the operation mode of “Company + Farmers + Cultivation Base”. We have established long term strategic partnerships with over 60,000 farmers to grow crops on farmland. We provide extensive agricultural services to the farmers to plan and harvest crops. Services include technical know-how and support, such as cultivation methods, seeding and logistics.

We are equipped with fully automatic and advanced production lines for grain processing with a total production capacity of over 105,000 tons. The advanced production lines and production technologies help produce grain products with high quality by maintaining the nutritional components of the products. We operate six self-owned warehouses and some rental warehouses with total storage capacity of over 100,000 tons of food products and an annual turnover of 700,000 tons. This capacity helps us to reach economies of scale with low cost of processing and storage. Our production bases are located in Jinzhong and Quwo in Shanxi Province with convenient transportation. We have exclusive lease agreements with three railway lines for freight transportation in Jinzhong: (a) Shanxi Cereal & Oil Group, Mingli Reservation Depot; (b) Shanxi Yuci Cereal Reservation Depot; and (c) YuciDongzhao Railway Freight Station, which ensure speedy delivery of our products at a low cost.26

We are equipped with fully automatic and advanced production lines for grain processing with a total production capacity of over 108,000 tons. The advanced production lines and production technologies help produce grain products with high quality by maintaining the nutritional components of the products. We operate six self-owned warehouses and some rental warehouses with total storage capacity of over 100,000 tons of food products and an annual turnover of 700,000 tons. This capacity helps us to reach economies of scale with low cost of processing and storage. Our production bases are located in Jinzhong and Quwo in Shanxi Province with convenient transportation. We have exclusive lease agreements with three railway lines for freight transportation in Jinzhong: (a) Shanxi Cereal & Oil Group, Mingli Reservation Depot; (b) Shanxi Yuci Cereal Reservation Depot; and (c) YuciDongzhao Railway Freight Station, which ensure speedy delivery of our products at a low cost.

We have cultivated a national network for corn and bulk trading with customers including various livestock feed companies, food manufacturers, corn oil/corn starch manufacturing companies, grain trading companies, wholesalers and governmental procurement agencies. Meanwhile, our processed grain products are sold to wholesalers, distributors, institutional clients and retail stores. We also sell OEM products made of grain through export agencies to Japan, Germany, the United States and other countries.

Operating revenue for the ~~nine~~three months ~~ended~~ ~~September~~ended 30March 31, ~~2014~~2015 was $7032,~~356~~208,~~209~~047, representing a 66106.48% ~~decrease~~increase from $~~209~~15,~~117~~573,~~183for~~320 for the ~~nine~~three months ended ~~September~~March 3031, ~~2013~~2014. Net loss available to common stockholders for the ~~nine~~three months ended ~~September~~March 3031, ~~2014~~2015 was $142,~~839~~499,~~491~~150, representing a decrease of of $16,~~360~~919,~~985~~098 from $169,~~200~~418,~~476~~248 of net loss for the ~~nine~~three months ended ~~September~~March 3031, ~~2013~~2014.

Our principal office is located in China at Unit 1010, Block B, Huizhi Building, No. 9 Xueqing Road, Haidian District, Beijing, PRC 100085. Our telephone number in China is +(8610)-8273-2870 and our fax number is +(8610)- 8273 2870 x 8518. Our corporate website is www.deyuagri.com (information on our website is not made a part of this Quarterly Report).

Recent Developments

Corn is mainly used as raw material for ~~livestock~~ livestock feeds and deep processed products such as corn starch and ethanol. Starting from ~~last year~~2013, the corn market experienced a ~~downturn~~ ~~resulted~~downturn byas a result of weak demand from the downstream industries with consecutive increase of output in the past few years in China. The on-going downturn continued to impact our business in ~~2014~~2015, ~~for~~as the demand offor corn continued to be weak. In order to ~~stabilize~~ stabilize the market, Chinese government started to implement some measures ~~in the second quarter~~, including government procurement and providing ~~subsidies~~ subsidies to downstream manufacturers. The market showed some fluctuation and the average sales prices had a slight increase in the ~~third~~ first quarter ~~had a~~of ~~slight increase~~2015. The Company increased the corn sales volume slightly according to the market situation although the Company is is still undertaking a conservative strategy.

The weather during the past winter in Shanxi Province in China was abnormally warm compared to winters of previous years and has caused serious damage to our inventories. This badly affected our operations. The Company incurred a substantial gross loss of $5.9 million from the disposal of the damaged corn inventory which mildewed in the first quarter of 2014. The Company has taken effective measures to prevent further mildewing, such as isolating the damaged inventories, continuous and constant drying of the stocks by machines and improving air ventilation of the warehouses. Further damage was stopped as a result of the Company’s imposing strict control measures.

Plan of Operation

The demand in the corn market showed some signs of recovery ~~in the third quarter~~, but it still ~~need~~needs time to ~~get~~fully ~~full recovery~~recover, ~~for~~as the demand from livestock feed companies was ~~still~~remains week and deep processed corn companies have been ~~running~~operating in the red for several years. However, we ~~still~~continue to believe that the ~~agriculture~~ agriculture sector is still very promising in the long term even though the evolving market conditions in China currently present great challenges.

The Company has been undertaking measures to optimize operations, to increase efficiency and to reduce operational costs. At the same time, the Company is continuing its business development initiatives to cultivate the entire value chain concept and develop new business strategies with resources integration. We expect these measures, together with new business development, will help us get through this difficult period and restore ~~the~~ growth in the future.

Results of Operations for the Three Months Ended September 30, 2014 as Compared to the Three Months Ended September 30, 2013

	For The Three Months Ended
	September 30,
	2014			2013			Change			%
Net revenue
Normal inventory	$	37,819,996		$	68,339,368		$	(30,519,372	)		-44.7	%
Damaged corn		-			-			-			100.0	%
Total Net Revenue		37,819,996			68,339,368			(30,519,372	)		-44.7	%
Cost of goods sold
Normal inventory		(35,067,741	)		(64,342,240	)		29,274,499			-45.5	%
Damaged corn		-			-			-			100.0	%
Total Cost of Goods Sold		(35,067,741	)		(64,342,240	)		29,274,499			-45.5	%
Gross Profit		2,752,255			3,997,128			(1,244,873	)		-31.1	%
Selling expenses		(3,156,574	)		(6,207,310	)		3,050,736			-49.1	%
General and administrative expenses		(1,562,640	)		(4,980,266	)		3,417,626			-68.6	%
Loss on impairment of assets		-			(6,586,425	)
Total Operating Expense		(4,719,214	)		(17,774,001	)		13,054,787			-73.4	%
Operating income (loss)		(1,966,959	)		(13,776,873	)		11,809,914			-85.7	%
Interest income		2,557			19,476			(16,919	)		-86.9	%
Interest expense		(200,978	)		(190,183	)		(10,795	)		5.7	%
Non-operating income (loss)		28,547			(1,107,683	)		1,136,230			-102.6	%
Total Other Expense		(169,874	)		(1,278,390	)		1,108,516			-86.7	%
Income (loss) before income taxes		(2,136,833	)		(15,055,263	)		12,918,430			-85.8	%
Income taxes		(188,581	)		(54,501	)		(134,080	)		246.0	%
Net income (loss)		(2,325,414	)		(15,109,764	)		12,784,350			-84.6	%
Net Income (loss) attributable to noncontrolling interests		297			194			103			53.1	%
Net income (loss) attributable to Deyu Agriculture Corp.		(2,325,117	)		(15,109,570	)		12,784,453			-84.6	%
Preferred stock dividends		(107,242	)		(122,691	)		15,449			-12.6	%
Net income (loss) available to common stockholders	$	(2,432,359	)		(15,232,261	)	$	12,799,902			-84.0	%

~~Net~~Results ~~Revenue~~of Operations for the Three Months Ended March 31, 2015 as Compared to the Three Months Ended March 31, 2014

Our net revenue for the three months ended September 30, 2014 was $37.8 million, a decrease of $30.5 million, or 44.7%, compared to $68.3 million for the three months ended September 30, 2013. This decrease was the combined result of a decrease of $19.0 million in corn sales, a decrease of $0.7 million in grain sales and a decrease of $10.8 million in bulk trading sales. Sales derived from our Corn Division, Grain Division and Bulk Trading Division for the three months ended September 30, 2014 were $28.6 million, $9.2 million and $0 million, respectively, accounting for 75.7%, 24.3% and 0% of total net revenue, respectively.

	For The Three Months Ended
	March 31,
	2015			2014			Change			%
Net revenue
Normal inventory	$	32,208,047		$	12,152,145		$	20,055,902			165.0	%
Damaged corn		-			3,421,175			-3,421,175.00			100.0	%
Total Net Revenue		32,208,047			15,573,320			16,634,727			106.8	%
Cost of goods sold
Normal inventory		(30,459,475	)		(11,553,198	)		(18,906,277	)		163.6	%
Damaged corn		-			(9,328,942)			9,328,942			100.0	%
Total Cost of Goods Sold		(30,459,475	)		(20,882,140	)		(9,577,335	)		45.9	%
Gross Profit		1,748,572			(5,308,820	)		7,057,392			-132.9	%

Selling expenses		(2,900,531	)		(1,098,652	)		(1,801,879	)		164.0	%
General and administrative expenses		(1,125,862	)		(2,678,029	)		1,552,167			-58.0	%
Total Operating Expense		(4,026,393	)		(3,776,681	)		(249,712	)		6.6	%
Operating income (loss)		(2,277,821	)		(9,085,501	)		6,807,680			-74.9	%

Interest income		2,393			1,080			1,313			121.6	%
Interest expense		(187,971	)		(195,653	)		7,682			-3.9	%
Non-operating income (loss)		128,468			47,265			81,203			171.8	%
Total Other Expense		(57,110	)		(147,308	)		90,198			-61.2	%

Income (loss) before income taxes		(2,334,931	)		(9,232,809	)		6,897,878			-74.7	%
Income taxes		(56,448	)		(83,249	)		26,801			-32.2	%
Net income (loss)		(2,391,379	)		(9,316,058	)		6,924,679			-74.3	%
Net Income (loss) attributable to noncontrolling interests		36			159			(123	)		-77.4	%
Net income (loss) attributable to Deyu Agriculture Corp.		(2,391,343	)		(9,315,899	)		6,924,556			-74.3	%
Preferred stock dividends		(107,807	)		(102,349	)		(5,458	)		5.3	%
Net income (loss) available to common stockholders	$	(2,499,150	)		(9,418,248	)	$	6,919,098			-73.5	%

The following table breaks down the distribution of our sales volume and amount by division and as a percentage of gross sales:

	For The Three Months Ended September 30,
	2014							2013
	Volume (ton)		Net Revenue		% of total sales			Volume (ton)		Net Revenue		% of total sales			Changes			%
Corn Division
Normal inventory		75,420	$	28,624,331		75.7	%		135,000	$	47,613,504		69.7	%	$	(18,989,173	)		-39.9	%
Damaged corn		-		-		-			-		-		-			-			-
Subtotal		75,420		28,624,331		75.7	%		135,000		47,613,504		69.7	%		(18,989,173	)		-39.9	%
Grain Division		6,679		9,195,665		24.3	%		4,391		9,936,614		14.5	%		(740,949	)		-7.5	%
Bulk Trading Division		-		-		-			10,530		10,789,250		15.8	%		(10,789,250	)		-100.0	%
Total		82,099	$	37,819,996		100.0	%		149,921	$	68,339,368		100.0	%	$	(30,519,372	)		-44.7	%

Net revenue from our Corn Division for the three months ended September 30, 2014 was approximately $28.6 million, a decrease of $19.0 million, or approximately 39.9%, as compared to $47.6 million for the three months ended September 30, 2013. The decrease was mainly the combined result of a decrease of 44.1% in sales volume and an increase of 7.6% in the average annual selling price of corn. The decrease was primarily due to a conservative strategy of reducing the sales volume temporarily taken by the Company to cope with the weak demand in the corn market.

Net revenue from our Grain Division for the three months ended September 30, 2014 was approximately $9.2 million, a decrease of $0.7 million, or 7.5%, as compared to $10.0 million for the three months ended September 30, 2013. The decrease was mainly attributable to the reduction in retail sales caused by the deteriorating efficiency of traditional retail sales.

Net revenue from our Bulk Trading Division for the three months ended September 30, 2014 was $0, a decrease of $10.8 million, or 100% as compared to $10.8 million for the three months ended September 30, 2013. This decrease was mainly attributable to a conservative strategy of reducing sales volume temporarily taken by the Company for bulk trading business.

Cost of Goods Sold

Cost of goods sold mainly consisted of the cost of raw materials, labor, utilities, manufacturing costs, manufacturing related depreciation and packaging costs. Our cost of goods sold was $35.1 million, a decrease of $29.3 million, or 45.5%, as compared to $64.3 million for the three months ended September 30, 2013. This decrease was primarily attributable to the decrease in sales volume.

Gross Profit (loss)

The following table breaks down the gross profit (loss) and gross margin by division:

	For The Three Months Ended September 30,
	2014								2013
	Gross Profit		% of total Gross Profit			Margin			Gross Profit		% of total Gross Profit			Margin
Corn Division
Normal inventory	$	1,224,232		44.5	%		4.3	%	$	2,448,738		61.3	%		5.1	%
Damaged corn		-		-			-			-		-			-
Subtotal		1,224,232		44.5	%		4.3	%		2,448,738		61.3	%		5.1	%
Grain Division		1,528,023		55.5	%		16.6	%		1,365,285		34.2	%		13.7	%
Bulk Trading Division		-		-			-			183,105		4.6	%		1.7	%
Total		2,752,255		100.0	%		7.3	%	$	3,997,128		100.0	%		5.8	%

Gross profit for the three months ended September 30, 2014 was $2.8 million, a decrease of $1.2 million, or 31.1%, as compared to gross profit of $4.0 million for the three months ended September 30, 2013. The decrease was a combined result of a decrease in gross profits of $1.2 million in the Corn Division, a decrease of $0.2 million in the Bulk Trading Division and an increase of $0.2 million in the Grain Division. Our gross margin increased from 5.8% for the three months ended September 30, 2013 to 7.3% for the three months ended September 30, 2014. The increase in gross margin was mainly attributable to the increase in sales percentage of the Grain Division sales with relatively higher gross margin compared with the Corn Division sales for the three months ended September 30, 2014.

Gross profit in the Corn Division was $1.2 million for the three months ended September 30, 2014, while gross profit in the Corn Division was $2.4 million for the three months ended September 30, 2013. Gross margin for our Corn Division was 4.3% for the three months ended September 30, 2014, compared with 5.1% for the three months ended September 30, 2013. Gross margin decreased 80 basis points, which was primarily due to the weak demand for corn from the downstream industries.

Gross profit in the Grain Division was $1.5 million for the three months ended September 30, 2014, an increase of $0.2 million or 11.9%, compared to $1.4 million for the three months ended September 30, 2013. The increase in gross profit in the Grain Division was mainly due to the increase of the bean-based grain product export business in Taizihu Group retail sales with relatively higher gross margin. Gross margin for the Grain Division was 16.6% for the three months ended September 30, 2014, which increased by 290 basis points from 13.7% for the three months ended September 30, 2013. This increase in gross margin was primarily due to the increase of export business with higher gross margin.

Gross profit in the Bulk Trading Division was $0, a decrease of $0.2 million or 100%, compared to gross profit of $0.2 million for the three months ended September 30, 2013.This decrease was mainly attributable to a conservative strategy of reducing sales volume temporarily taken by the Company for bulk trading business.

Selling Expenses

Selling expenses included expenses of freight, warehousing, handling, distribution, advertising, farmer subsidies, payroll and other expenses. Selling expenses for the three months ended September 30, 2014 were $3.2 million, a decrease of $3.1 million, or 49.1% from the $6.2 million for the three months ended September 30, 2013. The decrease was mainly attributable to the decline of freight costs caused by the reduction in sales volume.

General and Administrative Expenses

General and administrative expenses included payroll, professional services, rental, travel, depreciation and amortization, bad debt allowance. General and administrative expenses for the three months ended September 30, 2014 was $1.6 million, a decrease of $3.4 million or 68.6% compared to the three months ended September 30, 2013. This decrease was a combined result of a $1.6 million of general expenses reduction with the Company’s cost saving measures and a $1.8 million decrease in bad debt expense. The Company offered $0.4 million of incentives to customers for accelerating collections of accounts receivable in the second quarter of 2014, and recorded as write-off of allowance for doubtful accounts.

Loss on impairment of assets

Loss on impairment of assets was nil million for the three months ended September 30, 2014 while Loss on impairment of assets was $6.6 million for the three months ended September 30, 2013, which represented a $5.8 million impairment loss of the land use rights of farmlands located in Yuci, Shanxi Province and a $0.8 million loss resulted from the termination of the construction of an uncompleted building in the subsidiary Huichun, due to a change in our plan of operation.

Non-operating income (loss)

Non-operating income for the three months ended September 30, 2014 was immaterial; while non-operating loss for the three months ended September 30, 2013 was $1.1 million, mainly represented donations to the local community and the deposal of unqualified inventories.

Interest Expense

Interest expense for the three months ended September 30, 2014 was $200,978 compared to $190,183 for the three months ended September 30, 2013, an increase of $10,795, or 5.7%. This increase was mainly due to the fluctuation of the balances on loans and their interest rates.

Provision for Income Taxes

Under the Enterprise Income Tax (“EIT”) Law of the PRC, the standard EIT rate is 25%. Our PRC subsidiaries are subject to PRC income taxes on an entity basis on income arising in or derived from the tax jurisdiction in which they operate. According to the Tax Pronouncement [2008] No. 149 issued by the State Administration of Tax of the PRC, the preliminary processing industry of agricultural products is entitled to EIT exemption starting January 1, 2008. Three of the Company’s wholly-owned subsidiaries located in Shanxi Province, namely JinzhongDeyu, JinzhongYongcheng and JinzhongYuliang, are subject to the EIT exemption. All of our other subsidiaries are subject to the 25% EIT rate.

Income tax expenses were $188, 581 for the three months ended September 30, 2014; an increase of $134,080 or 246.0%, compared to $54,501 for the three months ended September 30, 2013. Income tax expenses were mainly representing the current income tax expenses derived from Huichun, both of which were subject to the 25% EIT rate. The increase of the income tax expenses was mainly due to the increase of taxable income in Huichun.

Net Income (Loss)

As a result of the above, we had net loss available to common stockholders of $2.4 million for the three months ended September 30, 2014 compared to a net loss of $15.2 million for the three months ended September 30, 2013.

Results of Operations for the nine months ended September 30, 2014 as Compared to the nine months ended September 30, 2013

	For The Nine Months Ended
	September 30,
	2014			2013			Change			%
Net revenue
Normal inventory	$	66,935,029		$	209,117,183		$	(142,182,154	)		-68.0	%
Damaged corn		3,421,175			-			3,421,175			100.0	%
Total Net Revenue		70,356,204			209,117,183			(138,760,979	)		-66.4	%
Cost of goods sold
Normal inventory		(61,985,481	)		(190,705,629	)		128,720,148			-67.5	%
Damaged corn		(9,328,942	)		-			(9,328,942	)		100.0	%
Total Cost of Goods Sold		(71,314,423	)		(190,705,629	)		119,391,206			-62.6	%
Gross Profit		(958,219	)		18,411,554			(19,369,773	)		-105.2	%
Selling expenses		(6,455,802	)		(14,340,936	)		7,885,134			-55.0	%
General and administrative expenses		(6,250,903	)		(9,884,504	)		3,633,601			-36.8	%
Loss of impairment of assets		-			6,586,425			(6,586,425)			-100.0	%
Total Operating Expense		(12,706,705	)		(30,811,865	)		18,105,160			-58.8	%
Operating income		(13,664,924	)		(12,400,311	)		(1,264,613	)		10.2	%
Interest income		4,516			33,148			(28,632	)		-86.4	%
Interest expense		(591,660	)		(593,464	)		1,804			-0.3	%
Non-operating income (loss)		96,509			(2,307,679	)		2,404,188			-104.2	%
Total Other Expense		(490,635	)		(2,867,995	)		2,377,360			-82.9	%
Income (loss) before income taxes		(14,155,559	)		(15,268,306	)		1,112,747			-7.3	%
Income taxes		(372,440	)		(580,054	)		207,614			-35.8	%
Net income (loss)		(14,527,999	)		(15,848,360	)		1,320,361			-8.3	%
Net Income (loss) attributable to noncontrolling interests		604			3,998			(3,394	)		-84.9	%
Net income (loss) attributable to Deyu Agriculture Corp.		(14,527,395	)		(15,844,362	)		1,316,967			-8.3	%
Preferred stock dividends		(312,096	)		(356,114	)		44,018			-12.4	%
Net income (loss) available to common stockholders	$	(14,839,491	)	$	(16,200,476	)	$	1,360,985			-8.4	%

Net Revenue

Our net revenue for the ~~nine~~three months ended ~~September~~March 3031, ~~2014~~2015 was $7032.42 million, aan ~~decrease~~increase of $~~138~~16.86 million, or 66106.48%, compared to $~~209~~15.16 million for the ~~nine~~three months ended ~~September~~March 3031, ~~2013~~2014. This ~~decrease~~increase was the combined result of aan ~~decrease~~increase of $7317.31 million in corn sales, aan ~~decrease~~increase of $80.31 million in grain sales and a decrease of $570.16 million in bulk trading sales. Sales derived from our Corn Division, Grain Division and Bulk Trading Division for the ~~nine~~three months ended ~~September~~March 3031, ~~2014~~2015 were $4525.45 million, $246.47 million and $0.6 million, respectively, accounting for 6479.60%, 3421.60% and 0.8% of total net revenue, respectively.

The following table breaks down the distribution of our sales volume and amount by division and as a percentage of gross sales:

	For The Nine Months Ended September 30,
	For The Three Months Ended March 31
	2014							2013
	2015							2014
	Volume (ton)		Net Revenue		% of total sales			Volume (ton)		Net Revenue		% of total sales			Changes			%
Corn Division
Normal inventory		~~114~~73,~~060~~920	$	4125,~~996~~458,~~751~~653		5979.70	%		~~331~~14,~~620~~040	$	~~118~~4,~~737~~909,~~234~~362		5631.85	%	$	~~(76~~20,~~740~~549,~~483~~291	)		~~-64~~418.6	%
Damaged corn		~~40,880~~-		~~3,421,175~~-		40.90	%		-40,880		-3,421,175		-22.0	%	$	(3,421,175	)		100.0	%
Subtotal		~~154~~73,~~940~~920		4525,~~417~~458,~~926~~653		6479.60	%		~~331~~54,~~620~~920		~~118~~8,~~737~~330,~~234~~537		5653.85	%		~~(73~~17,~~319~~128,~~308~~116	)		~~-61~~205.76	%
Grain Division		154,~~205~~303		246,~~354~~749,~~578~~394		3421.60	%		194,~~243~~193		326,~~675~~652,~~928~~924		1542.67	%		(896,~~321,350~~470	)		~~-25~~1.5	%
Bulk Trading Division		~~674~~-		~~583,700~~-		~~0.8~~n/a	%		~~87,728~~674		57589,~~704,021~~859		273.68	%		(57589,~~120,321~~859	)		~~-99~~100.0	%
Total		~~170~~78,~~819~~223	$	7032,~~356~~208,~~204~~047		100.0	%		~~438~~59,~~591~~787	$	~~209~~15,~~117~~573,~~183~~320		100.0	%	$	~~(138~~16,~~760~~634,~~979~~727	)		~~-66~~106.48	%

Net revenue from our Corn Division for ~~the~~ ~~nine~~the three months ended ~~September~~March 3031, ~~2014~~2015 was approximately $4525.45 million, aan ~~decrease~~increase of $7317.31 million, or approximately 61205.76%, as as compared to $~~118~~8.73 million for the ~~nine~~three months ended ~~September~~March 3031, ~~2013~~2014. The ~~decrease~~increase was mainly the combined result of aan ~~decrease~~increase of 6534.6% in sales volume and an increase of 18127.1% in the average ~~annual~~ selling price of corn. The ~~decrease~~increase was primarily due to the slightly ~~sales~~increase of ~~mildewed~~the ~~corn~~demand ~~inventory~~from tothe ~~third~~downstream ~~parties~~industry atwhich ~~prices~~coursed ~~lower than~~the ~~cost~~sale involume ~~the~~increase, ~~first~~although ~~quarter~~the ofCompany ~~2014~~still mentioned ~~and~~the a conservative strategy. The increase of ~~reducing~~the ~~sales~~average ~~volume~~selling ~~temporarily~~price ~~taken~~was byprimarily due to the ~~Company~~sales toof damaged corn ~~cope~~to the customers with ~~the~~lower ~~weak~~than ~~demand~~cost inprices during the ~~corn~~three ~~market~~months ended March 31, 2014.

Net revenue from our Grain Division for the ~~nine~~three months ended ~~September~~March 3031, ~~2014~~2015 was approximately $246.47 million, aan ~~decrease~~increase of $80.31 million, or 251.5%, as compared to $326.7 6 million for the ~~nine~~three months ended ~~September~~March 3031, ~~2013~~2014. The ~~decrease~~increase was ~~mainly~~the ~~attributable~~combined toresult of the increase of export business in Huichun and the reduction in retail sales caused by the ~~deteriorating~~costly ~~efficiency~~distribution ~~of traditional retail sales~~channel.

Net revenue from our Bulk Trading Division for the ~~nine~~three months ended ~~September~~March 3031, ~~2014~~2015 was $0~~.6 million~~, a decrease of $570.16 million, or ~~99.0~~100% as compared to $570.76 million for the ~~nine~~ three months ended ~~September~~March 3031, ~~2013~~2014. This decrease was mainly attributable to athat ~~conservative~~the ~~strategy~~Company ~~of reducing sales volume~~ temporarily ~~taken~~suspended by the ~~Company~~bulk ~~for~~trading business ~~its~~due ~~bulk~~to ~~trading~~lack ~~business~~of cash resources.

Cost of Goods Sold

Cost of goods sold mainly consisted of ~~the~~ the cost of raw materials, labor, utilities, manufacturing costs, manufacturing related depreciation and packaging costs. Our ~~cost~~ cost of goods sold was $7130.35 million, aan ~~decrease~~increase of $~~119~~9.46 million, or 6245.69%, as compared to $~~190~~20.79 million for the ~~nine~~three months ~~ended~~ ~~September~~ended 30March ~~2013~~31, 2014. This ~~decrease~~increase was primarily attributable to the ~~decrease~~increase in sales volume.

3129

Gross Profit (loss)

The following table breaks down the gross profit (loss) and gross margin by division:

	For The Nine Months Ended September 30,
	For The Three Months Ended March 31,
	2014									2013
	2015									2014
	Gross Profit			% of total Gross Profit			Margin			Gross Profit			% of total Gross Profit			Margin
Corn Division
Normal inventory	$	1,~~831~~051,~~303~~288			~~-191~~60.1	%		4.41	%	$	10208,~~593,137~~900			57-3.59	%		84.93	%
Damaged corn		~~(5,907,766~~-	)		~~616~~0.50	%		~~-172.7~~	%		-(5,907,766	)		-111.3	%		-172.7	%
Subtotal		(41,~~076~~051,~~463~~288	)		~~425~~60.41	%		-94.01	%		10(5,~~593~~698,~~137~~866	)		57107.53	%		8-68.94	%
Grain Division		3697,~~329,791~~284			~~-347~~39.59	%		1310.73	%		5590,~~756,671~~091			31-11.31	%		178.69	%
Bulk Trading Division		~~(211,547~~-	)		~~22.1~~0	%		~~-36.2~~	%		2(200,~~061,746~~045	)		113.28	%		3-33.69	%
Total		~~(958~~1,~~219~~748,572	)		100.0	%		-15.4	%	$	18(5,~~411~~308,~~554~~820	)		100.0	%		8-34.81	%
		1,748,572			100.0	%		5.4	%		(5,308,820	)		100.0	%		-34.1	%

Gross ~~loss~~profit for the ~~nine~~three months ended ~~September~~ 30March 31, ~~2014~~2015 was $1.7 million, an increase of $7.0 million, or 132.9%, as compared to gross ~~profit~~losses of $185.43 million for the ~~nine~~ three months ended ~~September~~March 3031, ~~2013~~2014. The ~~decrease~~ increase was a combined result of aan ~~decrease~~increase in gross profits of $146.78 million in the Corn Division, an aincrease ~~decrease~~ of $20.42 million in the ~~Grain~~ Bulk Trading Division and aan ~~decrease~~increase of $20.31 million in the ~~Bulk~~Grain ~~Trading~~ Division. Our gross margin increased ~~decreased~~ from 8(34.81%) for the ~~nine~~three months ended ~~September~~March 3031, ~~2013~~2014 to (15.4%) for the ~~nine~~three months ended ~~September~~March 3031, ~~2014~~2015. The ~~decrease~~ increase in gross margin was mainly ~~attributable to~~ the ~~gross~~result ~~loss~~of ~~resulting from~~ the ~~sales~~increase of ~~mildewed~~gross ~~corn~~margin ~~inventory to third parties at prices lower than cost~~ in ~~the~~Corn ~~first quarter of 2014~~Division.

Gross ~~loss~~profit in the Corn Division was $41.1 million for the ~~nine~~three months ended ~~September~~March 3031, ~~2014~~2015, while gross ~~profit~~loss in the Corn Division was $105.67 million for the ~~nine~~three months ended ~~September~~March 3031, ~~2013. Gross margin for our Corn Division was (9.0%) for the nine months ended September 30~~ 2014, ~~compared with 8~~.9% ~~for the nine months ended September 30 2013.~~ The Company incurred the gross loss of $5.9 million from the sales of the mildewed corn inventory to third parties at prices lower than the cost ~~for~~during the ~~nine~~first ~~months~~quarter ~~ended~~of ~~September 30~~ 2014. Taking out the impact of ~~the~~ disposal of mildewed corn, gross profit and gross margin from the sales of the normal corn was $10.82 million and 4.43%, respectively. Gross margin from ~~the sales of~~ normal corn sales decreased ~~450~~for 20 basis points, which was primarily due to the ~~weak~~pressure ~~demand~~from ~~for~~the ~~corn~~government’s ~~from the~~intervention ~~downstream~~on ~~industries~~the corn pricing.

Gross profit in the Grain Division was $30.37 million for the ~~nine~~three months ended ~~September~~March ~~302014~~31, a2015; ~~decrease~~an increase of $20.41 million or 4218.2%, compared to $50.86 million for the ~~nine~~three months ended ~~September~~March 3031, ~~2013~~2014. The ~~decrease~~increase in gross profit in the Grain Division was mainly due to the ~~reduction~~increase of ~~retail~~the bean-based ~~sales~~grain ~~and~~product ~~the~~export ~~decline~~business ofin Taizihu Group retail sales with relatively higher gross margin. Gross margin for the Grain Division was 1310.73% for the ~~nine~~three months ended ~~September~~March 3031, ~~2014~~2015, which ~~decreased~~increased by ~~390~~140 basis points from 178.69% for the ~~nine~~three months ended March ~~September~~31, ~~30 2013~~2014. This ~~decrease~~increase in gross margin was primarily due to the ~~increasing~~increase ~~cost~~ of ~~raw~~export ~~materials~~business ~~in addition to the reduction in grain retail sales~~ with higher gross margin.

Gross ~~loss~~profit in the Bulk Trading Division was $0.2, aan ~~decrease~~increase of $20.32 million or ~~110.3~~100%, compared to gross ~~profit~~loss of $20.12 million for the ~~nine~~three months ended ~~September~~March ~~30 2013~~31, 2014.~~This~~ The ~~decrease~~Company ~~was~~suspended ~~mainly~~bulk ~~attributable~~trading tobusiness adue ~~conservative~~to ~~strategy~~lack of ~~reducing~~cash ~~sales volume, temporarily taken by the Company for bulk trading business~~resources.

Selling Expenses

Selling expenses included expenses of freight, warehousing, handling, distribution, advertising, farmer subsidies, payroll and other expenses. Selling expenses for the ~~nine months~~three months ended ~~September~~March 3031, ~~2014~~2015 were $62.59 million, aan ~~decreased~~increase of $71.98 million, or 55164.0% from the $141.31 million for the ~~nine~~three months ~~ended~~ ~~September~~ended 30March 31, ~~2013~~2014. The ~~decrease~~increase was mainly attributable to the ~~decline~~increase of freight costs caused by the ~~reduction~~increase in sales volume.

General and Administrative Expenses

General and administrative expenses ~~included~~ included payroll, professional services, rental, travel, depreciation and amortization, and bad debt allowance. General and ~~administrative~~ administrative expenses for the ~~nine~~three months ended ~~September~~March 3031, ~~2014~~2015 ~~was~~were $61.31 million, a decrease of $31.6 million or 3658.80% compared to the ~~nine~~ $2.7 million for the three months ended ~~September~~March 3031, ~~2013~~2014. This decrease was a combined result of a reduction of $3.0 .8 million in general ~~expenses~~an expense as a result of the Company’s cost saving measures and a $0.8 million decrease in bad debt expenses. ~~The~~ ~~Company offered $0.8 million of incentives to customers for accelerating collections of accounts receivable in the second quarter of 2014, and recorded as write-off of allowance for doubtful accounts.~~

Loss on impairment of assets

Loss on impairment of assets was nil for the nine months ended September 30, 2014, while loss on impairment of assets was $6.6 million for the nine months ended September 30, 2013, which represented a $5.8 million impairment loss of the land use rights of farmlands located in Yuci, Shanxi Province and a $0.8 million loss resulted from the termination of the construction of an uncompleted building in our Huichun subsidiary, due to a change in our plan of operation.

Interest Expense

Interest expense for the ~~nine~~three months ended ~~September~~March 3031, ~~2014~~2015 was $~~591~~187,971 ~~660~~ compared to $~~593~~195,~~464~~653 for the ~~nine~~March ~~months ended September 30~~31, ~~2013~~2014, a decrease of $17,~~804~~682, or 0.3.9%. This decrease was mainly due to the fluctuation of balances on loans and their interest rates.

Non-operating income (loss)

Non-operating income for the nine months ended September 30, 2014 was immaterial. While non-operating loss for the nine months ended September 30, 2013 was $2.3 million, mainly representing the inventory loss due to the collapse of our warehouses under a heavy snow storm in April 2013, the deposal of unqualified inventories and donations to the local community.

Provision for Income Taxes

Income tax expenses were $~~372~~56,~~440~~448 for the ~~nine~~three months ended ~~September~~March 3031, ~~2014~~2015; a decrease of $~~207~~26,~~614~~801 or 3532.82%, compared to $~~580~~83,~~054~~249 for the ~~nine~~three months ended ~~September 30~~March 31, ~~2013~~2014. Income tax expenses were mainly representing the current income tax expenses derived from Huichun, both of which were ~~subject~~ subject to the 25% EIT rate. The decrease of the income tax expenses was mainly due to the decline of taxable income in Huichun.

Net Income (Loss)

As a result of the above, we had net loss available to common stockholders of $142.85 million for the ~~nine~~three months ended ~~September~~March 3031, ~~2014~~2015 compared to a net loss of $169.~~2 million~~4 million for the ~~nine~~three months ended ~~September~~March 3031, ~~2013~~2014.

Liquidity and Capital Resources

The following summarizes the key components of our cash flows for the ~~nine~~three months ended ~~September~~March 3031, ~~2014~~2015 and ~~2013~~2014:

	For the Nine Months Ended September 30,
	For The Three Months Ended March 31,
	2014			2013
	2015			2014
Net cash provided by operating activities	$	452,253		$	8,141,822
Net cash provided (used in) by operating activities	$	(165,408	)	$	(591,164	)
Net cash used in investing activities		(~~376~~19,~~122~~539	)	$	~~(632,522~~0	)
Net cash provided by (used in) financing activities		-			(855,~~694,752~~715	)
Effect of exchange rate change on cash and cash equivalents		~~(2,985~~940	)		(1837,~~432~~483	)
Net (decrease) increase in cash and cash equivalents	$	73(184,~~146~~007	)	$	(1609,~~203,884~~396	)

Net cash ~~provided~~used byin operating activities ~~totaled~~ totaled approximately $0.52 million for the ~~nine~~three months ended ~~September~~March 3031, ~~2014~~2015 and ~~$8.1~~net ~~million~~cash ~~for~~used ~~the~~in ~~nine~~operating ~~months~~activities ~~ended~~totaled ~~September~~approximately ~~30 2013, a decrease of~~ $70.6 million. ~~We incurred $15.0 million of net loss available to common stockholders~~ for the ~~nine~~three months ended ~~September~~March 3031, 2014, ~~while~~an weincrease ~~incurred~~of $160.24 million. ~~of net loss available to common stockholders for the nine months ended September 30 2013,~~ This decrease was primarily attributable to continue losses which weakened the operating cash flow.

Net cash used in investing activities for the ~~nine~~three months ended ~~September~~March 3031, ~~2014~~2015 and ~~2013~~2014 was $0.42 million and $0.6 million, respectively. There was no material net cash ~~used~~ used in investing activities for the ~~nine~~three months ended ~~September~~March 3031, ~~2014~~2015 and ~~2013~~2014.

Net cash provided in financing ~~activities~~ ~~for the nine months ended September 30, 2014~~ activities was $0 and ~~net~~$0.1 ~~cash~~million ~~used in financing activities~~ for the ~~nine~~three months ended ~~September~~March 3031, ~~2013~~2015 ~~was~~and $82014.7 ~~million.~~ There was no material net cash used in financing activities for the ~~nine~~three months ended ~~September~~March 3031 ~~2014~~2015, and cash used in financing activities for the ~~nine~~three months ended ~~September~~March 3031, ~~2013~~2014 was the ~~repayment of~~Construction ~~short-term~~and ~~loans~~remodeling ~~from~~of ~~bank~~the ~~and~~workshop ~~related~~in ~~parties~~Huichun.

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

Contractual Obligations

The following table presents the Company’s material contractual obligations Asas of ~~September~~March 3031, ~~2014~~2015:

Contractual Obligations

Total

Less than 1 year

1-32 years

3-5 years

More than 5 years

Bank Loans

7,~~362~~275,~~333~~367

Operating Lease Obligations

1,~~875~~743,~~600~~965

~~233~~204,~~670~~657

~~344~~339,~~412~~410

~~342~~339,~~782~~410

~~954~~860,~~736~~488

9,~~237~~019,~~933~~332

7,~~596~~480,~~003~~024

~~344~~339,~~412~~410

~~342~~339,~~782~~410

~~954~~860,~~736~~488

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements, financings, or other relationships with unconsolidated entities or other persons, also known as “special purpose entities”.

Critical Accounting Policies and Estimates

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

Basis of presentation

On April 27, 2010, as a result of the consummation of the Share Exchange, we changed our fiscal year end from May 31 to December 31 to conform to the fiscal year end of City Zone.

Use of estimates

Cash and cash equivalents

Cash and cash equivalents consist of cash on hand, cash in banks and all highly liquid investments with original maturities of three months or less.

Accounts receivable

Accounts receivable are recorded at net realizable value consisting of the carrying amount less allowance for doubtful accounts, as needed. We assess the collectability of accounts receivable based primarily upon the creditworthiness of the customer as determined by credit checks and analysis, as well as the customer’s payment history. Management reviews the composition of accounts receivable and analyzes historical bad debts, customer concentrations, customer credit worthiness, current economic trends, and changes in customer payment patterns to evaluate the adequacy of these reserves. While management uses the best information available upon which to base estimates, future adjustments to the allowance may be necessary if economic conditions differ substantially from the assumptions used for the purposes of analysis. The ~~Company wrote off $834,253~~ balance of allowance for doubtful accounts ~~for the period ended September 30, 2014~~ as ~~a result~~ of ~~incentives~~March ~~offered to customers for accelerating collections of accounts receivable. The balance of allowance for doubtful accounts as of September 30~~31, ~~2014~~2015 and December 31, ~~2013~~2014 was $1,~~328~~353,~~272~~571 and $~~984~~1,~~717~~337,364 respectively.

Inventories

The Company's inventories are stated at lower of cost or market. Cost is determined on a moving-average basis. Costs of inventories include purchase and related costs incurred in delivering products to their present location and condition. Market value is determined by reference to selling prices after the balance sheet date or to management’s estimates based on prevailing market conditions. Management periodically evaluates the composition of its inventories at least quarterly to identify slow-moving and obsolete inventories to determine if a valuation allowance is required. The balance of reserve for inventory valuation as of ~~September~~March 3031, ~~2014~~2015 and December 31, ~~2013~~ 2014 was $~~142~~140,~~107~~709 and $4140,~~603~~582,~~929,~~ respectively.

Property, plant, and equipment

Depreciation is computed using the straight-line method over the estimated useful lives of the assets as follows:

	Useful Life (in years)
Automobiles		5
Buildings		10-30
Office equipment		5
Machinery and equipment		5-10
Furniture & fixtures		5

Construction-in-progress

Long-lived assets

The Company applies the provisions of FASB ASC Topic 360 (ASC 360), "Property, Plant, and Equipment" which addresses financial accounting and reporting for the impairment or disposal of long-lived assets. The Company periodically evaluates the carrying value of long-lived assets to be held and used in accordance with ASC 360, at least on an annual basis. ASC 360 requires the impairment losses to be recorded on long-lived assets used in operations when indicators of impairment are present and the undiscounted cash flows estimated to be generated by those assets are less than the assets' carrying amounts. In that event, a loss is recognized based on the amount by which the carrying amount exceeds the fair market value of the long-lived assets. Loss on long-lived assets to be disposed of is determined in a similar manner, except that fair market values are reduced for the cost of disposal. As of ~~September~~March 3031, ~~2014~~2015 and December 31, ~~2013~~2014, the ~~balance~~ balance of impairment of construction-in-progress was $~~729~~772,~~937~~788 and $~~740~~772,~~102~~091, respectively.

Intangible assets

For intangible assets subject to amortization, an impairment loss is recognized if the carrying amount of the intangible asset is not recoverable and exceeds fair value. The carrying amount of the intangible asset is considered not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use of the assets. ~~For~~As ~~the nine months ended September 30 2014, there was no impairment loss~~ of ~~intangible~~March ~~assets. As of September 30~~31, ~~2014~~2015 and December 31, ~~2013~~2014, the balance of impairment of intangible assets was $6,~~901~~833,~~090~~ 181 and $6,~~675~~557,~~073~~755, respectively.

Fair value measurements

Level 1 – Inputs are quoted prices in active markets for identical assets or liabilities that the Company has the ability to access at the measurement date. Valuation of these instruments does not require a high degree of judgment as the valuations are based on quoted prices in active markets that are readily and regularly available.

This guidance applies to other accounting pronouncements that require or permit fair value measurements. On February 12, 2008, the FASB finalized FASB Staff Position (FSP) No. 157-2, Effective Date of FASB Statement No. 157 (ASC 820). This Staff Position delays the effective date of SFAS No. 157 (ASC 820) for nonfinancial assets and liabilities to fiscal years beginning after November 15, 2008 and interim periods within those fiscal years, except for those items that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). The adoption of SFAS No. 157 (ASC 820) had no effect on the Company's financial position or results of operations for the ~~nine~~ three months ended ~~September~~March 3031, ~~2014~~2015.

36We also analyze all financial instruments with features of both liabilities and equity under ASC 480-10 (formerly SFAS 150, “Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity”) and ASC 815-40 (formerly EITF 00-19, “Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock”). We have determined ASC 480-10 (formerly SFAS 150) and ASC 815-40 (formerly EITF 00-19) had no material effect on our financial position or results of operations for the three months ended March 31, 2015.

Revenue recognition

The Company’s revenue is recognized net of value-added tax (VAT), reductions to revenue for estimated product returns, and sales discounts based on volume achieved in the same period that the related revenue is recorded. The estimates are based on historical sales returns, analysis of credit memo data and other factors known at the time. The sales discounts for the ~~nine~~three months ended ~~September~~March 3031, ~~2014~~2015 and ~~2013~~2014 were not material.

We offer a right of exchange on our grain products sold through our relationships with grocery store networks. The consumer who purchases the product may exchange it for the same kind and quantity of product originally purchased. In accordance with FASB ASC 605-15-25-1 and 605-15-15-2, these are not considered returns for revenue recognition purposes. The returns of our products ~~was not material~~ for the ~~nine~~three months ended ~~September~~ 30March 31, ~~2014~~2015 and ~~$819,972~~2014 ~~for~~were ~~the~~not ~~nine months ended September 30, 2013~~material.

Advertising costs

The Company expenses the cost of advertising as incurred or, as appropriate, the first time the advertising takes place. Advertising costs for the ~~nine~~three months ended ~~September 30~~March 31, ~~2014~~2015 and ~~2013~~ 2014 were $~~335~~76,715 ~~326~~ and $~~219~~30,~~415~~185, respectively.

Research and development

Stock-based compensation

Income taxes

Under ASC 740, a tax position is recognized as a benefit only if it is “more likely than not” that the tax position would be sustained in a tax examination, with a tax examination being presumed to occur. The amount recognized is the largest amount of tax benefit that is greater than 50% likely of being realized on examination. For tax positions not meeting the “more likely than not” test, no tax benefit is recorded. The adoption had no material effect on the Company’s consolidated financial statements for the ~~nine~~three months ended ~~September~~ 30March ~~2014~~31, 2015.

Foreign currency translation and comprehensive income

Statement of cash flows

In accordance with FASB ASC Topic 230, “Statement of of Cash Flows,” cash flows from the Company’s operations ~~are~~is calculated based upon the local currencies. As a result, amounts related to assets and liabilities reported on the consolidated statement of cash flows will not necessarily agree with changes in the corresponding balances on the consolidated balance sheets.

Recent pronouncements

Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”)

The JOBS Act permits an “emerging growth company” such as us to take advantage of an extended transition period to comply with new or revised accounting standards applicable to public companies. We are choosing to “opt out” of this provision and, as a result, we will comply with new or revised accounting standards as required when they are adopted. This decision to opt out of the extended transition period under the JOBS Act is irrevocable.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Smaller reporting companies are not required to provide this information.

3837

Item 4. Controls and Procedures

(a) Evaluation of disclosure controls and procedures. At the conclusion of the period ended ~~September~~March 3031, ~~2014~~2015, we carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934 (the “Exchange Act”)). Based upon that evaluation, our Chief Executive Officer and Chief Financial Officer concluded that As of ~~September~~March 3031, ~~2014~~2015, our disclosure controls and procedures were effective and ~~adequately~~ adequately designed to ensure that the information required to be disclosed by us in the reports we submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the applicable rules and forms and that such ~~information~~ information was accumulated and communicated to our Chief Executive Officer and Chief Financial Officer, in a manner that allowed for timely decisions regarding required disclosure.

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

(b) Changes in internal controls. There were no changes in our internal control over financial reporting that occurred during our last fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. We recently reviewed the Company's overall corporate governance, internal control and financial controls and some weaknesses on operations of some subsidiaries were noticed. Measures are being taken to strengthen the Group’s, including subsidiaries, resources sharing, strategic planning and management of funds.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings.

To our knowledge, there is no action, suit, proceeding, inquiry or investigation before or by any court, public board, government agency, self-regulatory organization or ~~body~~ body pending or, to the knowledge of our executive officers or any of our subsidiaries, threatened against or affecting us, our ~~common~~ common stock, any of our subsidiaries or any of our companies or our companies’ subsidiaries’ officers or directors in their capacities as such, in which an adverse decision could have a material adverse effect.

Item 1A. Risk Factors.

Smaller reporting companies are not required to provide this information.

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

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

None.

Item 5. Other Information.

None.

4038

Item 6. Exhibits.

2.1		Share Exchange Agreement Dated April 27, 2010 (1)
3.1		Articles of Incorporation of Deyu Agriculture Corp. (2)
3.2		Certificate of Amendment of Articles of Incorporation of Deyu Agriculture Corp. (3)
3.3		Bylaws of Deyu Agriculture Corp. (2)
4.1		Certificate of Designation of Rights and Preferences of Series A Convertible Preferred Stock (1)
4.2		Form of Series A Warrant (1)
10.1		Securities Purchase Agreement Dated April 27, 2010 (1)
10.2		Registration Rights Agreement Dated April 27, 2010 (1)
10.3		Form of Lock-Up Agreement Dated April 27, 2010 (1)
10.4		Securities Escrow Agreement Dated April 27, 2010 (1)
10.5		Placement Agent Agreement between the Company and Maxim Group, LLC dated January 27, 2010(6)
10.6		Share Transfer Agreement between Hong Wang and Yam Sheung Kwok dated April 26, 2010 (6)
10.7		Share Transfer Agreement between JianmingHao and Yam Sheung Kwok dated April 26, 2010 (6)
10.8		Share Transfer Agreement between WenjunTian and Yam Sheung Kwok dated April 26, 2010 (6)
10.9		Share Transfer Agreement between YongqingRen and Yam Sheung Kwok dated April 26, 2010 (6)
10.10		Share Transfer Agreement between Junde Zhang and Yam Sheung Kwok dated April 26, 2010 (6)
10.11		Employment Agreement between David Lethem, as Chief Financial Officer, and the Company dated June 18, 2010 (4)
10.12		Certificate from China Organic Food Certification Center dated December 21, 2009 (6)
10.13		Corn Purchase Letter of Intent between Shanghai Yihai Trading Co., Ltd., Shanxi Office and JinzhongYuliang Agricultural Trading Co., Limited dated December 20, 2009 (6)
10.14		Warehouse Lease Agreement between Shanxi 661 Warehouse and JinzhongYongcheng Agricultural Trading Co., Limited dated December 21, 2006 (6)
10.15		Warehouse Lease Agreement between Shanxi Means of Production Company, Yuci Warehouse (formerly, the 671 Warehouse) and JinzhongYongcheng Agricultural Trading Co., Limited dated December 28, 2008 (6)
10.16		Railway Lease Agreement between Shanxi Cereal & Oil Group, Mingli Reservation Depot and JinzhongYongcheng Agriculture Trading Co., Limited dated December 21, 2006 (6)
10.17		Railway Lease Agreement between Shanxi Yuci Cereal Reservation Depot and JinzhongYongcheng Agriculture Trading Co., Limited dated November 15, 2007 (6)
10.18		Railway Lease Agreement between YuciDongzhao Railway Freight Station and JinzhongYongcheng Agriculture Trading Co., Limited dated December 21, 2006 (6)
10.19		Agricultural Technology Cooperation Agreement between JinzhongDeyu Agriculture Trading Co., Ltd. and Millet Research Institute, Shanxi Academy of Agricultural Science dated October 2007 (6)
10.20		Agricultural Technology Cooperation Agreement between Sorghum Institute, Shanxi Academy of Agricultural Sciences and JinzhongDeyu Agriculture Trading Co., Ltd. dated August 24, 2008 (6)

4139

10.21		Certificate of Forest Rights for the Yuci Forest Right Certificate (2005) No. 01518 dated August 11, 2006 (6)
In 10.21		Certificate of Forest Rights for the Yuci Forest Right Certificate (2005) No. 01518 dated August 11, 2006 (6)
10.22		Farmland Transfer Agreement between Detian Yu Biotechnology (Beijing) Co. Ltd. and Shanxi Jinbei Plant Technology Co, Ltd. dated September 30, 2010 (6)
10.23		Land Use Rights Acquisition Contract Dated September 30, 2010 (5)
10.24		Deyu Agriculture Corp. 2010 Share Incentive Plan (7)
10.25		Exclusive Management and Consulting Service Agreement, dated November 16, 2010, by and between Detian Yu Biotechnology (Beijing) Co. Limited and Beijing Jundaqianyuan Investment Management Co., Ltd. (English translated version) (8)
10.26		Exclusive Management and Consulting Service Agreement, dated November 16, 2010, by and between Detian Yu Biotechnology (Beijing) Co. Limited and JinzhongLongyue Investment Consulting Co., Ltd. (English translated version) (8)
10.27		Business Cooperation Agreement, dated November 16, 2010, by and between Detian Yu Biotechnology (Beijing) Co. Limited and Beijing Jundaqianyuan Investment Management Co., Ltd. (English Translated Version) (8)
10.28		Business Operation Agreement, dated November 16, 2010, by and among Detian Yu Biotechnology (Beijing) Co. Limited, Beijing Jundaqianyuan Investment Management Co., Ltd. and each of the shareholders of Beijing Jundaqianyuan Investment Management Co., Ltd. (English translated version) (8)
10.29		Business Operation Agreement, dated November 16, 2010, by and among Detian Yu Biotechnology (Beijing) Co. Limited, JinzhongLongyue Investment Consulting Co., Ltd. and both of the shareholders of JinzhongLongyue Investment Consulting Co., Ltd. (English translated version) (8)
10.30		Share Pledge Agreement, dated November 16, 2010, by and among Detian Yu Biotechnology (Beijing) Co. Limited and the following shareholders of Beijing Jundaqianyuan Investment Management Co., Ltd.: TianWenjun, HaoJianming, Yang Jianhui, Zhou Jianbin, Ren Li, RenYongqing, Zhang Junde and Wang Tao (English translated version) (8)
10.31		Share Pledge Agreement, dated November 16, 2010, by and among Detian Yu Biotechnology (Beijing) Co. Limited and the following shareholders of JinzhongLongyue Investment Consulting Co., Ltd.: Zhao Jing and Zhao Peilin (English translated version) (8)
10.32		Form of Power of Attorney (English translated version) (8)
10.33		Equity Acquisition Option Agreement, dated November 16, 2010, by and among Detian Yu Biotechnology (Beijing) Co. Limited and the following shareholders of Beijing Jundaqianyuan Investment Management Co., Ltd.: TianWenjun, HaoJianming, Yang Jianhui, Zhou Jianbin, Ren Li, RenYongqing, Zhang Junde and Wang Tao (English translated version) (8)
10.34		Equity Acquisition Option Agreement, dated November 16, 2010, by and among Detian Yu Biotechnology (Beijing) Co. Limited and the following shareholders of JinzhongLongyue Investment Consulting Co., Ltd.: Zhao Jing and Zhao Peilin (English translated version) (8)
10.35		Business Cooperation Agreement, dated November 16, 2010, by and between Detian Yu Biotechnology (Beijing) Co. Limited and JinzhongLongyue Investment Consulting Co., Ltd. (English Translated Version) (8)
10.36		Village Collective Farmland Transfer Agreement, dated December 20, 2010, by and between Detian Yu Biotechnology (Beijing) Co., Ltd. and Shanxi Jinbei Plant Technology Development Co., Ltd. (English Translated and Mandarin Versions) (9)
10.37		Contract of Agreement, effective as of January 10, 2011, by and between Deyu Agriculture Corp. and Charlie Lin (10)
14.1		Code of Conduct (6)
16.1		Letter from Auditor (11)

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21		List of Subsidiaries (12)
31.1		Certifications of the Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
31.2		Certifications of the Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002*
32.1		Certification Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 of the Sarbanes-Oxley Act Of 2002**
32.2		Certification Pursuant To 18 U.S.C. Section 1350, As Adopted Pursuant To Section 906 of the Sarbanes-Oxley Act Of 2002**
99.1		Audit Committee Charter adopted August 19, 2010 (6)
101. INS		XBRL Instance Document*
101. CAL		XBRL Taxonomy Extension Calculation Link base Document*
101. DEF		XBRL Taxonomy Extension Definition Link base Document*
101. LAB		XBRL Taxonomy Label Link base Document*
101. PRE		XBRL Extension Presentation Link base Document*
101. SCH		XBRL Taxonomy Extension Scheme Document*

(1)	Incorporated by reference to our Form 8-K filed on May 3, 2010.
(2)	Incorporated by reference to our Registration Statement on Form S-1 filed on July 8, 2009.
(3)	Incorporated by reference to our Form 8-K filed on June 4, 2010.
(4)	Incorporated by reference to our Form 8-K filed on June 18, 2010.
(5)	Incorporated by reference to our Form 8-K filed on October 6, 2010.
(6)	Incorporated by reference to our Form S-1/A filed on October 21, 2010.
(7)	Incorporated by reference to our Form S-8 filed on November 5, 2010.
(8)	Incorporated by reference to our Form 8-K filed on November 17, 2010.
(9)	Incorporated by reference to our Form 8-K filed on December 21, 2010.
(10)	Incorporated by reference to our Form 8-K filed on January 10, 2011.
(11)	Incorporated by reference to our Form 8-K filed on May 3, 2010.
(12)	Incorporated by reference to our Form 10-K filed on March 2731, ~~2013~~2015.

* Filed herewith.

** Furnished, not filed herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this Quarterly Report on Form 10-Q to be signed on its behalf by the undersigned, thereunto duly authorized.

DEYU AGRICULTURE CORP.

Signature	Title	Date
/s/ Hong Wang	Acting Chief Executive Officer, Principal Executive Officer	~~November~~May 1215, ~~2014~~2015
Hong Wang
/s/ Emma Wan	Acting Chief Financial Officer, Principal Financial	~~November~~May 1215, ~~2014~~2015
Emma Wan	and Accounting Officer

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Filing Compare · Deyu Agriculture Corp.