UNITED
STATES


SECURITIES AND EXCHANGE
COMMISSION


Washington, D.C.
20549




FORM 10-K




(Mark One)


x
            Annual Report Pursuant to
      Section 13 or 15(d) of the Securities Exchange Act of
      1934





For the fiscal year endedDecember 31,
2008.




or




 ̈
            Transition Report Pursuant to
      Section 13 or 15(d) of the Securities Exchange Act of
      1934





For the transition period from
__________ to __________.





Commission
File Number 000-83125





YUHE
INTERNATIONAL, INC.


(Exact
name of registrant as specified in its charter)




Nevada
            
            87-0569467(State
      or other jurisdiction of
              incorporation
      or organization)
            
            (I.R.S.
      Employer
              Identification
      No.)301
      Hailong Street
              Hanting
      District, Weifang, Shandong Province
              The
      People’s Republic of China(Address including zip code of
      principal executive
offices)




Registrant’s
telephone number, including area code (86) 536 736 3688





Securities
registered pursuant to Section 12(b) of the Act: None





Securities registered pursuant to
Section 12(g) of the Act: Common stock, $0.001 par
value




Indicate by check mark if the
registrant is a well-known seasoned issuer, as defined in Rule 405 of the
Securities Act. ̈Yes Nox





Indicate by check mark if the
registrant is not required to file reports pursuant to Section 13 or 15(d)
of the Act.    Yes ̈Nox









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.    YesxNoo


Indicate by check mark if disclosure
of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405
of this chapter) is not contained herein, and will not be contained, to the best
of registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. ̈





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
definition of “accelerated filer,” “large accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act. (Check
one):





Large accelerated filer ̈Accelerated filer ̈


Non-accelerated filer ̈xSmaller reporting
company





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





The
aggregate market value of voting and non-voting common equity held by
non-affiliates of the registrant as of June 30, 2008, based upon the closing
price of the common stock as reported by the OTC Bulletin Board under the symbol
“YUII” on such date, was approximately $13,700,000.




There were15,722,180 shares of the registrant’s common
stock issued and outstanding as of March 19, 2009.







YUHE
INTERNATIONAL, INC.


FORM 10-K


FOR
THE FISCAL YEAR ENDED DECEMBER 31, 2008





INDEX





Table
of Contents





PagePART
      IItem 1.
                Description
      of Business
                6Item 1A.
                Risk
      Factors
                23Item 1B.
                Unresolved
      Staff Comments
                23Item 2.
                Properties
                23Item 3.
                Legal
      Proceedings
                25Item 4.
                Submission
      of Matters to a Vote of Security Holders
                26PART IIItem 5.
                Market
      for Common Equity, Related Stockholder Matters and Issuer Purchases of
      Equity Securities
                26Item 6.
                Selected
      Financial Data
                28Item 7
                Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
                28Item 7A.
                Quantitative
      and Qualitative Disclosures About Market Risk
                38Item 8.
                Financial
      Statements and Supplementary Data
                38Item 9.
                Changes
      in and Disagreements with Accountants on Accounting and Financial
      Disclosure
                38Item 9A.
                Controls
      and Procedures
                39Item 9B
                Other
      Information
                40




3




PART
      IIIItem 10.
                Directors
      and Executive Officers and Corporate Governance
                41Item 11.
                Executive
      Compensation
                45Item 12.
                Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters
                49Item 13.
                Certain
      Relationships and Related Transactions
                51Item 14.
                Principal
      Accountant Fees and Services
                62PART IVItem 15.
                Exhibits,
      Financial Statement Schedules
                63Signatures
                68




4


Use
of Terms





As
used herein, references to “we”, “our”, “us”, and the “Company” refer to Yuhe
International, Inc. and its subsidiaries except in the "Management's Discussion
And Analysis And Results of Operation" below where all historical financial
information prior to March 12, 2008 refers to Weifang Yuhe Poultry Co. Ltd., PRC
Yuhe, which includes the accounts of  Weifang Taihong Feed Co. Ltd.,
Taihong.




Forward-Looking
Statement




This
Annual Report on Form 10-K contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934.  These statements relate to
future events or the Company’s future financial performance.  The Company
has attempted to identify forward-looking statements by terminology including
“anticipates,” “believes,” “expects,” “can,” “continue,” “could,” “estimates,”
“expects,” “intends,” “may,” “plans,” “potential,” “predict,” “should” or “will”
or the negative of these terms or other comparable terminology.  Such
statements are subject to certain risks and uncertainties, including the matters
set forth in this report or other reports or documents the Company files with
the Securities and Exchange Commission from time to time, which could cause
actual results or outcomes to differ materially from those
projected.   In evaluating these statements, you should
specifically consider various factors, including the risks outlined in the
section of the Registrant’s prospectus entitled “Risk Factors.” These factors
may cause the Company’s actual results to differ materially from any
forward-looking statement as a result of a number of risks and uncertainties,
including without limitation: (a) limited amount of resources devoted to
expanding the Company’s business plan; and (b) the Company’s failure to
implement its business plan within the time period it originally planned to
accomplish.  Although the Company believes that the expectations
reflected in the forward-looking statements are reasonable, the Company cannot
guarantee future results, levels of activity, performance or achievements. 
Undue reliance should not be placed on these forward-looking statements which
speak only as of the date hereof.  The Company’s expectations are as of the
date this Form 10-K is filed, and the Company does not intend to update any of
the forward-looking statements after the date this Annual Report on Form 10-K is
filed to confirm these statements to actual results or to changes in the
Company’s expectations, unless required by law.


5





PART
I




ITEM
      1.
            DESCRIPTION
      OF BUSINESS.




Overview




Through
the Company’s operating subsidiaries, the Company is a supplier of day-old
chickens raised for meat production, or broilers, in the People’s Republic of
China, which is also commonly referred to as the “PRC” or “China”. The Company
purchases parent breeding stock from breeder farms, raises them to produce
hatching eggs, and hatches the eggs to day-old broilers. Currently, the Company
operates thirteen breeder farms and two hatcheries with a total annual capacity
of 1,150,000 sets of breeders and 100 hatchers through its wholly-owned
subsidiary, Weifang Yuhe Poultry Co. Ltd., or “PRC Yuhe”. The Company’s day-old
broilers are primarily purchased by broiler farms and integrated chicken
companies for the purpose of raising them to market-weight broilers. The
Company’s customers are located in the ten provinces and special municipalities
centered around Shandong Province, which are Jiangsu, Anhui, Henan, Hebei,
Jilin, Liaoning, Heilongjiang, Tianjin, Beijing, and Shanghai. In connection
with the Company’s day-old broiler business, the Company also operates a feed
stock company named Weifang Taihong Feed Co. Ltd., or “Taihong”, whose primary
purpose is to supply feed stock to the Company’s breeders. The Company’s
operations are conducted exclusively by its subsidiaries, PRC Yuhe and Taihong,
in China.





The
Company’s principal executive office is located at 301 Hailong Street, Hanting
District, Weifang, Shandong Province, The People’s Republic of China. The
Company’s Internet address is http://www.yuhepoultry.com.




Unless
otherwise noted, all historical information prior to March 12, 2008 refers to
PRC Yuhe and Taihong.





History
and Background





First
Growth Investors, Inc.





First
Growth Investors, Inc., or “First Growth”, was incorporated under the laws of
the State of Nevada on September 9, 1997.





First
Growth was formed to buy and sell vintage wines. While the initial purchase of
wines was eventually resold at a profit, First Growth did not continue to be
successful in this venture. This business was not successful, and operations
were eventually discontinued with the final sale of inventory occurring in 2003.
Since 2003 First Growth was not engaged in any substantive business activities
or operations prior to the acquisition of Bright Stand described
below.





The
Company entered into a Stock Purchase Agreement, the “Stock Purchase Agreement”,
with Halter Financial Investments, L.P., a Texas limited partnership, “Halter
Financial”, dated as of November 6, 2007, pursuant to which it agreed to sell to
Halter Financial 14,000,000 unregistered shares, equivalent to 951,996
post-split shares, of its common stock for $425,000.


6




Halter
Financial and the then serving members of the Board of Directors of First Growth
entered into arm’s length negotiations regarding the acquisition of Halter
Financial’s ownership interest. The amount paid was based on the business
prospects of First Growth and the perceived value of a control position in
similarly situated publicly-traded shell corporations. The transaction closed on
November 16, 2007. As a result of the transaction, Halter Financial held
14,000,000 shares, equivalent to 951,996 post-split shares, or 87.5% of the
Company’s 16,000,000 shares, equivalent to 1,087,994 post-split shares, of
common stock then outstanding following the completion. The 87.5% interest
purchased by Halter Financial was fairly valued at $425,000. Halter Financial
advised First Growth that its purchase price was based on the results of its
research into the prices paid by other groups to acquire control positions
in publicly-traded shell companies similarly situated as First Growth
at the time Halter Financial acquired its position in First Growth. The Stock
Purchase Agreement also required the Company’s Board of Directors to declare and
pay a special cash dividend of $0.21, $3.088 post-split, per share to the
Company’s shareholders on November 19, 2007. Halter Financial did not
participate in such dividend. The dividend was payable to shareholders of record
on November 15, 2007, which was prior to the date the shares were issued to
Halter Financial under the Stock Purchase Agreement. The dividend payment date
was November 19, 2007. The dividend was payable to the Company’s shareholders
who held 2,000,000 shares, equivalent to 135,999 post-split shares, of the
Company’s common stock and resulted in a total dividend distribution of
$420,000. The funds for the dividend came from the $425,000 proceeds received
from the sale of common stock to Halter Financial. Mr. Richard Crimmins was
appointed as an officer and director of First Growth at the request of Halter
Financial as a result of the change in control transaction whereby Halter
Financial became First Growth’s principal shareholder. Richard Crimmins is
neither an officer, director nor shareholder of Halter Financial. Prior to
November 2007, neither Halter Financial nor its affiliates had a material
relationship with any of First Growth’s shareholders. After Halter Financial
became a 87.5% shareholder of First Growth pursuant to the Stock Purchase
Agreement, there was a potential conflict of interest associated with an
affiliate of Halter Financial, HFG International, Limited, advising Bright Stand
about its purchase of a U.S. shell company, First Growth. Despite this potential
conflict of interest, HFG International, Limited has informed the Company that
its advice to Bright Stand was based on its research results into the prices
paid by other groups to acquire control positions in publicly traded shell
companies, which were similarly situated as First Growth at the time Bright
Stand acquired First Growth.





Bright
Stand International Co., Ltd.





Bright
Stand International Co., Ltd., or “Bright Stand”, was incorporated on August 3,
2007 and it has a registered capital of $100. Bright Stand did not have any
operating activities from August 3, 2007 (inception) to March 12, 2008. Kunio
Yamamoto, a Japanese citizen, was the sole shareholder of Bright Stand through
March 12, 2008.





Weifang
Yuhe Poultry Co., Ltd.





PRC Yuhe
is the wholly-owned subsidiary of Bright Stand. PRC Yuhe was founded in March
1996 by Gao Zhentao and Sun Haoguo, with each of them owning, respectively, 60%
and 40% of its equity interest. From its formation through its acquisition by
Bright Stand, PRC Yuhe was effectively controlled by Gao Zhentao, the Company’s
chief executive officer. The principal business of PRC Yuhe is breeding poultry,
hatchlings and selling chicks.


7





Weifang
Taihong Feed Co., Ltd.





Taihong
was founded in May 2003 by Shandong Yuhe Food Group Co., Ltd., or “Yuhe Group”,
a PRC company based in Shandong Province, and Gao Zhenbo, the brother of the
Company’s chief executive officer, Gao Zhentao, with Yuhe Group and Mr. Gao
owning, respectively, 56.25% and 43.75% of its equity interest. Yuhe Group is an
entity controlled by the Company’s chief executive officer, Gao Zhentao, and his
brother, Gao Zhenbo. The principal business of Taihong is the production and
sale of feed and feed additives, primarily to PRC Yuhe. On September 14, 2007
Yuhe Group transferred all of its interests in Taihong to PRC Yuhe in a
reorganization of equity interest under common control. The 43.75% equity stake
in Taihong owned by Gao Zhenbo was subsequently transferred to Bright Stand in
the course of the corporate reorganization transactions described
below.




Corporate
Reorganization Transactions





HFG
International, Limited, an affiliate of Halter Financial, was engaged by Bright
Stand to provide consulting services related to Bright Stand’s efforts to
complete a combination transaction with a US domiciled publicly-traded “shell
corporation” and other post transaction matters. HFG International, Limited
introduced Bright Stand to First Growth. There is no correlation between the
decision of Bright Stand to engage HFG International, Limited to provide
consulting services to Bright Stand and the decision of Halter Financial to
acquire a control position in First Growth. After Halter Financial became a
87.5% shareholder of First Growth pursuant to a Stock Purchase Agreement, there
was a potential conflict of interest associated with an affiliate of Halter
Financial, HFG International, Limited, advising Bright Stand about its purchase
of a U.S. shell company, First Growth. Despite this potential conflict of
interest, HFG International, Limited has informed the Company that its advice to
Bright Stand was based on its research results into the prices paid by other
groups to acquire control positions in publicly traded shell companies, which
were similarly situated as First Growth when Bright Stand acquired First Growth.
After a diligence review by counsel for Bright Stand, the principal shareholder
of Bright Stand elected to enter into the exchange transaction contemplated
by the equity transfer agreement filed as Exhibit 10.2 to the
Registration Statement on Form S-1/A filed on December 19, 2008.





Bright
Stand entered into a share transfer agreement with all the existing shareholders
of PRC Yuhe on October 18, 2007 to acquire all the equity of PRC Yuhe with
cash consideration equal to the appraised fair market value of PRC Yuhe in the
amount of RMB 81,450,000, or $11,306,522. The sellers of PRC Yuhe included Yuhe
Group, Mr. Gao Zhentao and Mr. Gao Zhenbo. Bright Stand obtained the approval
from the Shandong Province counterpart of the Ministry of Commerce for this
transaction on November 9, 2007, and the acquisition closed on January 31, 2008.
There is no longer any connection between the Company and Yuhe Group, except
that Gao Zhentao, the Company’s chief executive officer and, his brother Gao
Zhenbo, are shareholders and directors of Yuhe Group. Sun Haoguo does not have
any relationship with Yuhe Group and two of three members of the Supervisory
Board of PRC Yuhe, Zheng Chaoyang is an Administrative Department Officer of
Yuhe Group and Zhang Lishun is an Administrative Department Officer of Yuhe
Group.


8


Bright
Stand entered into a share transfer agreement with Gao Zhenbo, a former
shareholder of Taihong on October 18, 2007 to acquire 43.75% of the
outstanding equity of Taihong for cash consideration equal to 43.75% of the net
asset value of Taihong in the amount of RMB 2,244,000, or $312,530. The
remaining 56.25% of Taihong is owned by PRC Yuhe. Bright Stand obtained the
approval from the Shandong provincial counterpart of the Ministry of Commerce
for this transaction on November 9, 2007, and the acquisition closed on January
31, 2008.





Effective
March 12, 2008, the Company closed an Equity Transfer Agreement with Bright
Stand and Kunio Yamamoto, a Japanese person, the sole former shareholder of
Bright Stand. Pursuant to the terms of the Equity Transfer Agreement, the
Company acquired all of the outstanding capital stock of Bright Stand from Mr.
Yamamoto in exchange for 126,857,134 shares, equivalent to 8,626,318 post-split
shares, of the Company’s common stock. At the closing, Bright Stand became the
Company’s wholly-owned subsidiary. Immediately following the date of the Equity
Transfer Agreement, Mr. Yamamoto held 126,857,134 shares, equivalent to
8,626,318 post-split shares, of the Company’s common stock. Neither Halter
Financial nor Mr. Yamamoto had any role in identifying the accredited investors
who purchased the Company’s unregistered securities on March 12,
2008.





There is
no direct or indirect connection between Mr. Yamamoto and the former
shareholders of PRC Yuhe and Taihong, including Mr. Gao Zhentao, Gao Zhenbo, and
Mr. Sun Haoguo. The acquisitions of PRC Yuhe and Taihong by Bright Stand closed
on January 31, 2008 after obtaining the relevant approval from the Shandong
Province counterpart of the Ministry of Commerce. There is no direct or indirect
connection between Mr. Yamamoto and the former shareholders of First Growth. Mr.
Yamamoto does not currently have any roles with the Company, except as the
Company’s shareholder. Mr. Gao Zhenbo and Mr. Sun Haoguo do not currently have
any roles with the Company.




Equity
Investment by Private Placement Investors





On March
12, 2008, the Company consummated with 25 accredited investors, the “Investors”,
a private placement of 85,714,282 shares, equivalent to 5,829,018 post-split
shares of its common stock for an aggregate purchase price of approximately
$18,000,000. The Investors were (i) Pinnacle Fund, L.P, (ii) Pinnacle China Fund
L.P, (iii) Black River Commodity Select Fund Ltd., (iv) Black River Small
Capitalization Fund Ltd., (v) Marion Lynton, (vi) Ardsley Partners Fund II, LP,
(vii) Ardsley Offshore Fund, Ltd, (viii) Ardsley Partners Institutional Fund,
LP; (ix) Investment Hunter, LLC, (x) Guerrilla Partners LP, (xi) Hua-Mei 21st
Century Partners, LP, (xii) Ruoling Wang, (xiii) Guli Ping, (xiv) Wu Mijia, (xv)
Dehua Qian, (xvi) Southwell Partners, L.P, (xvii) Westpark Capital, L.P, (xviii)
Straus Partners, LP, (xix) Straus-GEPT Partners, LP, (xx) Atlas Allocation Fund,
LP, (xxi) Chestnut Ridge Partners, LP, (xxii) Ancora Greater China Fund, LP,
(xxiii) Kevin B. Halter Jr, (xxiv) Octagon Capital Partners, and (xxv) Howard H.
Lu.





The
agreements the Company entered into with the Investors included a Securities
Purchase Agreement, a Registration Rights Agreement, Make Good Escrow Agreements
and various ancillary agreements and certificates, disclosure schedules and
exhibits in connection therewith. The following is a summary of their material
terms.


9


Securities Purchase
Agreement





Among
other things, under the Securities Purchase Agreement, Mr. Yamamoto
will  deliver a certain number of shares of the Company’s common stock
owned by him to the investors pro-rata in accordance with their respective
investment amount for no additional consideration if: (i) the Company’s after
tax net income for the Company’s fiscal year ending on December 31, 2008 is less
than $9,000,000 and fiscal year ending on December 31, 2009 is less than 95% of
$13,000,000; and (ii) the Company’s earnings per share reported in the fiscal
year ending on December 31, 2009 is less than $0.74 on a fully diluted basis,
the “Low Performance Events”.  Mr. Yamamoto has placed an aggregate of
49,411,763 shares, equivalent to 3,359,889 post-split shares, of common stock,
“Make Good Shares”, into an escrow account pursuant to the terms of the Make
Good Escrow Agreement by and among the Company, Mr. Yamamoto, the Investors and
the escrow agent named therein. If the Company does not achieve the targets in
2008 and 2009, Make Good Shares will be conveyed to all private placement
Investors and Halter Financial pro-rata in accordance with their respective
investment amount for no additional consideration. If the foregoing Low
Performance Events do not occur, the Make Good Shares will be transferred to Mr.
Yamamoto.




Covenants: The Securities
Purchase Agreement contains certain covenants on the Company’s part, including
the following:





(a) 
Board of Directors.
Within 180 days following the closing, the Company is required to nominate a
minimum of five members to its Board of Directors, a majority of which must be
“independent,” as defined under the Nasdaq Marketplace Rules, and to take all
actions and obtain all authorizations, consents and approvals as are required to
be obtained in order to effect the election of those nominees.





(b) 
Chief Financial
Officer. Within 180 days following the closing, the Company is required
to hire a chief financial officer, “CFO”, who is a certified public accountant,
fluent in English and familiar with US GAAP and auditing procedures and
compliance for US public companies.





(c) 
Investor Relations
Firm. Within 60 days following the closing, the Company is required to
hire one of the following investor relations firms: CCG Elite, Hayden
Communications or Integrated Corporate Relations.





In
connection with the above three post-closing covenants, the Company has
deposited an aggregate of $1,750,000, $750,000 as board holdback escrow amount,
$750,000 as CFO holdback escrow amount, and $250,000 as investor relations firm
holdback amount, from the gross proceeds of the private placement in the escrow
account pursuant to the Holdback Escrow Agreement by and among the Company, the
investors and the escrow agent named therein. If the Company fails to comply
with any of the above covenants in a timely fashion, it will incur liquidated
damages of 1% on a daily pro-rata basis for any portion of a month of the gross
proceeds of the private placement, or 2% if it suffers a holdback event relating
to Board of Directors or CFO in a 30-day period, to be subtracted from the
holdback escrow fund, until its compliance with such covenants.




The
Company filed a current report on form 8-K on June 13, 2008 with the SEC.
Pursuant to the relevant escrow agreement, the above mentioned $1,750,000 was
released to the Company on or about June 14, 2008.


10


Registration Rights
Agreement




With
respect to the 85,714,282 shares, equivalent to 5,829,018 post-split shares,
issued to the investors at closing on March 12, 2008, the Company is required to
file a resale registration statement on Form S-1 or any other appropriate form
(i) within 60 days following the closing for purposes of registering the resale
of these shares, (ii) within 15 days with respect to any additional registration
statement, (iii) within 15 days with respect to any additional registration
statements required to be filed due to SEC Restrictions, (iv) within 30 days
following the date on which it becomes eligible to utilize Form S-3 to register
the resale of common stock, or (v) within 45 days following the date the Make
Good Shares are delivered by Mr. Yamamoto to the investors. Among other things,
the Company will be required to pay the investors liquidated damages if it fails
to file a registration statement by the above filing deadlines or if it does not
promptly respond to comments received from the SEC. The liquidated damages
accrue at a rate of 0.5% per month of the aggregate investment proceeds received
from the investors, capped at 5% of the total investment proceeds. The Company
filed a Registration Statement on Form S-1 on May 12, 2008.On December 29, 2008,
the Company’s Registration Statement was declared effective by the Securities
and Exchange Commission, registering a total of 4,730,251 post-split shares of
the Company’s common stock for re-sale by certain selling shareholders, instead
of 5,829,018 post-split shares as contemplated by the registration rights
agreement following the Company’s discussion with the Securities and Exchange
Commission.





Lockup
Agreement





The
Company and Mr. Yamamoto entered into a lockup agreement, pursuant to which Mr.
Yamamoto irrevocably agrees from and after the date of such agreement and
through and including March 12, 2010, that he will not offer, pledge, encumber,
sell, contract to sell, sell any option or contract to purchase, purchase any
option or contract to sell, grant any option, right or warrant to purchase or
otherwise transfer or dispose of, directly or indirectly, or announce the
offering of, any of his shares, including any securities convertible into, or
exchangeable for, or representing the rights to receive, or engage in any short
sales with respect to any security issued by the Company. The Lockup Agreement
may not be waived or amended without the consent of a majority of the holders of
a majority of the shares issued in the private placement.





Name
Change to Yuhe International, Inc. and Reverse Stock Split





Effective
on April 4, 2008, the Company amended its articles of incorporation to (i)
change its name from “First Growth Investors, Inc.” to “Yuhe International,
Inc.”, and (ii) effect a 1-for-14.70596492 reverse stock split of its common
stock. The Company’s Board of Directors and shareholders approved the name
change and the reverse stock split pursuant to the Nevada Revised Statutes. The
number of authorized shares of common stock remains unchanged at 500
million.




The
change to the Company’s name and the reverse stock split were reflected in the
Amended and Restated Articles of Incorporation filed on April 4, 2008 with the
Secretary of State of Nevada, a copy of which is attached hereto as Exhibit 3.1.
The name change became effective with NASDAQ’s Over-the-Counter Bulletin Board
at the opening of trading on April 7, 2008, under the new stock symbol of
“YUII.OB”.


11





Appointment
of Investor Relations Firm





On April
20, 2008, the Company appointed CCG Elite Investor Relations as its investor
relations firm, which was effective on May 1, 2008. .





Appointment
of Chief Executive Director





On June
13, 2008, the Company entered into an employment contract with Mr. Gao Zhentao,
the Company’s Chief Executive Officer, “CEO”. The employment agreement was
effective as of March 12, 2008, the date Mr. Gao was appointed CEO, and has an
initial term of three years.





Appointment
of Chief Financial Officer





On June
13, 2008, Mr. Hu Gang was appointed the Chief Financial Officer, “CFO”, of the
Company. The Company has entered into an employment agreement with Mr. Hu,
effective as of June 13, 2008, his appointment date, and has an initial term of
three years.





Appointment
of Directors





On June
13, 2008, the Company appointed the following directors:-





(i)
Mr. Peter Li, aged 44, was appointed Independent Director, chair of the Audit
Committee and member of the Compensation and Nominating Committees;




(ii)
Mr. Liu Yaojun, aged 32, was appointed Independent Director, chair of the
Compensation Committee and member of the Nominating and Audit
Committees;





(iii)
Mr. Greg Huett, aged 46, was appointed Independent Director , chair of the
Nominating Committee and member of the Audit and Compensation Committees;
and





(iv)
Mr. Han Chengxiang, aged 44, was appointed Director and member of the Nominating
Committee.





The
Company filed a current report on form 8-K on June 13, 2008 with the SEC.
Pursuant to the Holdback Escrow Agreement, an aggregate of $1,750,000, $750,000
as board holdback escrow amount, $750,000 as CFO holdback escrow amount, and
$250,000 as investor relations firm holdback amount, was released to the Company
on or about June 14, 2008.





Corporate
Structure





The
Company has an offshore holding structure commonly used by foreign investors
with operations in China. The Company is a Nevada corporation which owns 100% of
the securities of Bright Stand, which in turn owns 100% of the securities of PRC
Yuhe and Taihong.




As of
December 31, 2008, Mr. Kunio Yamamoto, Pinnacle Fund, L.P., Pinnacle China
Fund L.P., Black River Small Capitalization Fund Ltd., Black River
Commodity Select Fund Ltd., Ardsley Partners Fund II, LP and Halter
Financial Investments, L.P. were the Company’s significant shareholders:
Mr. Yamamoto owned 48.7%, Pinnacle Fund, L.P. owned 7.72%, Pinnacle China
Fund L.P. owned 7.72%, Black River Small Capitalization Fund Ltd. owned 8.24%,
Black River Commodity Select Fund Ltd. owned 6.18%, Ardsley Partners Fund
II, LP owned 7.2% and Halter Financial Investments, L.P. owned 6.1% of the total
outstanding shares of the Company’s common stock.


12




The
following chart depicts the Company’s organizational structure:









The
Company’s Business: Day-Old Broilers




The
Company’s business is part of the commercial broiler supply chain, which is
illustrated below.







13


The
figure above illustrates the entire supply chain of broiler chickens. Day-old
broilers are one-day-old broilers that are sold to broiler raisers. Day-old
broilers sold by the Company’s wholly-owned subsidiary, PRC Yuhe, are the
Company’s primary source of revenue.





The
Company purchases parent breeding chickens from grandparent breeder farms and
raises them to maturity. Once these parent breeding chickens have matured, they
produce hatching eggs that the Company incubates and then sells the resulting
day-old broiler chicks to its customers.





Under
normal circumstances, female parent breeder chickens become productive from the
26th
week, and are no longer commercially productive after the 66th week. Typically a
breeder is capable of producing approximately 167 eggs which will be hatched to
137 broilers over its production lifetime and the breeders are maintained by the
Company for a period of 420 days. The Company sources its parent breeder
chickens from licensed suppliers located in Beijing, and Shandong and Jiangsu
provinces and these suppliers are required to have a vaccination certificate and
a breeder production certificate for the sale of the breeders. The Company’s
hatching eggs typically must be incubated for a period of 21 days.




The
following figure shows the production timeline in the broiler business. At least
28 weeks usually pass from the Company’s receipt of a day-old parent breeder to
the Company’s sale of the first day-old broilers.


14










The
Company operates in two elements of the broiler supply chain: day-old broiler
production and feed production. These activities are operated under two separate
subsidiaries, PRC Yuhe and Taihong, respectively.





In 2008,
PRC Yuhe generated 98.7% of the Company’s revenues. Taihong’s sale of feed to
unaffiliated third parties generated 1.3%. Taihong is also the primary supplier
of feed to PRC Yuhe. In addition to selling day-old broilers, the Company also
sells related chicken products, non-productive parent breeders, and a small
amount of feed for livestock and poultry. While the Company produces
substantially all of its inventory of hatching eggs through its own parent
breeders, it occasionally purchases additional hatching eggs from unaffiliated
third parties to meet market requirements.




The
Company provides a 98% guaranteed survival rate by delivering an additional 2%
of its day-old broilers. For example, the Company delivers two additional
day-old broilers to its customers for every order of 100 day-old broilers, the
cost for these two additional broilers has already been included in the
Company’s cost of sales and therefore no further liability needs to be accrued.
Any loss of broiler chicken solely caused by customers is excluded from the
guarantee. Guarantee expense for 2008 was $65,769. In 2007, the total guarantee
expense that the Company had to pay its customers under this guarantee was less
than $7,000.


15




The
Company will provide additional compensation to its customers if the survival
rate falls below 96% after taking into consideration the additional 2% broilers
given out.




According
to paragraph 8 of SFAS 5 “Accounting for Contingencies”, a loss contingency
should be accrued for if it is probable that a liability had been incurred at
the date of the financial statements and the amount of loss can be reasonably
estimated. The Company determined that a product liability need not be accrued
for the reporting period because there is only a remote chance that the survival
rate will fall below 96% based on historical experience. In 2007, only $7,000
was recorded as guarantee expense to customers; guarantee expense for 2008 was
$65,769.




The
Day-Old Broiler Industry in China; Competition





The
market for day-old broilers in China is highly fragmented. Shandong Province has
the highest number of day-old broilers in China. The Company’s market share was
approximately 3% in China in 2008 and the Company sold 75,000,000 day-old
broilers for the year 2008.




Day-old
broilers are very weak physically and need to be transported in closely
controlled temperature conditions during delivery. Therefore, producers of
broiler chicks usually only sell locally or to surrounding areas, which limits
the Company’s current effective sales market and competition to North
China.




Shandong
Minhe Animal Husbandry Co., Ltd., also located in Shandong Province, is one of
the Company’s major competitors for sales of day-old broilers. They are slightly
larger than the Company in terms of their annual day-old broiler production
volume. Another regional competitor of the Company’s is Jilin Deda, which is
located in Jilin Province in north-eastern China and is smaller than the Company
in terms of annual day-old broiler production volume. However, Jilin Deda is an
integrated chicken company, so it does not generally sell day-old broilers to
unaffiliated third parties.





The
Company competes against its competitors based on product quality and its
after-sales services and extensive marketing network. The Company’s “Yuhe” brand
has been named by the Shandong Province Administration of Industry and Commerce
as a “Well Known Brand”. PRC Yuhe was certified as ISO 9001:2000 compliant for
quality management systems.





The
Company has sales representatives in every district of Shandong Province.
Although the Company’s prices are relatively higher than prices of many of its
competitors, the Company typically lowers its price by RMB 0.1 to 0.2 per
day-old broiler in order to attract new customers. The Company is able to sell
its products at a relatively higher price because its products have a good
survival rate and require a shorter period to raise to market size. The
Company’s experience and advance breeding technique contribute to the health and
quality of parent breeders. The Company has a high gross margin because it
focuses on the production of day-old broilers through maintaining the health and
quality of its parent breeders, which involves only a small maintenance cost, to
produce healthy day-old broilers that have a high survival rate and require a
shorter period to raise to market size. The higher the number of day-old
broilers is being produced, the lower the unit cost. As such, the Company is
able to maintain itself as a relative low cost producer while charging
relatively higher prices for its products.


16





Breeder
Supply




PRC
Yuhe’s suppliers in 2008 and 2007 were as follows:





2008Suppliers
                      
                      Suppliers of
                      
                      Amount
                      
                      % of($
      ,000)
                      
                      TotalMa
      Suping
                      
                      Soybean
                      
                      
                      5,900.89
                      
                      27.63%Shandong
      Yisheng Poultry Co., Ltd.
                      
                      Chicken breeders
                      
                      
                      1,369.53
                      
                      6.41%Wang
      Jianbo
                      
                      Eggs
                      
                      
                      1,050.75
                      
                      4.92%Mao
      Shenlin
                      
                      Eggs
                      
                      
                      994.41
                      
                      4.66%Ding
      Jian Sheng
                      
                      Soybean and corn
                      
                      
                      892.81
                      
                      4.18%Liu
      Dianbao
                      
                      Eggs
                      
                      
                      720.30
                      
                      3.37%Qi
      Xiaoyun
                      
                      Soybean oil
                      
                      
                      681.95
                      
                      3.19%Zhang
      Chun Mao
                      
                      Coal
                      
                      
                      499.21
                      
                      2.34%Shanghai
      Shi Guo Agriculture and Equipment Co., Ltd.
                      
                      Equipment
                      
                      
                      492.44
                      
                      2.31%Sun
      Wenpeng
                      
                      Corn
                      
                      
                      483.87
                      
                      2.27%Total
                      
                      
                      
                      
                      13,086.16
                      
                      61.28%




2007Suppliers
                    
                    Suppliers of
                    
                    Amount
                    
                    % of($ ,000)
                    
                    TotalDong
      Jiangbo
                    
                    Soybean
                    
                    
                    775.02
                    
                    5.54
                    %Shandong
      Yisheng Poultry Co., Ltd.
                    
                    Chicken breeders
                    
                    
                    668.16
                    
                    4.84
                    %Wen
      Lihua
                    
                    Corn
                    
                    
                    554.75
                    
                    4.02
                    %Xin
      Yubin
                    
                    Eggs
                    
                    
                    491.15
                    
                    3.56
                    %Mao
      Shenlin
                    
                    Eggs
                    
                    
                    463.42
                    
                    3.36
                    %Jiangsu
      Aibayijia Co., Ltd.
                    
                    Chicken breeders
                    
                    
                    385.35
                    
                    2.79
                    %Tang
      Xinmin
                    
                    Corn
                    
                    
                    382.91
                    
                    2.77
                    %Yu
      Huazhi
                    
                    Corn
                    
                    
                    328.91
                    
                    2.38
                    %Xu
      Zhentang
                    
                    Soybean
                    
                    
                    269.17
                    
                    1.95
                    %Ma
      Suping
                    
                    Soybean
                    
                    
                    267.50
                    
                    1.94
                    %Total
                    
                    
                    
                    
                    4,586.34
                    
                    33.15
                    %




Operations





The main
raw materials needed for the production of the Company’s day-old broilers are
parent breeders, feed, and medicines and vaccines. PRC Yuhe purchases parent
breeders from multiple suppliers. As a result of the massive slaughter of
poultry in 2006 due to an outbreak of avian influenza, parent breeders are
currently in short supply in China. However, the Company has historically been
able to procure adequate stocks of parent breeders with a 5-8% discount from its
principal suppliers as a result of its eight- to ten-year relationship with them
and the Company’s large, stable orders. The Company purchases its parent
breeders from its long-term suppliers in Shandong Province, Jingsu Province and
Beijing.


17





Taihong
sells breeder feed to PRC Yuhe at cost, and these supplies have historically
accounted for all of PRC Yuhe’s feed requirements. The main raw materials for
Taihong’s feed are corn, soybean meal and nutritional elements for feed
production. Taihong purchases feed ingredients from numerous sources, but
primarily from wholesalers who collect the feed ingredients directly from
farmers. Taihong’s feed is produced in three separate phases. First, pre-mix
feed is produced from micro-nutritional elements, such as vitamins and minerals.
Second, concentrate feed is mixed by blending pre-mix feed and protein such as
soybean meals. Finally, whole feed is produced by mixing concentrate feed, corn
and soybean meal. Every raw material Taihong uses has more than three suppliers.
Taihong is not a large purchaser in the market for these materials, so to
strengthen its bargaining power, Taihong will sometimes cooperate with other
purchasers to place joint orders. The Company believes that its sources of
supply for these materials are adequate for its present needs and does not
anticipate any difficulty in acquiring these materials in the immediate
future.





The
Company obtains its medicines from suppliers in Beijing and Shandong, and its
vaccines locally in Harbin, Heilongjiang Province and from foreign companies in
the United States and Israel. Every such material the Company uses has more than
three suppliers.





The
Company considers the health of its flocks to be its primary concern, and as
such, the Company undertakes vaccination programs for its birds. Every breeder
is vaccinated with at least ten types of vaccine, including those against avian
flu. The Company’s birds are raised in enclosed buildings, not in the open where
they would be more prone to exposure to potential disease carriers. The
Company’s breeder farms are also distributed among various locations at least
five kilometers from each other so as to minimize the risks of co-infection.
None of the Company’s birds has been infected with the H5N1 virus, and no cases
of H5N1 have been found in Shandong Province, where the Company’s farms are
located. The Company is also one of the few companies in China to immunize its
embryos using the Inovoject® system provided by Embrex, Inc. The Inovoject®
system would enhance the quality of the day-old broilers and increase their
viability. The system can also improve disease resistance and bird health at the
time when they are placed on the breeder farm. The Company conducted a test
internally and estimated that the survival rate would be 1-2 % lower without
using the Inovoject system. PRC Yuhe was certified as ISO 9001:2000 compliant
for quality management systems on May 8, 2003.




Customers
and Distribution





Through
PRC Yuhe, the Company’s customers are principally comprised of distributors and
end users such as integrated chicken companies, broiler raising companies
and individual broiler raisers. Approximately eighty-five percent of the
Company’s total sales are made through third party distributors and fifty
percent of the Company’s sales are to five largest distributors. Forty-five
percent of the Company’s sales volume is to distributors with five to ten years
of relationship with us.


18


The
Company’s reference to “customers” includes both distributors and end users.
However, under the section “Customers and Distribution” in this Report, the
Company’s reference to “customers” includes the Company’s end users only as
the Company is constantly considering increasing and funding its sales network
into new geographic areas in an effort to expand its sales to end
users.




If any
distributor resells the Company’s product, such distributor will make profits
from the resale as well as be entitled to a year end bonus paid by the Company
at the rate of RMB 0.05-0.1 per day-old broiler. The Company sets the price to
third party distributors and end users according to the market price based
on supply and demand and the competitiveness of the market. The Company sets the
price according to its own policies and is not subject to any distributors’
control.





The
Company is constantly considering increasing and funding its sales network into
new geographic areas. The Company expects to purchase new facilities to
generate sufficient production capacity and expand roughly at the same rate
as it expects to increase its sales network.  The Company shall fund the
cost of increasing its sales network internally as it recruits more sales
representatives.  The Company considers that costs of acquiring new
production facilities and its ability to raise capital for expansion at a
particular time can affect its geographical expansion and sales. The Company
also considers that shortage of labor would also affect its geographical
expansion and sales. The impact of labor shortage can be immediate and
longer-term. The Company is monitoring the availability of professionals and
experienced workers to meet its production demand.





The
Company anticipates that it will use a penetration pricing strategy when first
entering a new geographic area. Historically, the Company’s penetration price
has been RMB 0.1 to RMB 0.2 per bird lower than its list price, which was still
higher than the prevailing market price in the market the Company was seeking to
enter.





For the
remaining feed produced by Taihong that is not sold to PRC Yuhe, Taihong retains
sales agents in various key locations to sell the feed. Because Taihong’s excess
feed production is not large, its feed is sold primarily in Shandong
Province.





As a part
of the Company’s after-sales service and customer relations initiative, the
Company regularly visits its customers to educate them on broiler-raising
techniques, conducts regular training courses and provides them with a 24-hour
help line. The Company also provides guarantees to its customers that the
survival rate of its day-old broilers will be not less than 98% within one week
of their delivery.





The table
below sets out the Company’s top ten major non-distributor customers. Sales to
PRC Yuhe’s major end users in 2008 and 2007 were as follows:




2008Customers
                    
                    Amount
                    
                    % of($ ,000)
                    
                    TotalWei
      Yunchao
                    
                    
                    3,317.01
                    
                    9.69%Wang
      Jianbo
                    
                    
                    2,984.97
                    
                    8.72%Li
      Chuanwang
                    
                    
                    2,219.25
                    
                    6.48%Jia
      Deliang
                    
                    
                    1,477.17
                    
                    4.32%Tian
      Liqiu
                    
                    
                    1,313.55
                    
                    3.84%Xing
      Changhan
                    
                    
                    908.50
                    
                    2.65%Geng
      Naiwei
                    
                    
                    897.46
                    
                    2.62%Yang
      Lunhao
                    
                    
                    882.87
                    
                    2.58%Wang
      Tongjun
                    
                    
                    671.16
                    
                    1.96%Zhang
      Songtang
                    
                    
                    617.64
                    
                    1.80%Total
                    
                    
                    15,289.58
                    
                    44.66%




19




2007Customers
                  
                  Amount
                  
                  % of($ ,000)
                  
                  TotalWang
      Jianbo
                  
                  
                  3,217.25
                  
                  15.07
                  %Li
      Chuanwang
                  
                  
                  2,593.89
                  
                  12.15
                  %Wei
      Yunchao
                  
                  
                  2,470.88
                  
                  11.57
                  %Tian
      Liqiu
                  
                  
                  1,806.22
                  
                  8.46
                  %Yang
      Lunhao
                  
                  
                  1,324.87
                  
                  6.21
                  %Zhang
      Songtang
                  
                  
                  958.70
                  
                  4.49
                  %Wang
      Jiazhong
                  
                  
                  936.77
                  
                  4.38
                  %Jia
      Deliang
                  
                  
                  825.03
                  
                  3.86
                  %Geng
      Naiwei
                  
                  
                  754.30
                  
                  3.53
                  %Xing
      Changhan
                  
                  
                  707.95
                  
                  3.32
                  %Total
                  
                  
                  15,595.86
                  
                  73.04
                  %




Employees




As of
December 31, 2008, PRC Yuhe and Taihong had 1,230 full-time employees. Among
these full-time employees, 120 employees, who are key technical and operational
personnel, have directly signed employment contracts with the Company. The
remaining employees who are unskilled workers have signed their employment
contracts with Weifang Chuangfu Labor Co., Ltd., an outside labor contracting
company that provides employees to meet the Company’s staffing needs. The
Company compensates the employees of Weifang Chuangfu Labor Co., Ltd. directly
for the services that these employees render to it and pays Weifang Chuangfu
Labor Co., Ltd. a yearly service fee. Bright Stand has no
employees.




R&D
and Intellectual Property





PRC Yuhe
and Taihong have not made any R&D expenditure in the last two fiscal
years.





PRC Yuhe
is the registered owner of two PRC trademarks consisting of the stylized Chinese
characters “Yu He” and accompanying logo in live agricultural products. The
registration period is ten years and the expiry dates for the two trademarks are
October 27, 2015 and April 6, 2010, respectively. In the PRC, trademark
registrations can be indefinitely renewed for ten-year periods. As the
registrant of these two trademarks, PRC Yuhe has the exclusive legal right to
use each trademark within the PRC on the goods for which it is registered. PRC
Yuhe has the right to prevent others from using a confusingly similar mark on
any good which is similar to any of those for which these two trademarks are
registered. Through a license agreement with PRC Yuhe, Taihong has the license
to use the same trademarks. PRC Yuhe and Taihong have no other patents,
trademarks, other licenses, franchises, concessions or royalty agreements. The
Company does not consider “Yu He” to be a consumer brand because it is not well
recognized by customers who purchase chickens in retail food markets, although
this brand is recognized by end users who raise broilers to market size for sale
to customers, retail food markets and restaurants.


20





Environmental
Laws





The
Company’s breeders farms are located in rural areas where there are no specific
requirements imposed on the Company by relevant environmental protection
agencies. Fecal wastes are treated and converted by the Company to fertilizers
and sold to farmers. PRC Yuhe and Taihong have never been penalized by any
environmental protection agencies. The Company therefore does not incur any
significant environmental law compliance costs.





Governmental
Approvals




The
production activities of PRC Yuhe and Taihong are primarily regulated by the
Farming Bureau of Shandong Province. Under relevant laws and regulations, both
PRC Yuhe and Taihong must obtain relevant production permits from the Farming
Bureau of Shandong Province to carry out their respective businesses. In
addition, PRC Yuhe, as a company engaging in the breeder business, must obtain
an immunization certificate from the local Farming Bureau in Weifang City. PRC
Yuhe’s breeder production permit from the Animal Husbandry Bureau of Shandong
Province is valid from August 5, 2008 to August 4, 2011. The immunization
certificate from the local farming bureau in Weifang City was issued on November
10, 2005 and does not have an expiry date. Taihong’s feed production permit was
issued on December 12, 2007 and is valid for a period of three
years.





Generally,
the primary breeder stock is imported and the import volume is closely
controlled by the PRC government. The Company has not seen an increasing trend
of the import volume.





PRC Yuhe
is currently entitled to an exemption from Chinese enterprises income tax, or
“EIT”, because it has been recognized as “a national leading agricultural
enterprise”. In accordance with the relevant regulations regarding the tax
exemption, PRC Yuhe is tax-exempt as long as it continues to be recognized as
“the national leading agricultural enterprise”. On January 31, 2008, the Chinese
operating subsidiaries PRC Yuhe and Taihong were acquired by Bright
Stand.




On March
16, 2007, the National People’s Congress of China enacted a new tax law, or “the
New Tax Law”, whereby both FIEs and domestic companies will be subject to a
uniform income tax rate of 25%. On November 28, 2007, the State Council of China
promulgated the Implementation Rules. Both the New Tax Law and the
Implementation Rules have become effective on January 1, 2008 and provide tax
exemption treatment for enterprises engaged in agricultural industries, such as
farming, foresting, fishing and animal husbandry. As an enterprise engaged in
the farming industry, the Company is eligible for relevant exemption treatment
and does not need to pay company income tax. In 2008, the local tax authorities
informed the Company that it is eligible for relevant preferential tax
treatment. However, any decision by relevant tax authorities in the future that
the Company is not eligible for tax exemption treatment may materially and
adversely affect its profits, business and financial
performance.


21





Seasonality





The
Company’s operating results and operating cash flows historically have been
subject to seasonal variations. Demand for the Company’s day-old broilers
generally decreases in May and June. Since the Company’s ultimate clients are
mostly farmers and the second quarter is their busy season for reaping, farmers
have little idle time to raise broilers during these months.





Another
low season for the Company’s products is from the second half of December to the
first half of January, which the Company believes is caused by a Chinese
cultural taboo on animal slaughter during the Chinese New Year holiday, which
occurs between late January and early February. Because it usually takes
approximately 45 days for a day-old broiler to reach market weight, the Company
experiences reduced demand for its day-old broilers during the period from 30 to
60 days prior to the Chinese New Year holiday period. In addition, since most
farmers are likely to rest during the Chinese New Year holiday, rather than
work, February would be another low season for the Company’s
products.


22





ITEM
1A.   RISK FACTORS.





Not
applicable.




ITEM
1B.   UNRESOLVED STAFF COMMENTS.




Not
Applicable.




ITEM
2.   PROPERTIES





Land use
rights are carried at cost and amortized on a straight-line basis over the
period of rights of 50 years commencing from the date of acquisition of
equitable interest. According to the laws of PRC, the Chinese government owns
all of the land in the PRC. Companies or individual are authorized to possess
and use the land only through land usage rights approved by the PRC
government.





Facilities





Except
its breeder farms, PRC Yuhe owns buildings/fixtures and land use rights of all
the lands used for its operations. Taihong leases all the land and buildings
used for its operations from PRC Yuhe.




PRC Yuhe
owns the land use rights to four parcels of land in Weifang, Shandong
Province, totaling approximately 102,596 square meters. PRC Yuhe has obtained
from the relevant governmental authorities the Land Use Right Certificates of
these four parcels of land. PRC Yuhe has also obtained Building Ownership
Certificates for all the buildings and fixtures erected on those
aforementioned four parcels of land. The first parcel comprises 25,040
square meters and is the location of two hatcheries operated by PRC Yuhe. The
second parcel of property comprises 31,450 square meters and is the location of
the Company’s corporate headquarters and living quarters for the Company’s
staff. The third parcel comprises 21,470 square meters which, together with all
the buildings erected on it, has been leased to Taihong for its operation of the
feed mill. The exclusive rights to use each of the foregoing three parcels of
land are valid for a period of 50 years and will expire in 2052 and 2053. The
fourth parcel of property comprises 24,636 square meters. The exclusive rights
to use the fourth parcel of land are valid for a period of 50 years and will
expire in 2057.





PRC Yuhe
does not directly own land or land use rights for its thirteen breeder farms,
but leases approximately 820,000 square meters of land to house these farms. PRC
Yuhe has built on the leased land various buildings to house its breeder. These
buildings are considered to be temporary structures.





Because
PRC Yuhe does not own these lands, it did not apply for and was not granted with
the Land Use Right Certificate and Building Ownership Certificate for the
breeder farm lands it leased and the buildings it has erected on the leased
land. However, PRC Yuhe has the right to use the breeder farm lands for terms as
specified in the Lease Agreement, which typically last about twenty to forty
years. During the term of relevant Lease Agreement, all the buildings and
fixtures erected by PRC Yuhe on the leased breeder farm lands are protected by
PRC law and PRC Yuhe can freely dispose of them.


23





As
of December 31, 2008, both PRC Yuhe and Taihong are not covered by any
insurance. It is the Company’s understanding that other large agricultural
factory entities in China in the same industry are not covered by insurance as
well. The Company would like to insure both day-old broilers and parent
breeders, which are its main asset; however, such insurance policies are not
available in China.





As of
December 31, 2008, the Group had capital commitment amounting to $10,519,644 in
relation to the construction cost, land acquisition and farm acquisition for PRC
Yuhe and the Group paid deposits of $10,214,093 related to these commitments and
recorded under Deposits paid for acquisition of long term
assets.   Further details are set out in the financial
statements.





The
following is a summary of some of the Company’s investment in acquisition of
land and farm construction of $8.2 million, including in the capital commitment
of approximately $10.5 million mentioned above as of December 31,
2008.





Land for Hatchery Farm
No. 3





On June
10, 2008, PRC Yuhe entered into an agreement with Shandong Meiweite Food Ltd.
and purchased land use rights for 45 years to an area covering 26,666 square
meters. According to the agreement, the total consideration for the sale and
purchase is RMB 10 million, or approximately $1.5 million, and a sum of RMB 9
million, or approximately $1.3 million, has been paid according to the terms of
such agreement. PRC Yuhe will manage and utilize the land to build a new
hatchery, bringing the total number of hatchery farm to three by the end of
2009.





Purchase of Breeding Farms
Nos. 3 & 4





On June
7, 2008, PRC Yuhe entered into an agreement with Shandong Anrui Poultry Feed
Ltd., and purchased land and the building on it for a total consideration of RMB
17 million, or approximately $2.5 million, and a sum of RMB 16 million, or
approximately $2.4 million, has been paid according to the terms of such
agreement. PRC Yuhe will utilize this facility as one of its breeding farms
without the need to pay for lease payments after such agreement was signed. PRC
Yuhe will have avoided annual lease payments by $500,000. The capacity of this
breeding farm is 100,000 sets of parent broilers.





Construction of Breeding
Farm No. 1





On August
15, 2008, PRC Yuhe completed construction work and facilities to set up the
southern farm of breeding farm No 1. On August 30, 2008, PRC Yuhe purchased
100,000 sets of parent breeders and began to feed. By the end of September 2008,
PRC Yuhe has spent RMB 29 million, or approximately $4.5 million, to build
breeding farm No 1. The breeding farm can be split into the southern and the
northern regions. PRC Yuhe looks forward to completing the northern farm
construction work and facilities by July 2009; and beginning to breed parent
broilers in the northern region by the end of 2009. The residual scheduled
payment is RMB 6 million, or $0.9 million, for the building and facilities; and
RMB 4.9 million, or approximately $0.75 million, in machineries. The capacity of
the northern factory is 140,000 sets of parent broilers.


24





Construction of Breeding
Farm Nos. 2, 3, 5, 6, 7





On
December 6, 2008, PRC Yuhe entered into a construction agreement with a
contractor to build and renovate five of its breeding farms for a total
consideration of RMB 2.6 million, approximately equivalent to $379,000. The
construction period is estimated to be from February 2009 to April
2009.





Construction of Steel
Structural Surface for Hatchery Farm No. 3





On
December 10, 2008, PRC Yuhe entered into a construction agreement with a
contractor to build the steel structure for its hatchery farm No. 3 for a
total consideration of RMB 3.9 million, approximately equivalent to $564,000.
The construction period is estimated to be from February 2009 to March
2009.





Equipment Leasing and Rental
Arrangement





On
November 11, 2008, PRC Yuhe entered into equipment leasing agreement and
property rental agreement, collectively, the “Agreements”, with Shandong
Nongbiao Purina Feed Co., Ltd., “Shandong Nongbiao Purina”. Shandong Nongbiao
Purina will construct a feed production facility on a property leased from PRC
Yuhe and become the exclusive feed supplier for PRC Yuhe. Pursuant to the terms
and conditions of the Agreements, Shandong Nongbiao Purina will lease certain
equipment for feed production from, and install them at the premises owned by,
PRC Yuhe. The lease term for both the equipment leasing agreement and property
rental agreement is 10 years. After completion of the feed production facility,
the lease term will commence on the date production begins.  Shandong
Nongbiao Purina shall pay to PRC Yuhe an annual rental payment for the leased
land, premises and facilities of RMB 1,500,000, approximately equivalent to
$219,000. The rent payable by Shandong Nongbiao Purina under the rental
agreement will be offset against the prepaid equipment rental costs of RMB
10,000,000, approximately equivalent to $1,459,000.





In
connection with the execution of the Agreements, Shandong Yuhe Food Group Co.,
Ltd., “Yuhe Group”, a PRC company based in Shandong Province, would be the
guarantor of PRC Yuhe for RMB 4,500,000, approximately equivalent to $657,000,
for the first five years and for RMB 3,000,000, approximately equivalent to
$438,000, for the next five years. No guarantee fee is required according to the
above Agreements.





ITEM
3.   LEGAL PROCEEDINGS.





In May
2008, Li Yu filed a claim against PRC Yuhe, Taihong and Yuhe Group claiming RMB
2,400,000, or approximately $360,000, arising from an alleged RMB 10,000,000, or
approximately $1,500,000, loan agreement dated October 31, 2007 entered into
among Li Yu, as the lender, PRC Yuhe, Taihong, Yuhe Group and Gao
Zhentao.  However, due to Li Yu’s failure to transfer the loan amount
to the borrowers timely, PRC Yuhe and Taihong could not utilize the loan amount.
As a result of the late remittance of funds, Yuhe Group has agreed to borrow and
take over the RMB 10,000,000, or approximately $1,500,000, loan from PRC Yuhe
and Taihong pursuant to a Capital Transfer Agreement dated November 28, 2007 by
and among PRC Yuhe, Taihong and Yuhe Group. Yuhe Group has already repaid RMB
9,200,000, or approximately $1,380,000, to Li Yu.


25





With
respect to the claim filed by Li Yu, while it appears that RMB 800,000, or
approximately $120,000, remains unpaid under the loan agreement, Li Yu has
claimed RMB 2,400,000, or approximately $360,000, without explaining his
basis. In addition to litigating over venue, the borrowers claimed that the
loan agreement was forged and counterclaimed losses due to Li Yu's failure to
transfer the loan amount to the borrowers timely.





On
December 8, 2008, Li Yu applied to the Court withdrawing his claim against PRC
Yuhe, Taihong and Yuhe Group.  The Court handed down the judgment on
the same date allowing Li Yu’s application for withdrawal and ordering Li Yu to
pay the costs of his application.




ITEM
4.   SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS




None.




PART
II




ITEM
5.   MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES.





Market
Information




The
Company’s common stock is quoted under the symbol, “YUII.OB” on the OTC Bulletin
Board. Trading in the common stock in the over-the-counter market has been
limited and sporadic and the quotations set forth below are not necessarily
indicative of actual market conditions. The following sets forth high and low
bid price quotations for each calendar quarter during the last two fiscal years
that trading occurred or quotations were available. All prices prior to the
quarter ended December 31, 2007 reflect activity in the Company’s common stock
prior to the announcement of the Company’s agreement to enter into the Equity
Transfer Agreement to acquire Bright Stand.”  Further, all prices
reflect inter-dealer prices without retail mark-up, mark-down, or commission and
may not necessarily reflect actual transactions. The following share prices are
quoted on OTC Bulletin Board trading system.  The high and low sales
prices for the periods presented have not been adjusted to reflect the 1:
14.70596492 reverse stock split effected on April 4, 2008:




High*
                
                
                Low*2007
      – Quarter Ended:March
      31, 2007
                
                
                2.90
                
                
                
                1.05June
      30, 2007
                
                
                1.95
                
                
                
                0.55September
      30, 2007
                
                
                0.61
                
                
                
                0.60December
      31, 2007
                
                
                1.40
                
                
                
                0.602008
      – Quarter Ended:March
      31, 2008
                
                
                0.60
                
                
                
                0.45June
      30, 2008
                
                
                8.00
                
                
                
                8.00September
      30, 2008
                
                
                6.50
                
                
                
                6.50December
      31, 2008
                
                
                4.00
                
                
                
                4.00


26











*
            Source:
      Yahoo Finance




The most
recent market trade of the Company’s common stock occurred on March 19, 2009 at
the price of $1.80 per share. There is a lack of any meaningful market value
quotations for the Company’s shares.




Holders




As
of December 31, 2008, there were 15,722,180 shares outstanding and
approximately 46 holders of record of the Company’s common stock.




Securities
Authorized for Issuance under Equity Compensation Plans




The
Company has not reserved any securities for issuance under any equity
compensation plan, as it currently has not adopted any equity compensation
plan.





Dividend
Policy




Prior to
the Company’s entering into the Equity Transfer Agreement, none of Bright Stand,
PRC Yuhe or Taihong has declared any dividends.




The
Company entered into a Stock Purchase Agreement, the “Stock Purchase Agreement”,
with Halter Financial Investments, L.P., a Texas limited partnership, “Halter
Financial”, dated as of November 6, 2007, pursuant to which it agreed to sell to
Halter Financial 14,000,000 unregistered shares, equivalent to 951,996
post-split shares, of its common stock for $425,000. The transaction closed on
November 16, 2007. As a result of the transaction, Halter Financial holds
14,000,000 shares, equivalent to 951,996 post-split shares, or 87.5% of the
Company’s 16,000,000 shares, equivalent to 1,087,994 post-split shares, of
common stock then outstanding following the completion of all matters referred
to above. The Stock Purchase Agreement also required the Company’s Board of
Directors to declare and pay a special cash dividend of $0.21, $3.088
post-split, per share to the Company’s shareholders on November 19, 2007. Halter
Financial did not participate in such dividend. The dividend was payable to
shareholders of record on November 15, 2007, which was prior to the date the
shares were issued to Halter Financial under the Stock Purchase Agreement. The
dividend payment date was November 19, 2007. The dividend was payable to the
Company’s shareholders who held 2,000,000 shares, equivalent to 135,999
post-split shares, of the Company’s common stock and resulted in a total
dividend distribution of $420,000. The funds for the dividend came from the
$425,000 proceeds received from the sale of common stock to Halter
Financial.




Any
future determination as to the declaration and payment of dividends on the
Company’s common stock will be made at the discretion of the Company’s board of
directors out of funds legally available for such purpose. The Company is under
no contractual obligations or restrictions to declare or pay dividends on its
common stock. In addition, the Company currently has no plans to pay such
dividends. However, even if it wishes to pay dividends, because its cash flow is
dependent on dividend distributions from its affiliated entities in China, the
Company may be restricted from distributing dividends to its holders of common
stock in the future if at the time it was unable to obtain sufficient dividend
distributions from PRC Yuhe or Taihong. The board of directors currently intends
to retain all earnings for use in the business for the foreseeable
future.


27





ITEM
6. SELECTED FINANCIAL DATA





Not
required for smaller reporting companies.





ITEM
7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS




You should read the following
description of the Company’s results of operations and financial condition in
conjunction with the Company’s consolidated audited financial statements
presented in this report. Unless otherwise specified, all dollar amounts are in
U.S. dollars.





Overview





The
Company is in the middle of the broiler chicken supply chain. The Company
purchases baby parent breeding stocks from primary breeder farms, raises them
for hatching eggs and sells live day-old broilers to the market. The Company’s
business segment along the broiler supply chain has the highest margin along the
supply chain. The Company produces high quality day-old broilers supported by
its know-how in the areas of feed ingredient composition, immunizations system
and breeding techniques, gained through over a decade of
experience.





Unless
otherwise noted, all dollar figures provided herein are translated into United
States Dollars from Renminbi at year-end exchange rates as to assets and
liabilities and average exchange rates as to revenues and expenses. Capital
accounts are translated at their historical exchange rates when the capital
transactions occurred.




Unless
otherwise noted, all historical financial information prior to March 12, 2008
refers to PRC Yuhe, which includes the accounts of Taihong.





Results
of Operations – Comparison of twelve months ended December 31, 2008 and
2007





The
Company has consolidated the results of PRC Yuhe and Taihong into its
Consolidated Financial Statements from February 1, 2008 to December 31, 2008.
For comparative purposes, the Company has provided a pro forma Consolidated
Statement of Operations for each of the twelve months ended December 31,
2008 and 2007 (please refer to F-37 – F-40) to provide comparable presentation
to its reported results for the twelve months ended December 31, 2008 and
2007.  The Company believes that providing this pro forma financial
statement as if it had consolidated PRC Yuhe and Taihong as of January 1, 2007
may assist investors in assessing performance between periods and in developing
expectations of future performance.


28





All amounts,
                                                
                                                
                                                
                                                
                                                All amounts,
                                                
                                                
                                                
                                                
                                                All amounts,
                                                
                                                
                                                
                                                
                                                
                                                Increase/other than
                                                
                                                As a
                                                
                                                
                                                other than
                                                
                                                As a
                                                
                                                
                                                other than
                                                
                                                
                                                As a
                                                
                                                
                                                (Decrease)
                                                
                                                Increase/percentage, in
                                                
                                                percentage of
                                                
                                                
                                                percentage, in
                                                
                                                percentage of
                                                
                                                
                                                percentage, in
                                                
                                                
                                                percentage of
                                                
                                                
                                                Dollar ($)
                                                
                                                (Decrease)U.S. dollars
                                                
                                                net revenues
                                                
                                                
                                                U.S. dollars
                                                
                                                net revenues
                                                
                                                
                                                U.S. dollars
                                                
                                                
                                                net revenues
                                                
                                                
                                                U.S. dollars
                                                
                                                PercentageFor the year
                                                
                                                For the year
                                                
                                                
                                                For the year
                                                
                                                For the year
                                                
                                                
                                                For the year
                                                
                                                
                                                For the year
                                                
                                                
                                                For the year
                                                
                                                For the yearended
                                                
                                                ended
                                                
                                                
                                                ended
                                                
                                                ended
                                                
                                                
                                                ended
                                                
                                                
                                                ended
                                                
                                                
                                                ended
                                                
                                                endedDecember
      31
                                                
                                                December
      31
                                                
                                                
                                                December
      31
                                                
                                                December
      31
                                                
                                                
                                                December
      31
                                                
                                                
                                                December
      31
                                                
                                                
                                                December
      31
                                                
                                                December
      312008
                                                
                                                2008
                                                
                                                
                                                2008
                                                
                                                2008
                                                
                                                
                                                2007
                                                
                                                
                                                2008
                                                
                                                
                                                2008
                                                
                                                2008(As reported)
                                                
                                                
                                                
                                                
                                                (Pro forma)
                                                
                                                
                                                
                                                
                                                (Pro forma)Sales
      revenue
                                                
                                                
                                                34,626,282
                                                
                                                
                                                100.00
                                                %
                                                
                                                
                                                36,117,611
                                                
                                                
                                                100.00
                                                %
                                                
                                                
                                                22,075,224
                                                
                                                
                                                
                                                100.00
                                                %
                                                
                                                
                                                14,042,387
                                                
                                                
                                                63.61
                                                %Costs
      of revenue
                                                
                                                
                                                21,572,722
                                                
                                                
                                                62.30
                                                %
                                                
                                                
                                                22,910,160
                                                
                                                
                                                63.43
                                                %
                                                
                                                
                                                13,502,545
                                                
                                                
                                                
                                                61.17
                                                %
                                                
                                                
                                                9,407,615
                                                
                                                
                                                69.67
                                                %Gross
      profit
                                                
                                                
                                                13,053,560
                                                
                                                
                                                37.70
                                                %
                                                
                                                
                                                13,207,451
                                                
                                                
                                                36.57
                                                %
                                                
                                                
                                                8,572,679
                                                
                                                
                                                
                                                38.83
                                                %
                                                
                                                
                                                4,634,772
                                                
                                                
                                                54.06
                                                %Selling
      expenses
                                                
                                                
                                                425,460
                                                
                                                
                                                1.23
                                                %
                                                
                                                
                                                454,457
                                                
                                                
                                                1.26
                                                %
                                                
                                                
                                                312,927
                                                
                                                
                                                
                                                1.42
                                                %
                                                
                                                
                                                141,530
                                                
                                                
                                                45.23
                                                %General
      and administrative expenses
                                                
                                                
                                                2,538,590
                                                
                                                
                                                7.33
                                                %
                                                
                                                
                                                2,661,285
                                                
                                                
                                                7.37
                                                %
                                                
                                                
                                                1,112,758
                                                
                                                
                                                
                                                5.04
                                                %
                                                
                                                
                                                1,548,527
                                                
                                                
                                                139.16
                                                %Operating
      income
                                                
                                                
                                                10,089,510
                                                
                                                
                                                29.14
                                                %
                                                
                                                
                                                10,091,709
                                                
                                                
                                                27.94
                                                %
                                                
                                                
                                                7,146,994
                                                
                                                
                                                
                                                32.38
                                                %
                                                
                                                
                                                2,944,715
                                                
                                                
                                                41.20
                                                %Bad
      debts (recovery) expenses
                                                
                                                
                                                (813,000
                                                )
                                                
                                                -2.35
                                                %
                                                
                                                
                                                (1,032,893
                                                )
                                                
                                                -2.86
                                                %
                                                
                                                
                                                231,569
                                                
                                                
                                                
                                                1.05
                                                %
                                                
                                                
                                                (1,264,462
                                                
                                                
                                                -546.04
                                                %Interest
      income
                                                
                                                
                                                249,738
                                                
                                                
                                                0.72
                                                %
                                                
                                                
                                                249,743
                                                
                                                
                                                0.69
                                                %
                                                
                                                
                                                796
                                                
                                                
                                                
                                                0.00
                                                %
                                                
                                                
                                                248,947
                                                
                                                
                                                31274.75
                                                %Other
      income (expense)
                                                
                                                
                                                75,210
                                                
                                                
                                                0.22
                                                %
                                                
                                                
                                                80,814
                                                
                                                
                                                0.22
                                                %
                                                
                                                
                                                (106,246
                                                )
                                                
                                                
                                                -0.48
                                                %
                                                
                                                
                                                187,060
                                                
                                                
                                                -176.06
                                                %Interest
      expenses
                                                
                                                
                                                702,573
                                                
                                                
                                                2.03
                                                %
                                                
                                                
                                                788,740
                                                
                                                
                                                2.18
                                                %
                                                
                                                
                                                924,915
                                                
                                                
                                                
                                                4.19
                                                %
                                                
                                                
                                                (136,175
                                                
                                                
                                                -14.72
                                                %Net
      income
                                                
                                                
                                                10,524,885
                                                
                                                
                                                30.40
                                                %
                                                
                                                
                                                10,666,419
                                                
                                                
                                                29.53
                                                %
                                                
                                                
                                                5,885,060
                                                
                                                
                                                
                                                26.66
                                                %
                                                
                                                
                                                4,781,359
                                                
                                                
                                                81.25
                                                %





Net revenue (As reported).Sales revenue of $34.6 million represents sales of 73 million day-old
broilers from the period February 1, 2008 to December 31, 2008.





Net revenue (Pro forma).Sales revenue increased by $14 million, or 63.6%, to $36.1 million for
the twelve months ended December 31, 2008 from $22.1 million for the twelve
months ended December 31, 2007. The increase was driven by the increase in sales
volume of 32 million day-old broilers, or 73.4%, from 43.6 million birds for the
twelve months ended December 31, 2007 to 75.6 million birds for the twelve
months ended December 31, 2008.  The increase in sales volume was
partially offset by a decrease in selling price. The selling price of day-old
broilers decreased from 3.75 RMB per bird for the twelve months ended December
31, 2007 to approximately 2.93 RMB per bird, or 16.9%, for the twelve months
ended December 31, 2008. The increase in sales volume was a result of expansion
in production capacity as well as the increase of the parent breeders volume in
the year 2008. The price decline was primarily the result of a sharp price
decrease in June and July due to the Olympic Games.





Sales of
retired breeder stocks increased $1.8 million, or 191%, from $1 million for the
year ended December 31, 2007 to $2.8 million for the year ended December 31,
2008. There are two reasons for this sales growth, the first is the significant
increase in the volume of parent breeders in year 2008. The second reason is the
old age of certain breeder stock, whose productivity has decreased.





Sales of
eggs increased $0.12 million, or 45%, from $0.28 million for the year ended
December 31, 2007 to $0.4 million for the year ended December 31, 2008. This
increase is in line with the growth of the day old broiler sales
volume.





Since
almost all the products of Taihong were supplied to its parent, PRC Yuhe,
revenue contributed from Taihong’s external sales comprised only approximately
1% of the
Company’s total revenues for the twelve months ended December 31,
2008.





Cost of revenues (As reported).The Company’s cost of revenues amounted to approximately $21.6 million,
or representing approximately 62% of its sales revenue from the period February
1, 2008 to December 31, 2008.


29





Cost of revenues (Pro forma).The Company’s cost of revenues increased by $9.4 million, or 70%, to $23
million for the twelve months ended December 31, 2008 from $13.5 million for the
twelve months ended December 31, 2007. The main reason for the increase in the
cost of revenues was the increase in sales volume. As a percentage of net
revenues, the cost of revenues increased slightly by 2%, from 61% for the twelve
months ended December 31, 2007, to 63% for the twelve months ended December 31,
2008. The increase in cost of revenues as a percentage of net revenues was
mainly due to the decrease in the day old broiler selling price in year 2008, as
the Company discussed above.





Gross profits (As reported).Gross profit amounted to approximately $13.1 million from the period
February 1, 2008 to December 31, 2008.  Gross profit as a percentage
of net revenues was approximately 37.7% from the period February 1, 2008 to
December 31, 2008.





Gross profit (Pro forma).The
Company’s gross profit increased by $4.6 million to $13.2 million for the twelve
months ended December 31, 2008 from $8.6 million for the twelve months ended
December 31, 2007.  Gross profit as a percentage of net revenues was 36.6%
for the twelve months ended December 31, 2008, as compared to 38.8% for the
twelve months ended December 31, 2007. The decrease was mainly attributable
to the decline in sales price of the Company’s day-old broilers, which was
discussed above.





General and administrative expenses
(As reported).The general and administrative expenses amounted to
approximately $2.54 million from the period February 1, 2008 to December 31,
2008.





General and administrative expenses
(Pro forma). The general and administrative expenses increased
$1.55 million, or 139%, to $2.66 million for the twelve months ended December
31, 2008 from $1.11 million for the twelve months ended December 31, 2007. The
increase in general and administrative expenses was mainly due to the public
company related expense incurred this fiscal year. The general and
administrative expenses comprised mainly of human resources and related expenses
of approximately $0.4 million,
representing 12% of total general and administrative expenses, facilities and
utility expenses of $0.5 million,
representing 16% of total general and administrative expenses, travel expenses
of $0.5
million, representing 16% of total general and administrative expenses, and
public company expense of $1.5 million, representing 52% of total general and
administrative expenses.





Bad
Debts Recovery


During
the year 2008, bad debts recovery was $813,000 (as reported) and $1,033,000 (pro
forma).





In the
twelve months of year 2008, $1 million of bad debts have been recovered,
compared to the $0.2 million bad debts expense in year 2007. The main reason is,
in year 2008, the Company has collected those advances to third parties which
have been recognized as bad debts under general accepted accounting principles
and the Company has determined that a lower allowance for bad debt is adequate
as of December 31, 2008.





Selling Expenses (As reported).The Company’ selling expenses amounted to $425,000 from the period
February 1, 2008 to December 31, 2008.





Selling Expenses (Pro
forma).The
Company’ selling expenses increased by $142,000, or 45%, to $454,000 for
the twelve months ended December 31, 2008 from $313,000 for the same period in
2007. It comprised mainly of human resources and related expenses of
approximately $62,000, representing 13% of total selling expenses, packaging and
transportation expenses of $305,000, representing 67% of total general and
administrative expenses, and travel and office expenses of $60,000, representing
13% of total selling expense. The increase in selling expenses was primarily due
to the increase in sales volume. As a percentage of net revenues, selling
expenses decreased from 1.4% to 1.3% for the twelve months ended December 31,
2008 and 2007.


30





Interest expense (As reported).Interest expense amounted to approximately $703,000 from the period
February 1, 2008 to December 31, 2008. Interest expense consisted primarily of
interest on bank loans of approximately $1.1 million, less capitalized interest
of $437,000. The Company expects to extend or roll over the loans as they come
due in the near future, and the interest on bank loans will remain steady in the
near future.





Interest expense (Pro forma).Interest expense decreased $136,000 to $789,000 for the twelve months
ended December 31, 2008 from $925,000 for the twelve months ended December 31,
2007. Interest expenses consisted primarily of interest on bank loans. Interest
expense appears to decrease due to $437,000 of interest being capitalized in
construction in progress.  If interest has not been capitalized,
interest expense would increase by $300,000. The increase in interest
expense is primarily due to the increase in interest rate on some of the bank
loans as discussed under the Loan Facilities section.





Interest income (Pro forma).Interest income increased $249,000 to $250,000 for the twelve months
ended December 31, 2008 from $800 for the twelve months ended December 31, 2007.
Interest income mainly comes from interest from loans to the third
parties.





Provision for Income
Taxes.


In
December of 2007, the PRC government announced income tax exemption on poultry
producers, effective as of January 1,2008.





The
corporate income tax rate for the Company’s subsidiary
Taihong is 25%. There is no provision for income tax because Taihong has a net
operating loss carry forward which resulted in a deferred tax asset of
$60,204 as of December 31, 2008.  Taihong historically
experiences net losses before income taxes, and management does not expect
Taihong to generate net income before taxes in the future as its business is to
supply feed to PRC Yuhe.  As such, a full valuation allowance of
$60,204 is recorded against the deferred tax asset.





Net income (As reported).Net
profit amounted to approximately $10.52 million from the period February 1, 2008
to December 31, 2008, as a result of the factors described above.





Net income (Pro forma).Net profit
increased by $4.78 million to $10.67 million for the twelve months ended
December 31, 2008 from $5.89 million for the twelve months ended December 31,
2007, as a result of the factors described above.





Liquidity
and Capital Resources





For the
period from February 1, 2008 to December 31, 2008





The
Company expects that its strong positive working capital of $14.0 million as of
December 31, 2008 will meet its foreseeable working capital needs for the next
12 months from the date of this filing.





In
support of the Company’s long-term business plan, the Company arranged a private
placement on March 12, 2008 of $18,000,000 with a net amount of $15,359,523 that
it received up to December 31, 2008. The Company believes that these funds will
be used for its foreseeable expansion in 2009.





General


As of
December 31, 2008, the Company had cash and cash equivalents of approximately
$13.4 million. The following table provides detailed information about the
Company’s net cash flow for the twelve month period ended December 31,
2008.


31





Twelve months ended
                  December
      31, 2008Net
      cash used in operating activities
                
                
                (1,761,854
                )Net
      cash (used in) investing activities
                
                
                (13,928,211
                )Net
      cash provided by financing activities
                
                
                27,911,982Effect
      of foreign currency translation on cash and cash
    equivalents
                
                
                140,120Net
      cash inflow
                
                
                12,362,037Cash
      and cash equivalents at beginning of year
                
                
                1,050,168Cash
      and cash equivalents at end of year
                
                
                13,412,205





Operating Activities.Net
cash used in operating activities was $1.8 million for the twelve months ended
December 31, 2008. Net cash used in operating activities was primarily
attributable to an increase in inventory of $5 million for ordinary course
payment of inventory and the purchase of breeder stocks to replace retired
breeder stocks.





Investing Activities.Net
cash used in investing activities for the twelve months ended December 31, 2008
was $13.9 million. Net cash used in investing activities was mainly due to the
acquisition of 100% of the common stock of PRC Yuhe and 43.75% of the
common stock of Taihong for approximately $10.57 million cash in January
2008.





The
Company paid $12.69 million for capital expenditures; in which $2.48 million was
for the acquisition of property, plant and equipment and $10.21 million for
deposits paid for the acquisition of land and farm construction. The Company has
capital commitment amounting $10.52 million, of which the Company has paid
$10.21 million as deposits for land and farm construction. The Company is
required to pay the remaining $0.31 million to complete the existing
construction projects for the expansion of the farm and hatch
houses.




Financing Activities.Net
cash from financing activities totaled $27.9 million for the twelve months ended
December 31, 2008. The significant cash flows provided by financing
activities was primarily a result of the business combination which occurred
during the period ended March 31, 2008. Bright Stand received a $12.15
million capital contribution from its shareholder to use for the acquisition of
PRC Yuhe.  In addition, $15.35 million of net proceeds was raised in
the sale of the Company's common stock during the period ended December 31,
2008; of which $12.21 million was received during the period ended March 31,
2008. $1.75 million was released from the escrow agent as a result of the
Company’s appointment of a new CFO and independent directors and $1.39 million
was a subscription received by the Company during the three months ended
December 31, 2008. The Company also had net cash proceeds of $1.07 million from
the receipt of receivables from and payments to related parties. Moreover, the
Company had additional borrowings of $0.2 million during the twelve months ended
December 31, 2008.




Loan
Facilities





As of
December 31, 2008, maturities of the Company’s bank loans are as
follows:





As at December
                        31,
      20082009
                      
                      $
                      1,356,8322010
                      
                      
                      9,410,289$
                      10,767,121


32





All
amounts, other than percentages, are in U.S. dollars





Type
                                  
                                  Contracting
      party
                                  
                                  Valid
      period
                                  
                                  Duration
                                  
                                  AmountBank
      loan
                                  
                                  Hanting
      Kaiyuan Rural Credit Cooperative
                                  
                                  July
      1, 2007 - Jan 10, 2009
                                  
                                  18
      months
                                  
                                  $
                                  1,065,040Bank
      loan
                                  
                                  Nansun
      Rural Credit
                                  
                                  Nov
      28,2008 – May 28, 2010
                                  
                                  24
      months
                                  
                                  
                                  4,814,566Bank
      loan
                                  
                                  Nansun
      Rural Credit
                                  
                                  May
      17, 2007 - May 17, 2010
                                  
                                  36
      months
                                  
                                  
                                  3,647,399Bank
      loan
                                  
                                  Nansun
      Rural Credit
                                  
                                  Dec
      10, 2007 - Dec 9, 2009
                                  
                                  24
      months
                                  
                                  
                                  291,792Bank
      loan
                                  
                                  Shuangyang
      Rural Credit
                                  
                                  Oct
      16,2008 - Oct 13, 2010
                                  
                                  24
      months
                                  
                                  
                                  948,324Total
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  $
                                  10,767,121





The
Company has loan facilities from three institutions and the following are the
material terms of such bank loans





Loan from
Hanting Kaiyuan Rural Credit Cooperative:





On July
1, 2007, PRC Yuhe entered into a loan agreement with Hanting Kaiyuan Rural
Credit Cooperative. Pursuant to the loan agreement, Hanting Kaiyuan Rural Credit
Cooperative loaned PRC Yuhe $1,065,040 at an interest rate of 11.09% per annum.
PRC Yuhe is obligated under such loan agreement to pay interest monthly and
repay the loan on its maturity date, January 1, 2009. PRC Yuhe uses the loan to
finance the purchase of raw materials. The loan is secured by the plant and
equipment of PRC Yuhe with a net book of $1,229,020 as of December 31,
2008.





Loans
from Nansun Rural Credit:





PRC Yuhe
renewed four loan agreements with Nansun Rural Credit on November 28, 2008. The
interest rate for the loan agreements is 13.82% per annum for the renewed bank
loan contract, compared to the original rate of 9.21%, which enjoyed the support
of government policy. The total amount of these four bank loans is
$4,814,566.





The other
four loans with an outstanding balance of $3,355,607 from Nansun Rural Credit
also increased their interest rate from 10.51% to 12.1% due to the same reason.
Nansun Rural Credit also provided four loans to Taihong at interest rates of
12.1% per annum.





The last
bank loan from Nansun Rural Credit is the one engaged in October, 2007 with an
outstanding balance of $291,792, with an interest rate remaining at 10.46% per
annum.





The loans
are used for financing of working capital. All loans are secured by the land use
rights and buildings of PRC Yuhe and Taihong with a net book value of
$11,585,153 as of December 31, 2008.





Loan from
Shuangyang Rural Credit:





Taihong
renewed the loan agreements with Shuangyang Rural Credit on October 16, 2008,
amounting to $948,324. The interest rate for the loans is 9.83% per annum for
the renewed bank loan contract, compared to the original rate of 10.51%. Taihong
is obligated under such loan agreement to pay interest monthly and repay the
loan on its maturity date, October 13, 2010. The loan is secured by the plant
and equipment of Taihong with a net book value of $1,060,891 as of December 31,
2008.


33


Due to
related companies





As of
December 31, 2008, the Company has $210,633 due to Weifang Hexing Breeding Co.,
Ltd., a company for which Mr. Gao Zhentao also serves as a
director.  The amounts due to this related company are unsecured,
interest free and have no fixed repayment date.  These loans are used
for working capital purposes.





Obligations
Under Material Contracts





Below is
a table setting forth the Company’s material contractual obligations as of
December 31, 2008:




Payment
      due by periodContractual
                                                Obligations
                                              
                                              Total
                                              
                                              
                                              Less
      than 1
                                                year
                                              
                                              
                                              1-3
      years
                                              
                                              
                                              3-5
                                                years
                                              
                                              
                                              More
      than
                                                5
      yearsLong-Term
      Debt Obligations
                                              
                                              $
                                              10,767,121
                                              
                                              
                                              $
                                              1,356,832
                                              
                                              
                                              $
                                              9,410,289
                                              
                                              
                                              $
                                              -
                                              
                                              
                                              $
                                              -Due
      to Related Companies
                                              
                                              $
                                              210,633
                                              
                                              
                                              $
                                              210,633
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -Operating
      Lease Obligations
                                              
                                              $
                                              2,291,993
                                              
                                              
                                              $
                                              89,901
                                              
                                              
                                              $
                                              179,802
                                              
                                              
                                              $
                                              179,802
                                              
                                              
                                              $
                                              1,842,488Capital
      Lease Obligations
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -Purchase
      Obligations
                                              
                                              $
                                              305,551
                                              
                                              
                                              $
                                              305,551
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -Other
      Long-Term Liabilities Reflected on the Registrant’s Balance Sheet under
      GAAP
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -Total
                                              
                                              $
                                              13,575,298
                                              
                                              
                                              $
                                              1,962,917
                                              
                                              
                                              $
                                              9,590,091
                                              
                                              
                                              $
                                              179,802
                                              
                                              
                                              $
                                              1,842,488


34


Critical
Accounting Policies





The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires the Company’s management to
make assumptions, estimates and judgments that affect the amounts reported in
the financial statements, including the notes thereto, and related disclosures
of commitments and contingencies, if any. The Company considers its critical
accounting policies to be those that require the more significant judgments and
estimates in the preparation of financial statements, including the
following:





l
            Inventory - Inventories
      consisting of raw materials, work in progress and finished goods are
      stated at the lower of cost and net realizable value. The cost of
      inventories is determined using the weighted average cost method, and
      includes expenditures incurred in acquiring the inventories and bringing
      them to their existing location and condition. Net realizable value is the
      estimated selling price in the ordinary course of business less any
      applicable selling expenses. Finished goods are comprised of direct
      materials, direct labor and an appropriate proportion of overhead. At each
      balance sheet date, inventories that are worth less than cost are written
      down to their net realizable value, and the difference is charged to the
      cost of revenues of that period.





l
            Trade receivable –Trade receivables are recognized and carried at the original
      invoice amount less an allowance for any uncollectible amounts. An
      estimate for doubtful accounts is made when collection of the full amount
      is no longer probable. Bad debts are written off as
    incurred.





l
            Note receivables – Note
      receivables are stated at the original principal amount less an allowance
      for any uncollectible amounts. Management provides for an allowance when
      collection of the full amount is no longer probable by establishing an
      allowance equivalent to 30% of gross amount of notes receivables due over
      6 months and 60% of gross amount of notes receivables due over 1 year.
      Full provision will be made for notes receivables due over 2
      years.





l
            Plant and equipment -Plant and equipment are carried at cost less accumulated
      depreciation. Depreciation is provided over their estimated useful lives,
      using the straight-line method. Estimated useful lives of the plant and
      equipment are as follows:




Buildings
              20
      yearsMachinery
              10
      yearsVehicles
              5
      yearsFurniture
      and equipment
              3
      years





The cost
and related accumulated depreciation of assets sold or otherwise retired are
eliminated from the accounts and any gain or loss is included in the statement
of income. The cost of maintenance and repairs is charged to income as incurred,
whereas significant renewals and betterments are capitalized.





l
            Valuation of long-lived assets
      - Long-lived assets held and used by the Company are reviewed for
      impairment whenever events or changes in circumstances indicate that the
      carrying amount of assets may not be recoverable. It is reasonably
      possible that these assets could become impaired as a result of technology
      or other industry changes. Determination of recoverability of assets to be
      held and used is by comparing the carrying amount of an asset to future
      net undiscounted cash flows to be generated by the
  assets.





If such
assets are considered to be impaired, the impairment to be recognized is
measured as the amount by which the carrying amount of the assets exceeds the
fair value of the assets. Assets to be disposed of are reported at the lower of
the carrying amount or fair value less costs to sell. During the reporting
periods, there was no impairment loss.


35





l
            Intangible assets -
      Intangible assets represent land use rights in the PRC. Land use rights
      are carried at cost and amortized on a straight-line basis over the period
      of rights of 50 years commencing from the date of acquisition of equitable
      interest. According to the laws of PRC, the government owns all of the
      land in PRC. Companies or individual are authorized to possess and use the
      land only through land usage rights approved by the PRC
      government.





l
            Guarantee Expense -The Company accounts for its liability for products guaranteed in
      accordance with FASB Interpretation No. 45 (FIN 45), "Guarantor's
      Accounting and Disclosure Requirements for Guarantees, Including Indirect
      Guarantees of Indebtedness of Others."  Under FIN 45, the aggregate
      changes in the liability for accruals related to product warranties issued
      during the reporting period must be charged to expense as
      incurred.




The
Company guarantees a 98% survival rate of its product by delivering additional
2% of the product.  The guarantee expires seven days after delivery. 
If the survival rate falls below 98%, the Company provides an additional
guarantee compensation to customers.  Based on historical experience, the
likelihood that survival rate falls below 96% is remote and therefore no accrued
guarantee liability was recorded at period end.  The Company records
guarantee expense as incurred.




l
            Revenue recognition -
      Net revenue is recognized when the third-party distributors and broiler
      farms and integrated chicken companies take delivery and acceptance of
      products.  The Company treats both the distributors and broiler farms
      and integrated chicken companies as end customers.  The price is
      fixed or determinable as stated in the sales contract, and the
      collectability is reasonably assured.  Customers do not have a
      general right of return on products
delivered.




l
            Use of estimates- The
      preparation of the Company’s financial statements in conformity with
      accounting principles generally accepted in the United States of America
      (“GAAP”) requires management to make estimates and assumptions that affect
      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.
      Actual results could differ from those estimates. The financial statements
      include some amounts that are based on management’s best estimates and
      judgments. These accounts and estimates include, but are not limited to,
      the valuation of accounts receivable, other receivables, inventories,
      deferred income taxes, and the estimation on useful lives of plant and
      equipment. These estimates may be adjusted as more current information
      becomes available, and any adjustment could be
  significant.





l
            Significant Estimates -Relating to Specific Financial Statement Accounts and Transactions
      Are Identified - The financial statements include some amounts that are
      based on management’s best estimates and judgments. The most significant
      estimates relate to allowance for uncollectible accounts receivable,
      inventory work in process valuation and obsolescence, depreciation, useful
      lives, taxes, and contingencies. These estimates may be adjusted as more
      current information becomes available, and any adjustment could be
      significant.





l
            Income tax – The
      Company accounts for income taxes using an asset and liability approach
      and allows for recognition of deferred tax benefits in future
      years.  Under the asset and liability approach, deferred taxes
      are provided for the net tax effects of temporary differences between the
      carrying amounts of assets and liabilities for financial reporting
      purposes and the amounts used for income tax purposes.  A
      valuation allowance is provided for deferred tax assets if it is more
      likely than not these items will either expire before the Company is able
      to realize their benefits, or that future realization is
      uncertain.


36





The Group
is operating in the PRC, and in accordance with the relevant tax laws and
regulations of PRC, the corporate income tax rate is 25%. Weifang Yuhe Poultry
Co., Ltdis a
poultry company, and in accordance with the relevant regulations regarding the
favorable tax treatment for an outstanding poultry company, the Company is
entitled to income tax exemption effective as of January 1, 2008.





The
corporate income tax for the subsidiary, Weifang Taihong Feed Co., Ltd is
25%.





l
            Fair value of financial
      instruments – SFAS No. 107, “Disclosures about Fair Value of
      Financial Instruments” (“SFAS 107”) requires entities to disclose the fair
      values of financial instruments except when it is not practicable to do
      so. Under SFAS No. 107, it is not practicable to make this disclosure when
      the costs of formulating the estimated values exceed the benefit when
      considering how meaningful the information would be to financial statement
      users.





The fair
values of all assets and liabilities do not differ materially from their
carrying amounts. None of the financial instruments held are derivative
financial instruments and none were acquired or held for trading purposes during
the years ended December 31, 2008 or 2007.





l
            Statutory reserve – In
      accordance with the relevant laws and regulations of the PRC and the
      articles of associations of the Company’s PRC subsidiaries, PRC Yuhe and
      Taihong are required to allocate 10% of their net income reported in the
      PRC statutory accounts, after offsetting any prior years’ losses, to the
      statutory surplus reserve, on an annual basis.  When the balance
      of such reserve reaches 50% of the respective registered capital of the
      subsidiaries, any further allocation is optional.  The statutory
      surplus reserves can be used to offset prior years’ losses, if any, and
      may be converted into registered capital, provided that the remaining
      balances of the reserve after such conversion is not less than 25% of
      registered capital. The statutory surplus reserve is
      non-distributable.





Effects of
Inflation





Inflation
and changing prices have not had a material effect on the Company’s business and
the Company does not expect that inflation or changing prices will materially
affect its business in the foreseeable future. However, the impact of inflation
on PRC Yuhe and Taihong may not be readily recoverable in the prices of the
Company’s products.





Off
Balance Sheet Arrangements




The
Company does not have any off balance sheet arrangements that have or are
reasonably likely to have a current or future effect on its financial condition,
changes in financial condition, revenues or expenses, results of operations,
liquidity or capital expenditures or capital resources that is material to an
investor in its securities.




Seasonality




Our
business has been subject to material seasonal variations in operations for the
normal life cycle of 66 weeks of the breeder stock. Breeder stock produces eggs
at their mature stage, around weeks 28 - 60 and therefore, the Company’s
business will have seasonal variation on the early and aged stage of the breeder
stock. In addition, the Company normally raises a new batch of breeder stock
after the aged breeder stock retires and is sold. This impact of seasonality can
be resolved when the Company expands its batches of breeder
stocks.


37





The
Company has been subject to seasonal variations. Since the Company’s ultimate
clients are mostly farmers and the second quarter is their busy season for
reaping, farmers have little idle time to raise broilers during these months, so
the demand for the Company’s day-old broilers generally decreases in May and
June.





Another
low season for the Company’s products is from the second half of December to the
first half of January, during which the Company experiences reduced demand for
its day-old broilers during the period from 30 to 60 days prior to the Chinese
New Year holiday period. In addition, since most farmers are likely to rest
during the Chinese New Year holiday, rather than work, February is traditionally
a low season for the Company’s products.





ITEM
7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK





Not
required for smaller reporting companies.




ITEM
8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA




(a)
Financial Statements




The
following financial statements are set forth at the end hereof.




1.     Report
of Independent Registered Public Accounting Firm




2.     Consolidated
Balance Sheets as of December 31, 2008 and 2007




3.     Consolidated
Statements of Income and Comprehensive Income (Loss) for the years ended
December 31, 2008 and 2007




4.     Consolidated
Statements of Stockholders’ Equity for the years ended December 31, 2008
and 2007




5.     Consolidated
Statements of Cash Flows for the years ended December 31, 2008 and
2007




6.     Notes
to Consolidated Financial Statements.




ITEM
9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE




On
March 12, 2008, concurrent with the reverse acquisition of First Growth, the
Company’s board of directors approved the dismissal of Pritchett, Siler &
Hardy, P.C. as the Company’s independent auditor, effective upon the completion
of the audit of financial statements of First Growth as of and for the fiscal
year ended December 31, 2007 and the issuance of its report thereon. Concurrent
with the decision to dismiss Pritchett, Siler & Hardy, P.C. as the Company’s
independent auditor, the Company’s board of directors elected to continue the
existing relationship of the Company’s new subsidiary Weifang Yuhe Poultry Co.,
Ltd. with Child, Van Wagoner & Bradshaw, PLLC and appointed Child, Van
Wagoner & Bradshaw, PLLC as the Company’s independent
auditor.


38





The
dismissal of Pritchett, Siler & Hardy, P.C. became effective when Pritchett,
Siler & Hardy, P.C. completed its audit of such financial statements and
released its report with respect thereto on March 31, 2008.





The
reports of Pritchett, Siler & Hardy, P.C. on the Company’s financial
statements for the fiscal year ended December 31, 2006 did not contain an
adverse opinion or disclaimer of opinion, nor were they qualified or modified as
to any uncertainty, audit scope or accounting principles. During the Company’s
fiscal years ended December 31, 2006 and 2007 and the subsequent interim periods
preceding the termination, there were no disagreements with Pritchett, Siler
& Hardy, P.C. on any matter of accounting principles or practices, financial
statement disclosure, or auditing scope or procedure, which disagreements, if
not resolved to the satisfaction of Pritchett, Siler & Hardy, P.C. would
have caused Pritchett, Siler & Hardy, P.C. to make reference to the subject
matter of the disagreements in connection with its report on the financial
statements for such years or subsequent interim periods.




During
the Company’s two most recent fiscal years ended December 31, 2007 and 2006, the
Company did not consult Child, Van Wagoner & Bradshaw, PLLC with respect to
(i) the application of accounting principles to a specified transaction, either
completed or proposed; or the type of audit opinion that might be rendered on
its consolidated financial statements, and neither a written report was provided
to the Company nor oral advice was provided that Child, Van Wagoner &
Bradshaw, PLLC concluded was an important factor considered by the Company in
reaching a decision as to the accounting, auditing or financial reporting issue;
or (ii) any matter that was either the subject of a disagreement, as defined in
Item 304(a)(1)(iv) of Regulation S-K and the related instructions to that Item,
or a reportable event, as described in Item 304(a)(1)(v) of Regulation
S-K.





The
Company provided Pritchett, Siler & Hardy, P.C. with a copy of this
disclosure on April 2, 2008, providing Pritchett, Siler & Hardy, P.C. with
the opportunity to furnish the Company with a letter addressed to the SEC
stating whether it agrees with the statement made by the Company herein in
response to Item 304(a) of Regulation S-K and, if not, stating the respect in
which it does not agree. A letter from Pritchett, Siler & Hardy, P.C. dated
April 3, 2008 was filed by the Company as Exhibit 16.1 to its current report on
Form 8-K on April 4, 2008.





ITEM
9A. CONTROLS AND PROCEDURES





Management
of the Company is responsible for establishing and maintaining adequate internal
control over financial reporting.   The Company’s internal control system
was designed to provide reasonable assurance to its management and Board of
Directors regarding the preparation and fair presentation of financial
statements.


39





The
Company’s management, with the participation of its chief executive officer and
chief financial officer, Messrs. Gao Zhentao and Hu Gang, respectively evaluated
the effectiveness of the Company’s disclosure controls and procedures. The term
“disclosure controls and procedures,” as defined in Rules 13a-15(e) and
15d-15(e) under the Exchange Act, means controls and other procedures of a
company that are designed to ensure that information required to be
disclosed by a company in the reports, such as this 10-K, that it files or
submits under the Exchange Act is recorded, processed, summarized and reported,
within the time periods specified in the SEC’s rules and forms. Disclosure
controls and procedures include, without limitation, controls and procedures
designed to ensure that information required to be disclosed by a company in the
reports that it files or submits under the Exchange Act is accumulated and
communicated to the company’s management, including its principal executive and
principal financial officers, as appropriate to allow timely decisions regarding
required disclosure.





The
Company’s disclosure controls and procedures are designed to provide reasonable
assurance of achieving the Company’s objectives, and management necessarily
applies its judgment in evaluating the cost-benefit relationship of possible
controls and procedures.  In making its assessment of internal control
over financial reporting, the management used the criteria set forth by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated
Framework.  Based on this evaluation, Messrs. Gao and Hu concluded
that as of December 31, 2008, the Company’s disclosure controls and procedures
were effective based on those criteria.





There
were no changes in the Company’s internal control over financial reporting
identified in connection with the evaluation performed that occurred during the
period covered by this report that has materially affected or is reasonably
likely to materially affect, the Company’s internal control over financial
reporting.




This
annual report does not include an attestation report of the Company’s
independent registered public accounting firm regarding internal control over
financial reporting.  Management’s report was not subject to attestation by
the Company’s registered public accounting firm pursuant to temporary rules of
the Securities and Exchange Commission that permit the Company to provide only
management’s report in this annual report.





ITEM
9B. OTHER INFORMATION




None.


40





PART
III




ITEM
10. DIRECTORS AND EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE




Executive
Officers, Director and Key Employees





The
following table sets forth information about the Company’s executive officers,
directors and key employees as of December 31, 2008. Unless expressly
disclosed, all officers above are employed full time by us:-





Name
            
            Age
            
            PositionExecutive
      OfficersGao
      Zhentao**
            
            47
            
            Chief
      Executive Officer and Chairman of the Board of
DirectorsHan
      Chengxiang
            
            44
            
            Chief
      Production OfficerHu
      Gang
            
            33
            
            Chief
      Financial OfficerDirectorsPeter
      Li
            
            44
            
            Director
      *Liu
      Yaojun
            
            32
            
            Director
      *Greg
      Huett
            
            46
            
            Director
      *Han
      Chengxiang
            
            47
            
            DirectorKey
      EmployeesTan
      Yi
            
            52
            
            Marketing
      Director of PRC YuheDing
      Wengui
            
            45
            
            Chief
      Technology Officer of PRC Yuhe




* Not
full time


**Other
than spending approximately 4 hours per week, or approximately 10% of his
professional time, as executive director of Yuhe Group, Mr. Gao Zhentao is
employed full time by the Company as the Chief Executive Officer and
Chairman.





Executive
Officers





Gao Zhentao. Mr. Gao has been
the Company’s Chief Executive Officer and Chairman of its Board of Directors
since March 12, 2008. Prior to joining us, Mr. Gao served as the Chief Executive
Officer and Chairman of the Board of Directors of PRC Yuhe from 1996 to 2008. He
was one of the co-founders of PRC Yuhe and Taihong. Mr. Gao is a member of the
Agricultural Work Committee of the Weifang City People’s Congress and a member
of the Standing Committee of the Hanting District People’s Congress. Mr. Gao has
also served as the vice-chairman of the Shandong Province Farming Association
since 2006, and as vice-chairman of the Poultry Subcommittee of the National
Farming Association of China since 2007. Mr. Gao is the
controlling shareholder, legal representative and executive director of
Shandong Yuhe Food Group Co., Ltd., “Yuhe Group,” and holds 80% of Yuhe Group’s
shares.


41





Han Chengxiang has been the
Company’s Chief Production Officer since March 12, 2008. Prior to joining us,
Mr. Han served as the Chief Production Officer of PRC Yuhe from 1998 to 2008.
Prior to joining PRC Yuhe in 1998, Mr. Han served as the vice factory manager
and then the factory manager of Weifang Zhonglianghuawei Food Co., Ltd. from
1996 to 1998. Prior to that, Mr. Han served as the chief production officer and
then the vice factory manager of Weifang Broiler Group Co., Ltd. from 1990 to
1996.  Mr. Han Chengxiang was appointed Director of the Company and
member of the Nominating Committee of the Company on June 13, 2008. Pursuant to
an employment agreement entered into by the Company with Mr. Han, dated June 13,
2008. Mr. Han is receiving an annual salary of $17,142 and is entitled to PRC
statutory holidays, and leave for maternity, marriage and mourning with pay
in accordance with relevant government laws and regulations.




Hu Gang has been the Company’s
Chief Financial Officer since June 13, 2008. Prior to joining us, Mr. Hu was the
Chief Financial Officer of Sino-Gas International Holding Inc from October
2007 to March 2008. Prior to that, between August 2004 and October 2007, Mr. Hu
served as the Finance Director of FedExKinkos’ Greater China operations. Between
August 2002 and July 2004, Mr. Hu served as the accounting supervisor and group
leader of DuPont China Holding Ltd. Mr. Hu graduated from Shanghai Finance and
Economics University, PRC, with a B.A in International Accounting.





Directors





On June
13, 2008, Mr. Peter Li
was appointed Independent Director of the Company, chair of the Audit Committee
and member of the Compensation and Nominating Committees of the Company. Mr. Li
is currently a Senior Advisor with Yucheng Technologies Limited, a  NASDAQ-listed leading
IT services provider to the Chinese banking industry based in Beijing, the PRC.
Prior to that, between 2004 and 2008, he served as the Chief Financial Officer
of Yucheng Technologies Limited.





On June
13, 2008, Mr. Liu Yaojun
was appointed Independent Director of the Company, chair of the Compensation
Committee and member of the Nominating and Audit Committees of the Company. Mr.
Liu is currently a partner at Global Law Office, a law firm based in Beijing,
the PRC. Prior to that, between 2003 and 2006, Mr. Liu served as an attorney at
Jingtian Gongcheng Law Firm, a law firm based in Beijing, the PRC.




On June
13, 2008, Mr. Greg Huett
was appointed Independent Director of the Company, chair of the Nominating
Committee and member of the Audit and Compensation Committees of the Company.
Mr. Huett is currently the Chief Executive Officer of Great Creations LLC, a
consumer packaged goods company. Prior to that, from 1981 to 2007 Mr. Huett
worked at Tyson Foods, where he last served as the Group Vice President of
Tyson’s International division.





On June
13, 2008, Mr. Han
Chengxiang was appointed Director of the Company and member of the
Nominating Committee of the Company. Mr. Han is currently the Chief Production
Officer of the Company. Prior to joining the Company, Mr. Han served as the
Chief Production Officer of PRC Yuhe from 1998 to 2008.





Key
Employees





Tan Yi has served as Marketing
Director of PRC Yuhe since 1995. Prior to joining PRC Yuhe in 1995, Mr. Tan
served in various marketing roles with a gas company located in Harbin Province
from 1990 to 1994.


42





Ding Wengui has been the chief
technology officer of the Company’s subsidiary PRC Yuhe since 2006. Prior to
this he served as the general manager of PRC Yuhe’s production division. Prior
to joining PRC Yuhe in 2005, Mr. Ding worked at Qingdao Zhengda Co., Ltd., a
broiler chicken company located in Shandong Province from 1993 to 2005, where he
ultimately served as the vice general manager of its production division. Prior
to joining Qingdao Zhengda Co., Ltd. in 1993, Mr. Ding worked at Heilongjiang
Tieli Agricultural Co., Ltd., a company located in Heilongjiang Province from
1983 to 1993. Mr. Ding holds a degree in agriculture from the Heilongjiang Bayi
Agricultural University.





Involvement in
Certain Legal Proceedings





To the
Company’s knowledge, during the past five years, none of the Company’s directors
or executive officers was involved in any of the following: (1) any bankruptcy
petition filed by or against any business of which such person was a general
partner or executive officer either at the time of the bankruptcy or within two
years prior to that time; (2) any conviction in a criminal proceeding or being
subject to a pending criminal proceeding, excluding traffic violations and other
minor offenses; (3) being subject to any order, judgment, or decree, not
subsequently reversed, suspended or vacated, of any court of competent
jurisdiction, permanently or temporarily enjoining, barring, suspending or
otherwise limiting his/her involvement in any type of business, securities or
banking activities; and (4) being found by a court of competent jurisdiction in
a civil action, the Securities and Exchange Commission, or SEC, or the
Commodities Futures Trading Commission to have violated a federal or state
securities or commodities law, and the judgment has not been reversed, 
suspended or vacated.




Board
Composition and Committees





The
Company’s board of directors currently consists of five members: Gao Zhentao,
Han Chengxiang, Peter Li, Liu Yaojun and Greg Huett.





The
Company’s board of directors has appointed a compensation committee on June 13,
2008. The Company’s compensation committee comprises three members and is
responsible for the administration of all salary, bonus and incentive
compensation plans for the Company’s officers and key employees. The
compensation committee will also determine the discretionary annual bonus to be
paid to Mr. Gao if the Company exceeds the after tax net income target
of $9 million, by providing Mr. Gao with a cash bonus amount
equivalent to 0.5 to 1.5% of the amount by which the Company’s after tax net
income exceeds $9 million. The factors that the compensation committee will
consider in determining Mr. Gao’s bonus will be revenue increase as well as the
survival rate, productivity and hatching rate of the broilers. The members of
the Company’s compensation committee are Liu Yaojun, Peter Li and Greg
Huett.





The
Company’s board of directors appointed an audit committee on June 13, 2008. The
Company’s audit committee members are Peter Li, Liu Yaojun, and Greg Huett. Mr.
Li qualifies as an “audit committee financial expert” as defined in Item 401(h)
of Regulation S-K, and is “independent” as the term is used in Item 7(d)(3)(iv)
of Schedule 14A under the Exchange Act.


43





The
Company’s board of directors appointed a nominating committee on June 13, 2008.
The Company’s nominating committee members are Greg Huett, Liu Yaojun, Peter Li
and Han Chengxiang.





Supervisory
Board and Shareholder’s Congress





As
required by PRC Company Law (2005), each of PRC Yuhe and Taihong, as PRC
companies, must establish a "Supervisory Board" and a "Shareholder Congress" as
its internal corporate organs.




(i)
Shareholder Congress.





Shareholder
Congress comprises all the shareholder(s) of a PRC company and is the organ with
the highest authority. Its authority is higher than that of both the Board of
Directors and the Supervisory Board.





As
stipulated by PRC Company Law (2005), the Shareholder Congress has, among
others, the following powers or functions:





1.  
to elect and replace directors and supervisors of the company;


2.  
to pass resolutions on matters such as the merger, division, dissolution,
liquidation or change of the corporate form of the company; and


3.  
to amend the articles of association of the company.





The
Shareholder Congress of PRC Yuhe consists of Bright Stand, and the Shareholder
Congress of Taihong consists of Bright Stand and PRC Yuhe.





(ii)
Supervisory Board.





All the
members of the Supervisory Board serve for a term of three years. At the
Shareholder Congress, the shareholders of PRC Yuhe were obligated to
approve the appointment of one Supervisory Board member who was elected by
the workers of PRC Yuhe as required by current Chinese laws and regulations
and also appointed two other members. There are no other nominations or
arrangements for nomination of Supervisory Board member. The current
members of the Supervisory Board of PRC Yuhe are Zhang Jinhua, Zheng Chaoyang
and Zhang Lishun, and their business background and relationships with Yuhe are
as follows :-





(a)
  Zhang Jinhua




Mr. Zhang
graduated from Shandong Light Industrial University with a professional
degree in economics and business administration in July 1999. Mr. Zhang has
been the Chairman of the Supervisory Board of PRC Yuhe since November
2007 and secretary to the Company’s board of directors since March 2008.
Mr. Zhang is receiving a monthly salary of RMB 8,000, or approximately
$1,169, for his services as secretary to the Company's board of
directors. Mr. Zhang does not receive any salary for being a member of the
Supervisory Board.


44





Prior to
joining the Company, Mr. Zhang was a factory supervisor and branch factory
general manager of Shandong Lorain Foodstuff (Group) Co., Ltd. from March 2003
to June 2007 and was a Development Planning Department manager of Yuhe Group
from July 2007 to March 2008. Mr. Zhang was receiving a monthly salary of RMB
1,800, or approximately $263, for his services as a Development Planning
Department manager.




(b)
  Zheng Chaoyang




Mr. Zheng
is currently an Administrative Department officer of Yuhe Group and has held
those positions since July 1997. Prior to joining Yuhe Group in July 1997, Mr.
Zheng was a sole proprietor engaging in the retail business from 1985 to 1997.
Mr. Zheng is receiving a monthly salary of RMB 1,700, or approximately $248, for
his services as an Administrative Department Officer. Mr. Zheng does not receive
any salary for being a member of the Supervisory Board.




(c)
  Zhang Lishun




Mr. Zhang
is a university graduate and a senior political worker. Mr. Zhang is currently
an Administrative Department officer of Yuhe Group and has held these positions
since February 2004. Prior to joining Yuhe Group in February 2004, Mr. Zhang was
the chief officer at the security section of Shandong Hailong Holdings Limited
from July 1985 to February 2004. Mr. Zhang is receiving a monthly salary of
RMB 1,500, or approximately $219, for his services as an Administrative
Department Officer. Mr. Zhang does not receive any salary for being a member of
the Supervisory Board.




The
Supervisory Board has, among others, the following powers:





1.  
to examine the company's financial affairs;


2.  
to propose the convening of extraordinary shareholders’ meetings;
and


3.  
to institute proceedings against the directors and senior management personnel
on behalf of the company.





Code
of Ethics





The Board
of Directors has adopted a Code of Ethics which is applicable to all officers,
directors and employees.  The Code of Ethics is filed as Exhibit 14.1 to
this Report on Form 10-K.  The Code of Ethics will also be posted on
the corporate governance page of the Company’s website at http://www.yuhepoultry.com





ITEM
11. EXECUTIVE COMPENSATION





Summary Compensation
Table




The
following table presents compensation information for the Company’s fiscal years
ended December 31, 2007 and 2008 paid to or accrued for the Company’s chief
executive officer, the Company’s two former presidents, the Company’s chief
financial officer and the Company’s three other most highly compensated officers
or former officers. The Company refers to these executive officers as its “named
executive officers.”


45





Annual CompensationName and Principal Position
                      
                      Year
                      
                      Base Salary
                      
                      Bonus
                      
                      All Other
                        Compensation
                      
                      TotalGao Zhentao (1)
                        Chief Executive Officer
                      
                      
                      2008
                        2007
                      
                      105,110
                        34,286
                      
                      
                      0
                        0
                      
                      0
                        0
                      
                      
                      105,110
                        34,286Han
      Chengxiang
                        Chief
      Production Officer
                      
                      
                      2008
                        2007
                      
                      17,518
                        4,616
                      
                      
                      0
                        0
                      
                      0
                        0
                      
                      
                      17,518
                        4,616Hu
      Gang
                        Chief
      Financial Officer
                      
                      
                      2008
                      
                      72,993
                      
                      
                      0
                      
                      0
                      
                      
                      72,993Jiang
      Yiqiang
                        Former Chief Financial Officer
      and current Chief Accounting Officer (2)
                      
                      
                      2008
                        2007
                      
                      12,262
                        2,311
                      
                      
                      0
                        0
                      
                      0
                        0
                      
                      
                      12,262
                        2,311Richard
      Crimmins (3)
                        Former
      President, Chief Executive Officer, Chief Financial Officer, Chief
      Operating Officer and Secretary-Treasurer
                      
                      
                      2007
                      
                      0
                      
                      
                      0
                      
                      0
                      
                      
                      0Pam
      Jowett (4)
                        Former
      President
                      
                      
                      2007
                      
                      0
                      
                      
                      0
                      
                      0
                      
                      
                      0










(1)
            Gao
      Zhentao receives an annual salary in the sum of $8,000 from the Yuhe
      Group.(2)
            Mr.
      Jiang served as the Chief Financial Officer of First Growth, later Yuhe
      International, Inc., from March 12, 2008 to June 13, 2008. He is now the
      Company’s Chief Accounting Officer.(3)
            Mr.
      Crimmins served as the President of First Growth from November 16,
      2007 through March 12, 2008.(4)
            Ms.
      Jowett served as the President of First Growth from September 1997 through
      November 16, 2007.





(i) Mr.
Gao Zhentao





The
Company entered into an employment contract with Gao Zhentao, its Chief
Executive Officer, “CEO”, on June 13, 2008. The employment agreement was
effective as of March 12, 2008, the date Mr. Gao was appointed CEO, and has an
initial term of three years, “Mr. Gao’s Initial Term”. Following Mr. Gao’s
Initial Term, the agreement may be extended on an annual basis by agreement of
the parties. As the principal executive officer, Mr. Gao is responsible for the
Company’s overall management. Mr. Gao will receive an annual base salary of RMB
1,200,000, or approximately $175,387, which will be reviewed on an annual basis
by the compensation committee of the Company’s board of directors, plus an
annual discretionary bonus, as determined by said compensation
committee, and separation benefits. During Mr. Gao’s
employment, he will be entitled to insurance and other benefits including, among
others, medical and disability coverage and life insurance as are afforded to
other of the Company’s senior executives. By entering into the employment
agreement, Mr. Gao agreed to a 12-month non-competition clause post
termination.


46





(ii)Mr.
Han Chengxiang





Mr. Han
Chengxiang was appointed Director and member of the Nominating Committee on June
13, 2008. Mr. Han is currently the Company’s Chief Production Officer. Prior to
joining us, Mr. Han served as the chief production officer of PRC Yuhe from 1998
to 2008. Pursuant to an employment agreement entered into by the Company with
Mr. Han, dated June 13, 2008, Mr. Han is receiving an annual salary of $17,142
and is entitled to PRC statutory holidays, and leave for maternity, marriage
and mourning with pay in accordance with relevant government laws and
regulations.





(iii) Mr.
Hu Gang





On June
13, 2008, Mr. Hu Gang was appointed the Company’s Chief Financial Officer,
“CFO”. The Company entered into an employment agreement with Mr. Hu, effective
as of June 13, 2008, his appointment date, which has an initial term of
three years, “Mr. Hu’s Initial Term”. Following Mr. Hu’s Initial Term, the
agreement may be extended on an annual basis by agreement of the parties. As the
principal financial officer, Mr. Hu is responsible for the Company’s financial
management. Mr. Hu will receive an annual base salary of RMB 1,000,000, or
approximately $146,156, during the first year, RMB 1,500,000, or approximately
$219,234, during the second year, and RMB 1,800,000, or approximately $263,081,
during the third year, of Mr. Hu’s Initial Term. In addition, the agreement
provides for an annual discretionary bonus, as determined by the
compensation committee of the Company’s board of directors, stock options and
separation benefits. By entering into the employment agreement, Mr. Hu agreed to
a 12-month non-competition clause post termination.





(iv) Mr.
Jiang Yingjun





Mr. Jiang
was appointed the Company’s Chief Accounting Officer and he is receiving an
annual salary of $12,000 pursuant to an employment agreement entered into by the
Company with Mr. Jiang, dated June 13, 2008. In addition, Mr. Jiang is eligible
for an annual discretionary bonus, as determined by the compensation
committee of the Company’s board of directors. Mr. Jiang is entitled to PRC
statutory holidays, and leave for maternity, marriage and mourning with pay
in accordance with relevant government laws and regulations.




(v)
  Mr. Tan Yi




Mr. Tan
was appointed as a Marketing Director in the Sales Department of PRC Yuhe.
Pursuant to an employment agreement entered into by PRC Yuhe with Mr. Tan, dated
March 10, 2006, Mr. Tan is receiving a monthly salary of RMB 10,000,
or approximately $1,462. Mr. Tan is entitled to PRC statutory holidays and leave
for maternity, marriage and mourning with pay in accordance with relevant
government laws and regulations.


47


(vi) Ding
Wengui




Mr. Ding
was appointed as a Chief Technology Officer of PRC Yuhe. Pursuant to an
employment agreement entered into by PRC Yuhe with Mr. Ding, dated July 11,
2005, Mr. Ding is receiving a monthly salary of RMB 8,000, or approximately
$1,169. Mr. Ding is entitled to PRC statutory holidays and leave for maternity,
marriage and mourning with pay in accordance with relevant government laws and
regulations.




(vii)
Zhao Beijing




Mr. Zhao
was employed as a Production Manager of PRC Yuhe. Pursuant to an employment
agreement entered into by PRC Yuhe with Mr. Zhao, dated July 10, 2001, Mr. Zhao
is receiving a monthly salary of RMB 8,000, or approximately $1,169. Mr. Zhao is
entitled to PRC statutory holidays and leave for maternity, marriage and
mourning with pay in accordance with relevant government laws and
regulations.




(viii)
Wang Jianbo




Mr. Wang
was employed as a Sales Manager of Taihong. Pursuant to an employment agreement
entered into by Taihong with Mr. Wang, dated December 25, 2000, Mr. Wang is
receiving a monthly salary of RMB 6,000, or approximately $877. Mr. Wang is
entitled to PRC statutory holidays and leave for maternity, marriage and
mourning with pay in accordance with relevant government laws and
regulations.




(ix) Gao
Aiping




Ms. Gao
was employed as a Technician of Taihong. Pursuant to an employment agreement
entered into by Taihong with Ms. Gao, dated July 15, 2000, Ms. Gao is receiving
a monthly salary of RMB 3,500, or approximately $512. Ms. Gao is entitled to PRC
statutory holidays and leave for maternity, marriage and mourning with pay in
accordance with relevant government laws and regulations.





In
respect of Mr. Richard Crimmins and Ms. Pam Jowett, neither Richard
Crimmins nor Pam Jowett entered into any employment agreement with First
Growth.





Employment
contracts and change of control arrangements





All
executive officers and key employees of PRC Yuhe and Taihong are under
employment contracts. None of the executive officers or key employees has a
change-of-control related arrangement with us. These contracts typically have
period of validity of between three to ten years and one-month notice
period for early termination. The executive officers and key employees as of
December 31, 2008 have the following initial term of employment in their
respective employment contracts:-


48





Executive
      Officers
              Initial
      termGao
      Zhentao
              3
      yearsHan
      Chengxiang
              10
      yearsHu
      Gang
              3
      yearsKey
      Employees
              Initial
      termTan
      Yi
              5
      yearsDing
      Wengui
              5
      yearsJiang
      Yingjun
              8
      yearsZhao
      Beijing
              8
      yearsWang
      Jianbo
              10
      yearsGao
      Aiping
              10
      years





Copies of
these employment contracts have also been filed with the Registration Statement
on Form S-1/A on December 19, 2008 and are incorporated by reference
herein.





Security
ownership guidelines





The
Company does not have a stock grant policy or any stock ownership
guidelines.





Accounting
and tax treatment





Given the
Company’s current levels of compensation, the accounting and tax considerations
have not significantly impacted the Company’s forms of compensation. The board
considers as one factor the impact of accounting and tax treatment on
compensation in the Company’s compensation programs.




Director
Compensation




None of
the directors who served during the past two fiscal years received any form of
compensation from the Company.  The Company’s former sole director,
Gao Zhentao, is also an officer of Yuhe and received no additional compensation
for being a director.




ITEM
12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
STOCKHOLDER MATTERS





The
following table sets forth certain information regarding the Company’s common
stock beneficially owned on March 19, 2009, and as adjusted after giving
effect to the sale of the shares being sold in this offering for (i) each
shareholder the Company knows to be the beneficial owner of 5% or more of its
common stock, (ii) each of its “named executive officers” and directors, and
(iii) all executive officers and directors as a group.





Beneficial
ownership is determined in accordance with the rules of the SEC. In general, a
person is deemed to be a “beneficial owner” of a security if that person has or
shares the power to vote or direct the voting of such security, or the power to
dispose or to direct the disposition of such security. A person is also deemed
to be a beneficial owner of any securities of which the person has the right to
acquire beneficial ownership within 60 days. Unless otherwise indicated by the
footnotes below, the Company believes, based on the information furnished to it
and subject to community and marital property laws, all persons named have sole
voting and investment power with respect to such shares, except as otherwise
noted. Percentage of ownership is based on 15,722,180 shares of the Company’s
common stock outstanding as of March 19, 2009.


49





The
following table excludes any shares of the Company’s common stock which may be
issued for the round up of fractional shares and the special treatment to
preserve round lot shareholders.




Name of Beneficial Owner
                                      
                                      Number of
                                        Shares
                                        Beneficially
                                        Owned
                                      
                                      Percent of
                                        Shares
                                        Beneficially
                                        OwnedGreater
      than 5% ShareholdersKunio
      Yamamoto 1
                                      
                                      
                                      7,654,817
                                      
                                      48.7
                                      %Pinnacle
      China Fund L.P. 2
                                      
                                      
                                      1,214,378
                                      
                                      7.7
                                      %Pinnacle
      Fund L.P. 2
                                      
                                      
                                      1,214,378
                                      
                                      7.7
                                      %Black
      River Small Capitalization Fund Ltd. 3
                                      
                                      
                                      851,242
                                      
                                      8.3
                                      %Black
      River Commodity Select Fund Ltd. 4
                                      
                                      
                                      638,432
                                      
                                      5.4
                                      %Ardsley
      Partners Fund II, LP 5
                                      
                                      
                                      1,133,419
                                      
                                      7.2
                                      %CEDE
      & Co7
                                      
                                      
                                      1,956,785
                                      
                                      12.4
                                      %Directors
      and Executive OfficersGao
      Zhentao 1
                                      
                                      
                                      0
                                      
                                      *
                                      %Han
      Chengxiang 1
                                      
                                      
                                      0
                                      
                                      *
                                      %Hu
      Gang 1
                                      
                                      
                                      0
                                      
                                      *
                                      %Peter
      Li 1
                                      
                                      
                                      0
                                      
                                      *
                                      %Liu
      Yaojun 1
                                      
                                      
                                      0
                                      
                                      *
                                      %Greg
      Huett 1
                                      
                                      
                                      0
                                      
                                      *
                                      %Jiang
      Yingjun 1
                                      
                                      
                                      0
                                      
                                      *
                                      %Richard
      Crimmins 6
                                      
                                      
                                      0
                                      
                                      *
                                      %All
      Executive Officers and Directors as a group
                                      
                                      
                                      0
                                      
                                      *
                                      %





50









*
            Less
      than 1%




(1)
                  Address
      is c/o Weifang Yuhe Poultry Co. Ltd., 301 Hailong Street, Hanting
      District, Weifang, Shandong Province, The People’s Republic of
      China.(2)
                  Address
      is 4965 Preston Park Blvd., Suite 240, Plano, TX 75093. Barry Kitt has
      dispositive and voting power over the shares and may be deemed to be the
      beneficial owner of the shares of common stock beneficially owned by each
      of Pinnacle China Fund, L.P. and The Pinnacle Fund, L.P.  Mr. Kitt
      disclaims beneficial ownership of the shares to the extent of his direct
      or indirect pecuniary interest.(3)
                  Address
      is 12700 Whitewater Drive, Minnetonka, MN 55343-9438. Pursuant to an
      investment advisory agreement, Black River Asset Management LLC has
      investment and voting power with respect to the securities held by the
      Black River Small Capitalization Fund Ltd.(4)
                  Address
      is 12700 Whitewater Drive, Minnetonka, MN 55343-9438. Pursuant to an
      investment advisory agreement, Black River Asset Management LLC has
      investment and voting power with respect to the securities held by the
      Black River Commodity Select Fund Ltd.(5)
                  Address
      is 262 Harbor Drive, 4 th
      Floor, Stamford CT 06902. Ardsley Advisory Partners has investment and
      voting power with respect to the 178,571 shares held by Marion Lynton,
      7,038,690 shares held by Ardsley Partners Fund II, L.P., 4,910,714 shares
      held by Ardsley Offshore Fund, Ltd. and 4,538,690 shares held by
      Ardsley Partners Institutional Fund, L.P.(6)
                  Address
      is 4432 Long Fellow Drive, Plano, Texas 75093.(7)
                  Address
      is c/o PO Box 222 Bowling Green Stati, New York,
  10274.





ITEM
13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.




Security Interest in Personal Real
Estate. On November 9, 2006, PRC Yuhe borrowed $266,667 from Wei Fang Han
Ting Rural Credit Cooperatives Union, which was secured by a mortgage on the
personal residence of Gao Zhentao, the Company’s chief executive officer. There
is currently a principal balance of $266,667 outstanding on the loan, which
accrues interest at the rate of 0.6825% per month. Accrued interest on the loan
is payable on a monthly basis, and all outstanding principal and interest will
become due and payable on November 8, 2009.


51





Salary paid by the Group.
Since PRC Yuhe’s inception, the salary of the Company’s chief executive officer,
Gao Zhentao, was paid by Shandong Yuhe Food Group Co., Ltd., or “Yuhe Group”, a
PRC company based in Weifang, Shandong Province that is controlled by the
Company’s chief executive officer and his brother, Gao Zhenbo. In 2007 this
salary totaled $8,000.





Share Exchange Agreement Transaction
Between Mr. Kunio Yamamoto and First Growth. The Company entered into an
Equity Transfer Agreement, the “Equity Transfer Agreement”, dated as of March
12, 2008, with Mr. Kunio Yamamoto, the sole shareholder of Bright Stand, to
exchange all of the issued and outstanding shares of Bright Stand owned by him
in exchange for the Company’s issuing to Mr. Yamamoto 126,857,134 unregistered
shares, equivalent to 8,626,318 post-split shares, of the Company’s common
stock. As a result of the transaction, Mr. Yamamoto holds 126,857,134 shares,
equivalent to 8,626,318 post-split shares, or 88.8 % of the Company’s
142,857,134 shares, equivalent to 9,714,312 post-split shares, of common stock
then outstanding following the completion of all matters referred to
above.





Mr. Gao
is the controlling shareholder, legal representative and executive director of
Shandong Yuhe Food Group Co., Ltd., "Yuhe Group", holding 80% of its shares. Mr.
Gao does not have any affiliation or relationship with any of the Company’s
competitors, suppliers, customers, distributors and similar companies, including
without limitation, Hefeng Green Agriculture Co., Ltd., Shandong Yuhe New
Agriculture Academy of Sciences, and Weifang Hexing Breeding Co.,
Ltd.




In
previous years when the Company needed working capital, it received advances
from time to time from related companies and related companies also paid some
expenses on the Company’s behalf. At December 31, 2006, the accumulated amount
due to related companies was $2,567,739. The Company provided advances to and
paid some expenses for other related parties when they needed working capital.
The related parties serve as a source of temporary financing for each other in
order to save on significant interest expenses.




The
amounts due from related parties are an accumulation of some trade transactions
and advances to related companies for working capital purposes. There are no
agreements signed between the related companies and no fixed repayment dates,
although the lenders have the right to demand repayment in full at
anytime.


52





Related Party
                                                                          
                                                                          Terms
                                                                          Yuhe International,
                                                                            Inc.
                                                                            Balance as at
                                                                            December 31, 2008
                                                                          
                                                                          PRC Yuhe
                                                                            Balance as at
                                                                            December 31, 2007
                                                                          
                                                                          PRC Yuhe
                                                                            Balance as at
                                                                            December 31, 2006Loans to Former Owners of PRC YuheMr.
      Gao Zhentao,
                                                                            Director
      and former
                                                                            owner
      of PRC Yuhe
                                                                          
                                                                          The
      first oral loan agreement between PRC Yuhe as lender and Mr. Gao Zhentao
      as borrower was made in or about December 2006. Since then, there have
      been a number of borrowings and repayments under identical terms between
      these parties.
                                                                            
                                                                            Unsecured,
      interest free loans, have no fixed repayment date. For allowing Mr. Gao to
      make payments for his business trips and other expenses purpose. Balance
      in the sum of $74,125 was repaid on February 19, 2008.
                                                                            
                                                                            Remedies
      available to the creditor are prescribed pursuant to the laws of the
      PRC.
                                                                          
                                                                          $
                                                                          -
                                                                          
                                                                          
                                                                          $
                                                                          74,125
                                                                          
                                                                          
                                                                          $
                                                                          -Mr.
      Gao Zhenbo,

                                                                            Director
      of PRC
                                                                            Yuhe
      and former
                                                                            owner
      of Taihong
                                                                          
                                                                          The
      first oral loan agreement between PRC Yuhe as lender and Mr. Gao Zhenbo as
      borrower was made before January 1, 2005. Since then, there have been a
      number of borrowings and repayments under identical terms between these
      parties.




53




Unsecured,
      interest free loans, have no fixed repayment date. For allowing Mr. Gao to
      make payments for his business trips and other expenses purpose. Balance
      in the sum of $76,716 was repaid on February 19, 2008.
                              
                              Remedies
      available to the creditor are prescribed pursuant to the laws of the
      PRC.
                            
                            $
                            -
                            
                            
                            $
                            76,716
                            
                            
                            $
                            -Mr.
      Tan Yi,

                              Director
      of PRC
                              Yuhe
                            
                            The
      first oral loan agreement between PRC Yuhe as lender and Mr. Tan Yi as
      borrower was made on or about January 31, 2005. Since then, there have
      been a number of borrowings and repayments under identical terms between
      these parties.


54


Unsecured,
      interest free loans, have no fixed repayment date. For allowing
      Mr. Tan to make payments for his business trips and other expenses
      purpose. Balance in the sum of $78,092 was repaid on February 19,
      2008.Remedies
      available to the creditor are prescribed pursuant to the laws of the
      PRC.
                    
                    $
                    -
                    
                    
                    $
                    78,092
                    
                    
                    $
                    -
  Due from directors shown under
      non-current assets in balance
      sheet
                        
                        
                        $
                        -
                        
                        
                        
                        $
                        228,933
                        
                        
                        
                        $
                        -




Loans to Companies in
      which Former Owner of PRC Yuhe Served as a DirectorHexing
      Green Agriculture

                                                                        Co.,
      Ltd, a company in
                                                                        which
      Mr. Gao Zhentao
                                                                        served
      as a director
                                                                      
                                                                      The
      first oral loan agreement between PRC Yuhe as lender and Hexing Green
      Agriculture Co., Ltd. as borrower was made on or about September 30, 2005.
      Since then, there have been a number of borrowings and repayments under
      identical terms between these parties.





55




Unsecured,
      interest free loans, have no fixed repayment date. For working capital
      purposes. The management expects to receive the loan balance on demand in
      December 2009.
                                
                                Remedies
      available to the creditor are prescribed pursuant to the laws of the
      PRC.
                              
                              $
                              75,754
                              
                              
                              $
                              70,990
                              
                              
                              $
                              66,419Shandong
      Yuhe Food
                                Group
      Co., Ltd., a
                                company
      in which Mr.
                                Gao
      Zhentao served as a
                                director
                              
                              The
      first oral loan agreement between PRC Yuhe and Taihong as lenders and
      Shandong Yuhe Food Group Co., Ltd. as borrower was made before January 1,
      2005. Since then, there have been a number of borrowings and repayments
      under identical terms among these parties.
                                
                                Unsecured,
      interest free loans, have no fixed repayment date. For working capital
      purposes. The management expects to receive the loan balance on demand in
      December 2009.
                                
                                Remedies
      available to the creditor are prescribed pursuant to the laws of the
      PRC.
                              
                              $
                              3,580,553
                              
                              
                              $
                              5,617,363
                              
                              
                              $
                              4,015,833Shandong
      Yuhe New
                                Agriculture
      Academy of
                                Sciences,
      a company in
                                which
      Mr. Gao Zhentao
                                served
      as a director
                              
                              The
      first oral loan agreement between PRC Yuhe as lender and Shandong Yuhe New
      Agriculture Academy of Sciences as borrower was made before January 1,
      2005. Since then, there have been a number of borrowings and repayments
      under identical terms between these parties.




56




Unsecured,
      interest free loans, have no fixed repayment date. For working capital
      purposes. The management expects to receive the loan balance on demand in
      December 2009.
                    
                    Remedies
      available to the creditor are prescribed pursuant to the laws of the
      PRC.
                  
                  $
                  50,257
                  
                  
                  $
                  48,384
                  
                  
                  $
                  45,268Weifang
      Hexing
                    Breeding
      Co., Ltd., a
                    company
      in which Mr.
                    Gao
      Zhentao served as a
                    director
                  
                  The
      first oral loan agreement between Taihong as lender and Weifang Hexing
      Breeding Co., Ltd. as borrower was made before January 1, 2005. Since
      then, there have been a number of borrowings and repayments under
      identical terms between these parties.
                    
                    Unsecured,
      interest free loans, have no fixed repayment date. For working capital
      purposes. The balance in the sum of $214,954 was repaid on March 31,
      2008.
                    
                    Remedies
      available to the creditor are prescribed pursuant to the laws of the
      PRC.
                  
                  $
                  -
                  
                  
                  $
                  53,723
                  
                  
                  $
                  -




57




Weifang
      Jiaweike Food
                Co.,
      Ltd., a company in
                which
      Mr. Gao Zhentao
                served
      as a director
              
              The
      first oral loan agreement between Taihong as lender and Weifang Jiaweike
      Food Co., Ltd. as borrower was made on or about September 3, 2005. Since
      then, there have been a number of borrowings and repayments under
      identical terms between these parties.
                
                Unsecured,
      interest free loans, have no fixed repayment date. For working capital
      purposes. The management expects to receive the loan balance on demand in
      December 2009.
                
                Remedies
      available to the creditor are prescribed pursuant to the laws of the
      PRC.
              
              $
              25
              
              
              $
              26
              
              
              $
              -




Due from related companies
      shown under non-current assets on balance sheet
                                                
                                                $
                                                3,706,589
                                                
                                                
                                                $
                                                5,790,486
                                                
                                                
                                                $
                                                4,127,520Loans from Companies in which
      Former Owner of PRC Yuhe Served as a DirectorWeifang
      Hexing Breeding
                                                  Co.,
      Ltd, a company in
                                                  which
      Mr. Gao Zhentao
                                                  served
      as a director
                                                
                                                The
      first oral loan agreement between Weifang Hexing Breeding Co., Ltd. as
      lender and PRC Yuhe as borrower was made before January 1, 2005. Since
      then, there have been a number of borrowings and repayments under
      identical terms between these parties.




58


Unsecured,
      interest free loans, have no fixed repayment date. For working capital
      purposes. Balance in the sum of $2,169,237 was repaid on June 30,
      2007.
                                      
                                      Remedies
      available to the creditor are prescribed pursuant to the laws of the
      PRC.
                                    
                                    $
                                    -
                                    
                                    
                                    $
                                    -
                                    
                                    
                                    $
                                    1,879,785Weifang
      Jiaweike Food
                                      Co.,
      Ltd, a company in
                                      which
      Mr. Gao Zhentao
                                      served
      as a director
                                    
                                    The
      first oral loan agreement between Weifang Jiaweike Food Co., Ltd. as
      lender and PRC Yuhe as borrower was made before January 1, 2005. Since
      then, there have been a number of borrowings and repayments under
      identical terms between these parties.
                                      
                                      Unsecured,
      interest free loans, have no fixed repayment date. For working capital
      purposes. Balance in the sum of $473,220 was repaid on June 30,
      2007.
                                      
                                      Remedies
      available to the creditor are prescribed pursuant to the laws of the
      PRC.
                                    
                                    $
                                    -
                                    
                                    
                                    $
                                    -
                                    
                                    
                                    $
                                    687,954Weifang
      Hexing Breeding

                                      Co.,
      Ltd, a company in
                                      which
      Mr. Gao Zhentao
                                      served
      as a director
                                    
                                    The
      first oral loan agreement between Weifang Hexing Breeding Co., Ltd. as
      lender and PRC Yuhe as borrower was made on or about March 12, 2008. Since
      then, there have been a number of borrowings and repayments under
      identical terms between these parties.




59




Unsecured,
      interest free loans, have no fixed repayment date. For working capital
      purposes.
                
                Remedies
      available to the creditor are prescribed pursuant to the laws of the
      PRC.
              
              $
              185,885
              
              
              $
              -
              
              
              $
              -Others
              
              Unsecured,
      interest free loan, has no fixed repayment date. For working capital
      purposes.
              
              $
              24,748
              
              
              $
              -
              
              
              $
              -




Due to related companies in
      which Former Owner of PRC Yuhe Served as a Director
                                
                                $
                                210,633
                                
                                
                                $
                                -
                                
                                
                                $
                                2,567,739Loan from Bright Stand
      International LimitedBright
      Stand International
                                  Limited,
      a company in
                                  which
      Mr. Gao Zhentao
                                  served
      as a director
                                
                                Unsecured,
      interest free loan, has no fixed repayment date. The Balance was
      eliminated upon consolidation between Yuhe International and Bright Stand
      as a result of the reverse merger.
                                  
                                  Remedies
      available to the creditor are prescribed pursuant to the laws of the
      PRC.
                                
                                $
                                -
                                
                                
                                $
                                *1,000,000
                                
                                
                                $
                                -




60




Loan from Bright Stand
      International Limited
              
              $
              -
              
              
              $
              1,000,000
              
              
              $
              -Due to related companies shown
      under current liabilities on balance sheet
              
              $
              210,633
              
              
              $
              1,000,000
              
              
              $
              2,567,739





* This is
the cash deposits to PRC Yuhe by Bright Stand as capital injection, since
registration was not completed at December 31, 2007, and was classified as Loan
accounts instead of Common Stock.





Providing Guarantees on Behalf of A
Former Owner of PRC Yuhe. PRC  Yuhe provided a
guarantee in favor of Shandong Yuhe Food Group Co., Ltd., a former owner of PRC
Yuhe, in the amount of $2,128,399. The guarantee expired in January
2008.




Acquisition by Halter
Financial. The Company entered into a Stock Purchase Agreement, the
“Stock Purchase Agreement”, with Halter Financial Investments, L.P., a Texas
limited partnership, “Halter Financial”, dated as of November 6, 2007, pursuant
to which the Company agreed to sell to Halter Financial 14,000,000 unregistered
shares, equivalent to 951,996 post-split shares, of the Company’s common stock
for $425,000. The transaction closed on November 16, 2007. As a result of the
transaction, Halter Financial held 14,000,000 shares, equivalent to 951,996
post-split shares, or 87.5% of the Company’s 16,000,000 shares, equivalent to
1,087,994 post-split shares, of common stock then outstanding following the
completion. The Stock Purchase Agreement also required the Company’s Board of
Directors to declare and pay a special cash dividend of $0.21, $3.088
post-split, per share to the Company’s shareholders on November 19, 2007. Halter
Financial did not participate in such dividend. The dividend was payable to
shareholders of record on November 15, 2007, which was prior to the date the
shares were issued to Halter Financial under the Stock Purchase Agreement. The
dividend payment date was November 19, 2007. The dividend was payable to the
Company’s shareholders who held 2,000,000 shares of its common stock and
resulted in a total dividend distribution of $420,000. The funds for the
dividend came from the $425,000 proceeds received from the sale of common stock
to Halter Financial. Halter Financial is a Texas limited partnership of which
Halter Financial Investments GP, LLC, a Texas limited liability company is the
sole general partner. The limited partners of HFI are: (i) TPH Capital, L.P., a
Texas limited partnership of which TPH Capital GP, LLC is the general partner
and Timothy P. Halter is the sole member of TPH Capital GP, LLC; (ii) Bellfield
Capital, L.P., a Texas limited partnership of which Bellfield Capital
Management, LLC is the sole general partner and David Brigante is the sole
member of Bellfield Capital Management, LLC; (iii) Colhurst Capital LP, a Texas
limited partnership of which Colhurst Capital GP, LLC is the general partner and
George L. Diamond is the sole member of Colhurst Capital GP, LLC; and (iv)
Rivergreen Capital, LLC of which Marat Rosenberg is the sole member. As a
result, each of the foregoing persons may be deemed to be a beneficial owner of
the shares held of record by Halter Financial.  Halter Financial has
advised the Company that there is no correlation between the decision of Bright
Stand to engage HFG International, Limited to provide consulting services to
Bright Stand and the decision of Halter Financial to acquire a control position
in First Growth. After Halter Financial became a 87.5% shareholder of First
Growth pursuant to a Stock Purchase Agreement, there was a potential conflict of
interest associated with an affiliate of Halter Financial, HFG International,
Limited, advising Bright Stand about its purchase of a U.S. shell company, First
Growth. Despite this potential conflict of interest, HFG International, Limited
has informed the Company that its advice to Bright Stand was based on its
research results into the prices paid by other groups to acquire control
positions in publicly traded shell companies, which were similarly situated as
First Growth at the time Bright Stand acquired First Growth.


61




The
Halter Financial transaction was described under related party transactions due
to the special dividend payment to former officers and other former major
shareholders





Equity Investment by Certain
Investors. 
Effective March 12, 2008, the Company closed a Securities Purchase Agreement,
the “Securities Purchase Agreement”, with certain investors. Pursuant to the
terms of such Securities Purchase Agreement, such investors collectively
invested approximately $18,000,000 into the Company at the price of $0.21,
$3.088 post-split, per share in exchange for the Company’s issuance of
85,714,282 shares, equivalent to 5,829,018 post-split shares, to such investors.
Mr. Yamamoto also sold 14,285,710 shares, equivalent to 971,500 post-split
shares, of common stock to such investors for $3,000,000. Immediately following
the closing of the Securities Purchase Agreement, Mr. Yamamoto owned 112,571,424
shares, equivalent to 7,654,818 post-split shares, of the Company’s common
stock, and the investors owned 99,999,992 shares, equivalent to 6,800,518
post-split shares, of the Company’s common stock.





Agreements with Placement
Agents. On March 12, 2008, as part of the compensation to the Company’s
placement agent, Roth Capital Partners, LLC, in connection with their services
under the Securities Purchase Agreement, the Company issued to Roth Capital
Partners, LLC and WLT Brothers Capital, Inc. warrants to acquire an aggregate of
6,999,999 shares, equivalent to 476,014 post-split shares, of common stock,
exercisable at any time after the date falling 6 months after their issuance.
The warrants have a strike price equal to $0.252, $3.705 post-split, have a term
of three years starting from March 12, 2008 and permit cashless or cash exercise
at all times after they are exercisable until they expire on March 12,
2011.  On October 27, 2008, the Company issued 178,848 new shares to
Roth Capital Partners, LLC based on their cashless exercise of 333,198 warrants
issued to it as compensation for their services as co-placement
agent.  The issuance of these securities was deemed to be exempt from
registration pursuant to Section 4(2) of the Securities Act. The shares of
common stock issuable upon the exercise of the warrants have registration
rights. In addition, Roth Capital Partners, LLC and WLT Brothers Capital, Inc.
received cash compensation in the amount of $1.47 million. The above may have
been disclosed as a promoter under S-K 404(c).




ITEM
14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES.




The
following table sets forth the aggregate fees for professional audit services
rendered by Child, Van Wagoner & Bradshaw, PLLC, for the audit of the
Company’s annual financial statements for the fiscal years 2008 and 2007
respectively, and fees billed for other services provided by Child, Van Wagoner
& Bradshaw, PLLC for fiscal years 2008 and 2007. The Audit Committee has
approved all of the following fees.





Fiscal
      Year Ended2008
                        
                        2007Audit
      Fees
                        
                        $
                        68,654
                        
                        
                        $
                        6,575Audit
      related Fees
                        
                        $
                        20,987
                        (1)
                        
                        $
                        -Tax
      Fees
                        
                        $
                        
                        (2)
                        
                        $
                        300Total
      Fees
                        
                        $
                        89,641
                        
                        
                        $
                        6,875




62







(1)
            Includes
      fees for services related to the performance of the audit or review of the
      Company’s financial statements




(2)
            Includes
      fees for service related to tax compliance, tax advice, and tax
      planning




Audit
Committee’s Pre-Approval Policy




During
fiscal year ended December 31, 2008, the Audit Committee of the Company’s Board
of Directors adopted policies and procedures for the pre-approval of all audit
and non-audit services to be provided by the Company’s independent auditor and
for the prohibition of certain services from being provided by the independent
auditor.  The Company may not engage its independent auditor to render any
audit or non-audit service unless the service is approved in advance by the
Audit Committee or the engagement to render the service is entered into pursuant
to the Audit Committee’s pre-approval policies and procedures.  On an
annual basis, the Audit Committee may pre-approve services that are expected to
be provided to the Company by the independent auditor during the fiscal
year.  At the time such pre-approval is granted, the Audit Committee
specifies the pre-approved services and establishes a monetary limit with
respect to each particular pre-approved service, which limit may not be exceeded
without obtaining further pre-approval under the policy.  For any
pre-approval, the Audit Committee considers whether such services are consistent
with the rules of the Securities and Exchange Commission on auditor
independence.




PART
IV




ITEM
15.   EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.




(a)
            The
      following documents are filed as part of this
  report:





(1)
                Financial
      StatementsThe
      consolidated financial statements filed as part of this Form 10-K are
      located as set forth in the index on page F-1 of this
    report.





(2)
                Financial
      Statement SchedulesNot
      applicable.




(3)
            Exhibits




The list
of exhibits included in the attached Exhibit Index is hereby incorporated herein
by reference.





63




The
following is a list of exhibits filed as part of this Annual Report on Form
10-K. Where so indicated by footnote, exhibits that were previously filed are
incorporated by reference.




Exhibit
                        Number
                      
                      Description
      of Document3.1
                      
                      Articles
      of Incorporation of the registrant as filed with the Secretary of State of
      Nevada, as amended to date. [Incorporated by reference to Exhibit 3.1 to
      the registrant’s current report on Form 8-K filed on April 10,
      2007]4.1
                      
                      Registration
      Rights Agreement dated March 12, 2008 by and among First Growth Investors,
      Inc., and certain investors. [Incorporated by reference to Exhibit 10.4 to
      the registrant’s current report on Form 8-K filed on March 17,
      2008]5.1
                      
                      Opinion
      of Thomas G. Kimble & Associates, PC as to the legality of the shares.
      [Incorporated by reference to exhibit 5.1 to the registrant’s Registration
      Statement on Form S-1 filed on May 12, 2008]5.2
                      
                      Opinion
      of Long An Law Firm. [Incorporated by reference to exhibit 5.2 to the
      registrant’s Registration Statement on Form S-1 filed on May 12,
      2008]10.1
                      
                      Stock
      Purchase Agreement dated November 6, 2007 between First Growth Investors,
      Inc. and Halter Financial Investments, L.P. [Incorporated by
      reference to Exhibit 10.1 to the registrant’s current report on Form 8-K
      filed on November 6, 2007]10.2
                      
                      Equity
      Transfer Agreement dated March 12, 2008 between First Growth Investors,
      Inc. and Kunio Yamamoto. [Incorporated by reference to Exhibit 10.2 to the
      registrant’s current report on Form 8-K filed on March 17,
      2008]10.3
                      
                      Securities
      Purchase Agreement dated March 12, 2008 by and among First Growth
      Investors, Inc., Bright Stand International Limited, Weifang Yuhe Poultry
      Co., Ltd., Kunio Yamamoto and certain investors. [Incorporated by
      reference to Exhibit 10.3 to the registrant’s current report on Form 8-K
      filed on March 17, 2008]10.4
                      
                      Make
      Good Escrow Agreement dated March 12, 2008 by and among First Growth
      Investors, Inc., Kunio Yamamoto, certain investors, Roth Capital Partners,
      LLC and Tri-State Title and Escrow, LLC. [Incorporated by reference to
      Exhibit 10.5 to the registrant’s current report on Form 8-K filed on March
      17, 2008]10.5
                      
                      Holdback
      Escrow Agreement dated March 12, 2008 by and among First Growth Investors,
      Inc., certain investors, and Tri-State Title and Escrow, LLC.
      [Incorporated by reference to Exhibit 10.6 to the registrant’s current
      report on Form 8-K filed on March 17, 2008]10.6
                      
                      Warrant
      dated Mach 12, 2008 issued by First Growth Investors, Inc. to Roth Capital
      Partners, LLC [Incorporated by reference to Exhibit 10.7 to the
      registrant’s current report on Form 8-K filed on March 17,
      2008]




64





10.7
              
              Make
      Good Escrow Agreement dated March 12, 2008 by and among First Growth
      Investors, Inc., Kunio Yamamoto, HFG International, Limited, and Interwest
      Transfer Company, Inc. [Incorporated by reference to Exhibit 10.8 to the
      registrant’s current report on Form 8-K filed on March 17,
      2008]10.8
              
              Lock-up
      Agreement dated March 12, 2008 between Kunio Yamamoto and First Growth
      Investors, Inc. [Incorporated by reference to Exhibit 10.9 to the
      registrant’s current report on Form 8-K filed on March 17,
      2008]10.9
              
              Audited
      Financial Statements of First Growth Investors, Inc. for the Year Ended
      December 31, 2005. [Incorporated by reference to the registrant’s current
      report on Form 10-KSB filed on April 4, 2006]10.10
              
              Audited
      Financial Statements of First Growth Investors, Inc. for the Year Ended
      December 31, 2006. [Incorporated by reference to the registrant’s current
      report on Form 10K-SB filed on April 2, 2007]10.11
              
              Audited
      Financial Statements of First Growth Investors, Inc. for the Year Ended
      December 31, 2007. [Incorporated by reference to the registrant’s current
      report on Form 10K-SB filed on March 31, 2008]10.12
              
              Labour
      Contract dated July 15, 2000 entered into between Weifang Taihong Feed
      Co., Ltd. and Gao Aiping.  [Incorporated by reference to Exhibit
      10.12 to the registrant’s Registration Statement on Form S-1/A filed on
      December 19, 2008]10.13
              
              Labour
      Contract dated December 25, 2000 entered into between Weifang Taihong Feed
      Co., Ltd. and Wang Jianbo.  [Incorporated by reference to
      Exhibit 10.13 to the registrant’s Registration Statement on Form S-1/A
      filed on December 19, 2008]10.14
              
              Labour
      Contract dated July 10, 2001 entered into between Weifang Yuhe Poultry Co.
      Ltd. and Zhao Beijing.  [Incorporated by reference to Exhibit
      10.14 to the registrant’s Registration Statement on Form S-1/A filed on
      December 19, 2008]10.15
              
              Commitment
      to Product Quality and Customer Services Agreement dated February 12, 2004
      entered for and on behalf of Weifang Yuhe Poultry Co.
      Ltd.  [Incorporated by reference to Exhibit 10.15 to the
      registrant’s Registration Statement on Form S-1/A filed on December 19,
      2008]10.16
              
              Contract
      of land dated April 12, 2005 entered into between Yejiazhuang Village,
      Dabucum Village and Weifang Yuhe Poultry Co.,
      Ltd.  [Incorporated by reference to Exhibit 10.16 to the
      registrant’s Registration Statement on Form S-1/A filed on December 19,
      2008]10.17
              
              Lease
      Agreement dated June 25, 2005 entered into between Standing Weifang Farm
      and Weifang Yuhe Poultry Co., Ltd.  [Incorporated by reference
      to Exhibit 10.17 to the registrant’s Registration Statement on Form S-1/A
      filed on December 19, 2008]




65





10.18
              
              Labour
      Contract dated July 11, 2005 entered into between Weifang Yuhe Poultry Co.
      Ltd. and Ding Wengui.  [Incorporated by reference to Exhibit
      10.18 to the registrant’s Registration Statement on Form S-1/A filed on
      December 19, 2008]10.19
              
              Labour
      Contract dated October 15, 2005 entered into between Weifang Yuhe Poultry
      Co. Ltd. and Jiang Yingjun.  [Incorporated by reference to
      Exhibit 10.19 to the registrant’s Registration Statement on Form S-1/A
      filed on December 19, 2008]10.20
              
              Summary
      of loan agreements with Nansun Rural Credit in respect of loan agreement
      dated November 28, 2005.  [Incorporated by reference to Exhibit
      10.20 to the registrant’s Registration Statement on Form S-1/A filed on
      December 19, 2008]10.21
              
              Feed
      Purchase Contract dated January 1, 2006 entered into between Weifang
      Taihong Feed Co., Ltd. and Weifang Yuhe Poultry Co.,
      Ltd.  [Incorporated by reference to Exhibit 10.21 to the
      registrant’s Registration Statement on Form S-1/A filed on December 19,
      2008]10.22
              
              Labour
      Contract dated March 10, 2006 entered into between Weifang Yuhe Poultry
      Co., Ltd. and Tan Yi. [Incorporated by reference to Exhibit 10.22 to the
      registrant’s Registration Statement on Form S-1/A filed on December 19,
      2008]10.23
              
              Summary
      of Loan Agreement dated November 10, 2006 with Hanting Rural Credit
      Cooperative. [Incorporated by reference to Exhibit 10.23 to the
      registrant’s Registration Statement on Form S-1/A filed on December 19,
      2008]10.24
              
              Summary
      of Loan Agreement dated May 12, 2007 with Shuangyang Rural Credit.
      [Incorporated by reference to Exhibit 10.24 to the registrant’s
      Registration Statement on Form S-1/A filed on December 19,
      2008]10.25
              
              Summary
      of Loan Agreement dated July 1, 2007 with Hanting Kaiyuan Rural Credit
      Cooperative. [Incorporated by reference to Exhibit 10.25 to the
      registrant’s Registration Statement on Form S-1/A filed on December 19,
      2008]10.26
              
              Labour
      Contract dated December 1, 1998 entered into between Weifang Yuhe Poultry
      Co. Ltd. and Han Chengxiang.  [Incorporated by reference to
      Exhibit 10.26 to the registrant’s Registration Statement on Form S-1/A
      filed on December 19, 2008]10.27
              
              Labour
      Contract dated June 13, 2008 entered into between Yuhe International, Inc.
      and Han Chengxiang.  [Incorporated by reference to Exhibit 10.27
      to the registrant’s Registration Statement on Form S-1/A filed on December
      19, 2008]10.28
              
              Labour
      Contract dated June 13, 2008 entered into between Yuhe International, Inc.
      and Jiang Yingjun. [Incorporated by reference to Exhibit 10.12 to the
      registrant’s Registration Statement on Form S-1/A filed on December 19,
      2008]10.29
              
              Employment
      Agreement dated June 13, 2008 entered into between Yuhe International,
      Inc. and Gao Zhentao [Incorporated by reference to Exhibit 10.1 to the
      registrant’s current report on Form 8-K filed on June 13,
      2008]




66





10.30
            
            Employment
      Agreement dated June 13, 2008 entered into between Yuhe International,
      Inc. and Hu Gang [Incorporated by reference to Exhibit 10.2 to the
      registrant’s current report on Form 8-K filed on June 13,
      2008]10.31
            
            Supplemental
      Feed Purchase Agreement dated August 5, 2008 entered into between Weifang
      Taihong Feed Co., Ltd. and Weifang Yuhe Poultry Co.,
      Ltd.  [Incorporated by reference to Exhibit 10.12 to the
      registrant’s Registration Statement on Form S-1/A filed on December 19,
      2008]




10.32
            
            Form
      of Stock Option Agreement [Incorporated by reference to Exhibit 10.1 to
      the registrant’s quarterly report on Form 10-Q filed on August 14,
      2008]10.33
            
            Summaries
      of Oral Loan Agreements as disclosed under section “Transactions with
      Related Persons”.  [Incorporated by reference to Exhibit 10.33
      to the registrant’s Registration Statement on Form S-1/A filed on December
      19, 2008]10.34
            
            Capital
      Transfer Agreement dated November 28, 2007.  [Incorporated by
      reference to Exhibit 10.12 to the registrant’s Registration Statement on
      Form S-1/A filed on December 19, 2008]10.35
            
            Translation
      of Equipment Leasing Agreement dated November 11, 2008 in English.
      [Incorporated by reference to Exhibit 99.1 to the registrant’s 8-K filed
      on November 21, 2008]10.36
            
            Translation
      of Tenancy Agreement dated November 11, 2008 in English. [Incorporated by
      reference to Exhibit 99.2 to the registrant’s 8-K filed on November 21,
      2008]*14.1
            
            Code
      of Ethics.23.1
            
            Consent
      of Thomas G. Kimble and Associates, PC, included in Exhibit
      5.1.[Incorporated by reference to Exhibit 23.2 to the registrant’s
      Registration Statement S-1 filed on May 12, 2008]23.2
            
            Consent
      of Long An Law Firm.[Incorporated by reference to Exhibit 23.3 to the
      registrant’s Registration Statement on Form S-1 filed on May 12,
      2008]*24.1
            
            Power
      of Attorney (included on the signature page of this registration
      statement).*31.1
            
            Certification
      of the Chief Executive Officer pursuant to Rules 13a-14(a) and
      15(d)-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act
      of 2002*31.2
            
            Certification
      of the Chief Financial Officer pursuant to Rules 13a-14(a) and
      15(d)-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act
      of 2002*32.1
            
            Certification
      of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as
      adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.*32.2
            
            Certification
      of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as
      adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.










*
            Filed
      herewith




67




SIGNATURES




In
accordance with Section 13 or 15(d) of the Exchange Act, the Company caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.





Date:
March 31, 2009




Yuhe International, Inc.By:
            /s/ Gao ZhentaoGao ZhentaoChief Executive Officer(On behalf of the Registrant and as
              Principal Executive Officer)





By:
                      /s/ Hu GangHu GangChief Financial Officer(On behalf of the Registrant and as
                        Principal Financial Officer)By:
                      /s/ Jiang YiqiangJiang YiqiangChief Accounting Officer(On behalf of the Registrant and as
                        Principal Accounting Officer)




POWER
OF ATTORNEY




KNOW ALL
PERSONS BY THESE PRESENTS, that each person whose signature appears below hereby
constitutes and appoints Gao Zhentao,  Hu Gang and Jiang Yiqiang, and
each of them acting individually, as his true and lawful attorneys-in-fact and
agents, each with full power of substitution, for him in any and all capacities,
to sign any and all amendments to this Report on Form 10-K, and to file the
same, with exhibits thereto and other documents in connection therewith, with
the Securities and Exchange Commission, granting unto said attorneys-in-fact and
agents, with full power of each to act alone, full power and authority to do and
perform each and every act and thing requisite and necessary to be done in
connection therewith, as fully for all intents and purposes as he might or could
do in person, hereby ratifying and confirming all that said attorneys-in-fact
and agents, or his or their substitute or substitutes, may lawfully do or cause
to be done by virtue hereof.


68




Pursuant
to the requirements of the Securities Act, this report on Form 10-K has been
signed by the following persons in the capacities and on the dates
indicated:





Dated March 31, 2009
            /s/ Gao ZhentaoGao ZhentaoChief Executive Officer and DirectorDated March 31, 2009
            /s/ Hu GangHu GangChief Financial OfficerDated March 31, 2009
            /s/ Jiang YiqiangJiang YiqiangChief Accounting OfficerDated March 31, 2009
            /s/ Peter LiPeter LiDirectorDated March 31, 2009
            /s/ Liu YaojunLiu YaojunDirectorDated March 31, 2009
            /s/ Greg HuettGreg HuettDirectorDated March 31, 2009
            /s/ Han ChengxiangHan ChengxiangDirector




69





YUHE
INTERNATIONAL, INC.


(Formerly
known as First Growth Investors Inc.)





CONSOLIDATED
FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007


70


YUHE
INTERNATIONAL, INC.


(Formerly
known as First Growth Investors, Inc.)





CONSOLIDATED
FINANCIAL STATEMENTS


FOR
THE YEARS ENDED DECEMBER 31, 2008 AND 2007





Index to
consolidated financial statements





PageReport
      of Independent Registered Public Accounting Firm
              F-2Consolidated
      Balance Sheets
              F-3Consolidated
      Statements of Income and Comprehensive Income
              F-4Consolidated
      Statements of Changes in Stockholders’ Equity
              F-5Consolidated
      Statements of Cash Flows
              F-6Notes
      to Consolidated Financial Statements
              F-7 - F-36







YUHE
INTERNATIONAL, INC.


(Formerly
known as First Growth Investors, Inc.)





Report
of Independent Registered Public Accounting Firm











Douglas
      W. Child, CPA

                  Marty
      D. Van Wagoner, CPA
                  J.
      Russ Bradshaw, CPA
                  William
      R. Denney, CPA
                  Roger
      B. Kennard, CPA
                  Russell
      E. Anderson, CPA
                  Scott
      L. Farnes
                  
                  
                  
                  
                  
                  
                  
                  1284
      W. Flint Meadow Dr.
                  #D
                  Kaysville,
      Utah 84037
                  Telephone
      801.927.1337
                  Facsimile
      801.927.1344
                  
                  5296
      S. Commerce Dr. #300
                  Salt
      Lake City, Utah 84107
                  Telephone
      801.281.4700
                  Facsimile
      801.281.4701
                  
                  Suite
      B, 4F
                  North
      Cape Commercial
                  Bldg.
                  388
      King’s Road
                  North
      Point, Hong Kong
                  
                  
                  
                  
                  
                  
                  www.cpaone.net
                
                Report of Independent Registered
      Public Accounting Firm
                      
                      To the Board of Directors and
      Audit Committee
                      Yuhe International,
      Inc.
                      ShandongProvince,PeoplesRepublicofChina
                      
                      We have audited the consolidated
      balance sheets of Yuhe International, Inc. (the Company) as of December
      31, 2008 and 2007, and the related consolidated statements of income and
      comprehensive income, stockholders’ equity and cash flows for the years
      ended December 31, 2008 and 2007. These consolidated financial statements
      are the responsibility of the Company’s management. Our responsibility is
      to express an opinion on these consolidated financial statements based on
      our audits.
                      
                      We conducted our audits in
      accordance with the standards of the Public Company Accounting Oversight
      Board (United
      States). Those
      standards require that we plan and perform the audit to obtain reasonable
      assurance about whether the consolidated financial statements are free of
      material misstatement. The company is not required to have, nor were we
      engaged to perform, an audit of its internal control over financial
      reporting. Our audit included consideration of internal control over
      financial reporting as a basis for designing audit procedures that are
      appropriate in the circumstances, but not for the purpose of expressing an
      opinion on the effectiveness of the company’s internal control over
      financial reporting. Accordingly, we express no such opinion.An audit also
      includes examining, on a test basis, evidence supporting the amounts and
      disclosures in the consolidated financial statements, assessing the
      accounting principles used and significant estimates made by management,
      as well as evaluating the overall consolidated financial statement
      presentation. We believe that our audits provide a reasonable basis for
      our opinion.
                      
                      In our opinion, the consolidated
      financial statements referred to above present fairly, in all material
      respects, the financial position of Yuhe International, Inc. as of
      December  31, 2008 and 2007, and the results of its consolidated
      operations and its consolidated cash flows for the years ended December
      31, 2008 and 2007, in conformity with accounting principles generally
      accepted in the United States of America.
                  
                  
                  /s/ Child, Van
      Wagoner & Bradshaw, PLLC
                  Child,
      Van Wagoner & Bradshaw, PLLC
                  Salt
      Lake City, Utah
                  March
      27, 2009




F-2




YUHE
INTERNATIONAL, INC.


(Formerly
known as First Growth Investors, Inc.)





CONSOLIDATED
BALANCE SHEETS


(Stated
in US Dollars)





December
      31,2008
                                    
                                    
                                    2007ASSETSCurrent
      assets:Cash
      and cash equivalents
                                    
                                    $
                                    13,412,205
                                    
                                    
                                    $
                                    1,050,168Accounts
      receivable
                                    
                                    
                                    902
                                    
                                    
                                    
                                    -Inventories
                                    
                                    
                                    6,644,961
                                    
                                    
                                    
                                    -Advances
      to suppliers
                                    
                                    
                                    4,472,509
                                    
                                    
                                    
                                    -Total
      current assets
                                    
                                    
                                    24,530,577
                                    
                                    
                                    
                                    1,050,168Plant
      and equipment, net
                                    
                                    
                                    27,112,276
                                    
                                    
                                    
                                    -Deposits
      paid for acquisition of long term assets
                                    
                                    
                                    2,280,988
                                    
                                    
                                    
                                    -Notes
      receivable, net
                                    
                                    
                                    74,070
                                    
                                    
                                    
                                    -Other
      receivables, net
                                    
                                    
                                    650
                                    
                                    
                                    
                                    -Unlisted
      investments held for sale
                                    
                                    
                                    299,427
                                    
                                    
                                    
                                    -Intangible
      assets, net
                                    
                                    
                                    2,909,752
                                    
                                    
                                    
                                    -Due
      from related companies
                                    
                                    
                                    3,706,589
                                    
                                    
                                    
                                    1,000,000Deferred
      expenses
                                    
                                    
                                    604,973
                                    
                                    
                                    
                                    -Total
      assets
                                    
                                    $
                                    61,519,302
                                    
                                    
                                    $
                                    2,050,168LIABILITIES
      AND STOCKHOLDERS’ EQUITYCurrent
      liabilities:Accounts
      payable
                                    
                                    $
                                    4,606,055
                                    
                                    
                                    $
                                    -Current
      portion of long term loans
                                    
                                    
                                    1,356,832
                                    
                                    
                                    
                                    -Other
      payable
                                    
                                    
                                    937,535
                                    
                                    
                                    
                                    -Payroll
      and payroll related liabilities
                                    
                                    
                                    1,397,221
                                    
                                    
                                    
                                    -Accrued
      expenses
                                    
                                    
                                    728,366
                                    
                                    
                                    
                                    70Advances
      from customers
                                    
                                    
                                    673,528
                                    
                                    
                                    
                                    -Other
      taxes payable
                                    
                                    
                                    141,541
                                    
                                    
                                    
                                    -Loan
      from director
                                    
                                    
                                    291,792
                                    
                                    
                                    
                                    -Other
      liabilities
                                    
                                    
                                    143,591
                                    
                                    
                                    
                                    -Due
      to related companies
                                    
                                    
                                    210,633
                                    
                                    
                                    
                                    2,210Total
      current liabilities
                                    
                                    
                                    10,487,094
                                    
                                    
                                    
                                    2,280Non-current
      liabilitiesLong-term
      loans
                                    
                                    
                                    9,410,289
                                    
                                    
                                    
                                    -Total
      liabilities
                                    
                                    
                                    19,897,383
                                    
                                    
                                    
                                    2,280Stockholders'
      EquityCommon
      stock at $.001 par value; authorized 500,000,000 shares authorized,
      15,722,178 and 8,626,318 equivalent shares issued and
      outstanding
                                    
                                    
                                    15,722
                                    
                                    
                                    
                                    8,626Additional
      paid-in capital
                                    
                                    
                                    29,944,016
                                    
                                    
                                    
                                    2,041,474Retained
      earnings (accumulated deficits)
                                    
                                    
                                    10,522,673
                                    
                                    
                                    
                                    (2,212
                                    )Accumulated
      other comprehensive income
                                    
                                    
                                    1,139,508
                                    
                                    
                                    
                                    -Total
      stockholders’ equity
                                    
                                    
                                    41,621,919
                                    
                                    
                                    
                                    2,047,888Total
      liabilities and stockholders’ equity
                                    
                                    $
                                    61,519,302
                                    
                                    
                                    $
                                    2,050,168





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




F-3





YUHE
INTERNATIONAL, INC.


(Formerly
known as First Growth Investors, Inc.)




CONSOLIDATED
STATEMENTS OF INCOME AND COMPREHENSIVE INCOME


(Stated
in US Dollars)


December 312008
                
                
                2007Net
      revenue
                
                $
                34,626,282
                
                
                $
                -Cost
      of revenue
                
                
                (21,572,722
                )
                
                
                -Gross
      profit
                
                
                13,053,560
                
                
                
                -Operating
      ExpensesSelling
                
                
                (425,460
                )
                
                
                -General
      and administrative expenses
                
                
                (2,538,590
                )
                
                
                (2,340
                )Total
      operating expenses
                
                
                (2,964,050
                )
                
                
                (2,340
                )Income
      (loss) from operations
                
                
                10,089,510
                
                
                
                (2,340
                )Non-operating
      income (expenses)Bad
      debts recovery
                
                
                813,000
                
                
                
                -Interest
      income
                
                
                249,738
                
                
                
                -Other
      income (expenses)
                
                
                (21,704
                )
                
                
                198Gain
      on disposal of fixed assets
                
                
                84,663
                
                
                
                -Investment
      income
                
                
                12,251
                
                
                
                -Interest
      expenses
                
                
                (702,573
                )
                
                
                (70
                )Total
      other income (expenses)
                
                
                435,375
                
                
                
                128Net
      income (loss) before income taxes
                
                
                10,524,885
                
                
                
                (2,212
                )Income
      taxes
                
                
                -
                
                
                
                -Net
      income (loss)
                
                $
                10,524,885
                
                
                $
                (2,212
                )Other
      comprehensive incomeForeign
      currency translation
                
                
                1,139,508
                
                
                
                -Comprehensive
      income
                
                $
                11,664,393
                
                
                $
                (2,212
                )Earnings
      per shareBasic
                
                $
                0.74
                
                
                $
                -Diluted
                
                $
                0.73
                
                
                $
                -Weighted
      average shares outstandingBasic
                
                
                14,233,268
                
                
                
                8,626,318Diluted
                
                
                14,476,504
                
                
                
                8,626,318





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


F-4


YUHE
INTERNATIONAL, INC.


(Formerly
known as First Growth Investors, Inc.)




CONSOLIDATED
STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY


(Stated
in US Dollars)





Common stockShares
                              outstanding
                            
                            
                            Amount
                            
                            
                            Additional
                              paid-in capital
                            
                            
                            Retained
                              Earnings
                            
                            
                            Accumulated other
                              comprehensive
                              income
                            
                            
                            Total
                              Stockholders’
                              EquityBalance
      at December 31, 2006
                            
                            
                            -
                            
                            
                            $
                            -
                            
                            
                            $
                            -
                            
                            
                            $
                            -
                            
                            
                            $
                            -
                            
                            
                            $
                            -Issue
      of common stock on incorporation
                            
                            
                            100
                            
                            
                            
                            100
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            100Net
      loss
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            (2,212
                            )
                            
                            
                            -
                            
                            
                            
                            (2,212
                            )Contribution
      from shareholder
                            
                            
                            8,626,218
                            
                            
                            
                            8,526
                            
                            
                            
                            2,041,474
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            2,050,000Balance
      at December 31, 2007
                            
                            
                            8,626,318
                            
                            
                            
                            8,626
                            
                            
                            
                            2,041,474
                            
                            
                            
                            (2,212
                            )
                            
                            
                            -
                            
                            
                            
                            2,047,888Additional
      capital contribution
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            12,149,750
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            12,149,750Recapitalization
                            
                            
                            1,087,994
                            
                            
                            
                            1,088
                            
                            
                            
                            (2,082
                            )
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            (994
                            )Share
      issued in placement agent at $3.088 per share
                            
                            
                            5,829,018
                            
                            
                            
                            5,829
                            
                            
                            
                            17,994,171
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            18,000,000Cost
      of raising capital
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            (2,640,477
                            )
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            (2,640,477
                            )Stock
      based compensation
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            401,359
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            401,359Cashless
      exercise of warrants
                            
                            
                            178,848
                            
                            
                            
                            179
                            
                            
                            
                            (179
                            )
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            -Net
      income for the year
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            10,524,885
                            
                            
                            
                            
                            
                            
                            
                            10,524,885Foreign
      currency translation difference
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            1,139,508
                            
                            
                            
                            1,139,508Balance
      at December 31, 2008
                            
                            
                            15,722,178
                            
                            
                            $
                            15,722
                            
                            
                            $
                            29,944,016
                            
                            
                            $
                            10,522,673
                            
                            
                            $
                            1,139,508
                            
                            
                            $
                            41,621,919





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


F-5


YUHE
INTERNATIONAL, INC.


(Formerly
known as First Growth Investors, Inc.)


CONSOLIDATED
STATEMENTS OF CASH FLOWS (Stated in US Dollars)




Year EndedDecember 312008
                              
                              
                              2007Cash
      flows from operating activitiesNet
      income (loss)
                              
                              $
                              10,524,885
                              
                              
                              $
                              (2,212
                              )Adjustments
      to reconcile net income (loss) to net cash used in operating
      activities:Stock
      based compensation
                              
                              
                              401,359
                              
                              
                              
                              -Depreciation
                              
                              
                              1,668,059
                              
                              
                              
                              -Amortization
                              
                              
                              59,209
                              
                              
                              
                              -Capitalized
      interest in construction in progress
                              
                              
                              437,221
                              
                              
                              
                              -Bad
      debts recovery
                              
                              
                              (813,000
                              )Gain
      on disposal of fixed assets
                              
                              
                              (84,663
                              )
                              
                              
                              -Income
      from unlisted investment
                              
                              
                              (6,074
                              )
                              
                              
                              -Changes
      in operating assets and liabilities:Accounts
      receivable
                              
                              
                              (25
                              )
                              
                              
                              -Advances
      to suppliers
                              
                              
                              (11,781,086
                              )
                              
                              
                              -Inventories
                              
                              
                              (1,652,341
                              )
                              
                              
                              -Deferred
      expenses
                              
                              
                              (1,000
                              )
                              
                              
                              -Accounts
      payable
                              
                              
                              (408,001
                              )
                              
                              
                              -Other
      payable
                              
                              
                              (739,165
                              )
                              
                              
                              -Payroll
      and payroll related liabilities
                              
                              
                              626,620
                              
                              
                              
                              -Accrued
      expenses
                              
                              
                              (459,221
                              )
                              
                              
                              70Advances
      from customers
                              
                              
                              455,983
                              
                              
                              
                              -Other
      taxes payable
                              
                              
                              9,386
                              
                              
                              
                              -Prepaid
      expenses
                              
                              
                              
                              
                              
                              
                              -Net
      cash provided by (used in) operating activities
                              
                              
                              (1,761,854
                              )
                              
                              
                              (2,142
                              )Cash
      flows from investing activitiesDeposit
      paid and acquisition of property, plant and equipment
                              
                              
                              (5,461,344
                              )
                              
                              
                              -Advance
      to notes receivable
                              
                              
                              (3,432,603
                              )Proceeds
      from disposal of fixed assets
                              
                              
                              118,216
                              
                              
                              
                              -Acquisition
      of subsidiaries
                              
                              
                              (10,567,946
                              )
                              
                              
                              -Proceeds
      from notes receivable
                              
                              
                              4,309,226
                              
                              
                              
                              -Proceeds
      received from related parties receivables
                              
                              
                              1,106,240
                              
                              
                              
                              -Advance
      to related companies
                              
                              
                              -
                              
                              
                              
                              (1,000,000
                              )Net
      cash (used in) investing activities
                              
                              
                              (13,928,211
                              )
                              
                              
                              (1,000,000
                              )Cash
      flows from financing activitiesProceeds
      from loan payable
                              
                              
                              1,300,726
                              
                              
                              
                              -Repayment
      of loan payable
                              
                              
                              (1,099,842
                              )
                              
                              
                              -Proceeds
      from related party payable
                              
                              
                              260,454
                              
                              
                              
                              2,210Repayment
      of related party payable
                              
                              
                              (58,629
                              )
                              
                              
                              -Capital
      contribution by shareholder
                              
                              
                              12,149,750
                              
                              
                              
                              2,050,000Proceeds
      from issuance of common stock
                              
                              
                              15,359,523
                              
                              
                              
                              100Net
      cash flows provided by financing activities:
                              
                              
                              27,911,982
                              
                              
                              
                              2,052,310Effect
      of foreign currency translation on cash and cash
    equivalents
                              
                              
                              140,120
                              
                              
                              
                              -Net
      increase in cash
                              
                              
                              12,362,037
                              
                              
                              
                              1,050,168Cash-
      beginning of year
                              
                              
                              1,050,168
                              
                              
                              
                              -Cash-
      end of year
                              
                              $
                              13,412,205
                              
                              
                              $
                              1,050,168Cash
      paid during the period for:Interest
      paid
                              
                              $
                              1,199,467
                              
                              
                              $
                              -Income
      taxes paid
                              
                              $
                              -
                              
                              
                              $
                              -





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


F-6


YUHE
INTERNATIONAL, INC.


(Formerly
known as First Growth Investors Inc.)





NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


(Stated
in US Dollars)





1.
            Organization
      and Basis of Preparation of Financial
Statements





Yuhe
International, Inc.





Yuhe
International, Inc., formerly known as First Growth Investors, Inc., “Yuhe” or
“the Company”, was originally organized under the laws of the State of Nevada on
September 9, 1997. The Company was not engaged in any business activities and
had no operations, income producing assets or significant operating capital. At
December 31, 2007, the Company was at development stage until its business
combination with Bright Stand on March 12, 2008.





On March
12, 2008, the Company completed a reverse acquisition transaction with Bright
Stand International Co., Ltd., “Bright Stand”, and Kunio Yamamoto, a Japanese
person and the sole former stockholder of Bright Stand. Pursuant to the terms of
the Equity Transfer Agreement, the Company acquired all of the outstanding
capital stock of Bright Stand from Mr. Yamamoto in exchange for 126,857,134
shares, equivalent to 8,626,318 post-split shares, of its common stock. As a
result of the transaction, Mr. Yamamoto held 126,857,134 shares, equivalent to
8,626,318 post split shares, or 88.8 % of the Company’s 142,857,134 shares,
equivalent to 9,714,312 post–split shares, of common stock then outstanding
following the completion of all matters referred to above. At the closing,
Bright Stand became a wholly-owned subsidiary of the Company. Accordingly, all
references to common shares of Bright Stand’s common stock have been restated to
reflect the equivalent numbers of Yuhe International Inc. equivalent shares.
Bright Stand thereby became the Company’s wholly owned subsidiary and the former
shareholders of Bright Stand became the Company’s controlling
stockholders.





This
share exchange transaction resulted in Bright Stand former stockholders
obtaining a majority voting interest in the Company. Generally accepted
accounting principles require that the company whose stockholders retain the
majority interest in a combined business be treated as the acquirer for
accounting purposes, resulting in a reverse acquisition with Bright Stand as the
accounting acquirer and Yuhe International, Inc. as the acquired party.
Accordingly, the share exchange transaction has been accounted for as a
recapitalization of the Company. The equity section of the accompanying
financial statements has been restated to reflect the recapitalization of the
Company due to the reverse acquisition as of the first day of the first period
presented. The assets and liabilities acquired that, for accounting purposes,
were deemed to have been acquired by Bright Stand were not
significant.


F-7


YUHE
INTERNATIONAL, INC.


(Formerly
known as First Growth Investors Inc.)





NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


(Stated
in US Dollars)





1.
            Organization
      and Basis of Preparation of Financial Statements -
    continued





On March
12, 2008, the Company closed a Securities Purchase Agreement with certain
investors, the “Financing”. Pursuant to the terms of such Securities Purchase
Agreement, such investors collectively invested $18,000,000 into Yuhe at the
price of $0.21, $3.088 post-split, per share in exchange for the Company’s
issuance of 85,714,282, equivalent to approximately 5,829,018 post-split shares,
shares to such investors. Mr. Yamamoto also sold 14,285,710, equivalent to
971,500 post-split shares, shares of common stock to such investors for
$3,000,000. Immediately following the closing of the Securities Purchase
Agreement, Mr. Yamamoto owned 112,571,424, equivalent to 7,654,895 post-split
shares, shares of the Company’s common stock, and the investors owned 99,999,992
shares, equivalent to 6,800,518 post-split shares, of the Company’s common
stock.





From the
private placement arrangement, the Company raised gross proceeds of
$18,000,000.





The
Company amended its articles of incorporation on April 4, 2008 and changed its
name into Yuhe International Inc.





Bright
Stand International Limited, “Bright Stand”





On August
3, 2007, Bright Stand International Limited, “Bright Stand”, was incorporated
with limited liability in the British Virgin Islands. On January 31, 2008,
Bright Stand International Limited completed the acquisition (note 3) of 100%
common stock of Weifang Yuhe Poultry Co., Limited “PRC Yuhe” and 43.75% of
Weifang Taihong Feed Co., Ltd., “Taihong”. As a result, Bright Stand owned 100%
of PRC Yuhe and owned 43.75% direct interest of Taihong and 56.25% indirect
interest of Taihong through PRC Yuhe. PRC Yuhe and Taihong became the
wholly-owned subsidiaries of Bright Stand.





Weifang
Yuhe Poultry Co., Ltd., “PRC Yuhe”





Weifang
Yuhe Poultry Co., Ltd., “PRC Yuhe”, was established in Weifang, Shandong of the
People’s Republic of China, the “PRC”, as a limited company on March 8,
1996.  PRC Yuhe is a supplier of day-old chickens raised for meat
production, or broilers, in the People’s Republic of China.





Weifang
Taihong Feed Co., Ltd., “Taihong”





Weifang
Taihong Feed Co., Ltd. was established in Weifang, Shandong of the People’s
Republic of China, the “PRC”, as a limited company on May 26, 2003. Taihong is a
feed stock company whose primary purpose is to supply feed stock for PRC Yuhe’s
breeder chickens.


F-8


YUHE
INTERNATIONAL, INC.


(Formerly
known as First Growth Investors Inc.)





NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


(Stated
in US Dollars)





1.
            Organization
      and Basis of Preparation of Financial Statements -
    continued





The
Company’s operations are conducted through its subsidiaries in the People’s
Republic of China, PRC Yuhe, and Taihong. The Company and its subsidiary,
hereinafter, collectively referred to as “the Group”, are engaged in the
business of chick and feed production.





2.
            Summary
      of significant accounting policies





(a)
              Principles
      of consolidation





The
consolidated financial statements, prepared in accordance with generally
accepted accounting principles in the United States of America, include the
assets, liabilities, revenues, expenses and cash flows of the Company and all
its subsidiaries. This basis of accounting differs in certain material respects
from that used for the preparation of the books and records of the Company’s
principal subsidiaries, which are prepared in accordance with the accounting
principles and the relevant financial regulations applicable to enterprises with
limited liabilities established in the PRC, “PRC GAAP”, the accounting standards
used in the place of their domicile.  The accompanying consolidated
financial statements reflect necessary adjustments not recorded in the books and
records of the Company’s subsidiaries to present them in conformity with
generally accepted accounting principles in the United States of
America.





The
consolidated financial statements of the Company include the accounts of Yuhe
International, Inc, Bright Stand International Limited, Weifang Yuhe Poultry
Co., Ltd and Weifang Taihong Feed Co., Ltd. after the date of acquisitions. All
significant intercompany accounts, transactions and cash flows are eliminated on
consolidation.





The
following table depicts the identities of the subsidiary:





Name of Company
                      
                      Place & date
                        of
                        Incorporation
                      
                      Attributable
                        Equity Interest
                        %
                      
                      
                      Registered CapitalWeifang
      Yuhe Poultry Co., Ltd
                      
                      PRC/
                        March
      8, 1996
                      
                      
                      100%
                      
                      
                      $
                      11,045,467
                      
                      (equivalent
      to RMB77,563,481)Weifang
      Taihong Feed Co., Ltd.
                      
                      PRC/
                        May
      26 2003
                      
                      
                      100%
                      
                      
                      $
                      965,379
                      
                      (equivalent
      to
RMB8,000,000)


F-9


YUHE
INTERNATIONAL, INC.


(Formerly
known as First Growth Investors Inc.)





NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


(Stated
in US Dollars)





2.
            Summary
      of significant accounting policies –
continued





(b)
            Use
      of estimates





The
preparation of the financial statements in conformity with generally accepted
accounting principles in the United States of America 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 periods.  Management makes these estimates using
the best information available at the time the estimates are made; however
actual results could differ materially from those estimates.





(c)
            Intangible
      assets





Intangible
assets represent land use rights in the PRC.  Land use rights are
carried at cost and amortized on a straight-line basis over the period of rights
of 50 years commencing from the date of acquisition of equitable interest.
According to the laws of PRC, the government owns all of the land in PRC.
Companies or individuals are authorized to possess and use the land only through
land usage rights approved by the PRC government.





(d)
            Economic
      and political risks





The
Company’s operations are conducted in the PRC. Accordingly, the Company’s
business, financial condition and results of operations may be influenced by the
political, economic and legal environment in the PRC, and by the general state
of the PRC economy.





The
Company’s operations in the PRC are subject to special considerations and
significant risks not typically associated with companies in North America and
Western Europe. These include risks associated with, among others, the
political, economic and legal environment and foreign currency exchange. The
Company’s results may be adversely affected by changes in the political and
social conditions in the PRC, and by changes in governmental policies with
respect to laws and regulations, anti-inflationary measures, currency
conversion, remittances abroad, and rates and methods of taxation, among other
things.


F-10


YUHE
INTERNATIONAL, INC.


(Formerly
known as First Growth Investors Inc.)





NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


(Stated
in US Dollars)





2.  Summary
of significant accounting policies - continued





(e)
            Plant
      and equipment





Plant and
equipment are carried at cost less accumulated depreciation. Depreciation is
provided over their estimated useful lives, using the straight-line method.
Estimated useful lives of the plant and equipment are as follows:





Buildings
                          20
      yearsMachinery
                          10
      yearsVehicle
                          5
      yearsFurniture
      and equipment
                          3
      years





The cost
and related accumulated depreciation of assets sold or otherwise retired are
eliminated from the accounts and any gain or loss is included in the statement
of income. The cost of maintenance and repairs is charged to income as incurred,
whereas significant renewals and betterments are capitalized.





(f)
            Guarantee
      Expense





The
Company accounts for its liability for product guaranteed in accordance with
FASB Interpretation No. 45 (FIN 45), “Guarantor’s Accounting and Disclosure
Requirements for Guarantees, Including Indirect Guarantees of Indebtedness of
Others.” Under FIN 45, the aggregate changes in the liability for accruals
related to product warranties issued during the reporting period must be charged
to expense as incurred.





The
Company guarantees a 98% survival rate of its product by delivering additional
2% of the product. The guarantee expires seven days after delivery. If the
survival rate falls below 96%, the Company provides additional guarantee
compensation to customers. Based on historical experience, the likelihood that
survival rate falls below 96% is remote and therefore no accrued guarantee
liability was recorded at year-end. Guarantee expense for the years ended
December 31, 2008 and 2007 were $65,769 and $0, respectively.





(g)
            Accounting
      for the impairment of long-lived
assets





The
long-lived assets held and used by the Company are reviewed for impairment
whenever events or changes in circumstances indicate that the carrying amount of
assets may not be recoverable. It is reasonably possible that these assets could
become impaired as a result of technology or other industry
changes.  Determination of recoverability of assets to be held and
used is done by comparing the carrying amount of an asset to future net
undiscounted cash flows to be generated by the assets.


F-11


YUHE
INTERNATIONAL, INC.


(Formerly
known as First Growth Investors Inc.)





NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


(Stated
in US Dollars)





2.  Summary
of significant accounting policies - continued





If such
assets are considered to be impaired, the impairment to be recognized is
measured as the amount by which the carrying amount of the assets exceeds the
fair value of the assets. Assets to be disposed of are reported at the lower of
the carrying amount or fair value less costs to sell.  During the
reporting periods, there was no impairment loss.





(h)
            Inventories





Inventories
consisting of raw materials, work in progress and finished goods are stated at
lower of cost or net realizable value.  The cost of inventories is
determined using weighted average cost method, and includes expenditure incurred
in acquiring the inventories and bringing them to their existing location and
condition. Net realizable value is the estimated selling price in the ordinary
course of business less any applicable selling expenses. Finished goods are
comprised of direct materials, direct labor and an appropriate proportion of
overhead.  At each balance sheet date, inventories that are worth less
than cost are written down to their net realizable value, and the difference is
charged to the cost of revenues of that period.





(i)
              Trade
      receivables





Trade
receivables are recognized and carried at the original invoice amount less
allowance for any uncollectible amounts. An estimate for doubtful accounts is
made when collection of the full amount is no longer probable. Management
adopted an allowance policy which provides an allowance equivalent to 30% of
gross amount of accounts receivables due over 6 months and 60% of gross amount
of accounts receivables due over 1 year. Full provision will be made for
accounts receivables due over 2 years. Bad debts are written off as incurred. It
is a common industry practice in the PRC that customers pay in advance prior to
delivery of the products. As a result, the Company maintains a low level of
trade receivables.





(j)
              Notes
      receivable





Notes
receivable are stated at the original principal amount less allowance for any
uncollectible amounts. Management provides for an allowance when collection of
the full amount is no longer probable by establishing an allowance equivalent to
30% of gross amount of notes receivables due over 6 months and 60% of gross
amount of notes receivable due over 1 year. Full provision will be made for
notes receivable due over 2 years.


F-12


YUHE
INTERNATIONAL, INC.


(Formerly
known as First Growth Investors Inc.)





NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


(Stated
in US Dollars)





2.
            Summary
      of significant accounting policies -
continued





(k)
            Cash
      and cash equivalents





The
Company considers all highly liquid investments purchased with original
maturities of three months or less to be cash equivalents. The Company maintains
bank accounts only in the PRC. The Company does not maintain any bank accounts
in the United States of America.  Cash deposits in PRC banks are not
insured by any government agency or entity.





(l)
            Revenue
      recognition





Revenue
from sales of the Company’s products is recognized when the significant risks
and rewards of ownership have been transferred to the third-party distributor
and larger producers at the time when the products are delivered to and accepted
by them, the sales price is fixed or determinable as stated in the sales
contract, and collection is reasonably assured.





Customers
do not have a general right of return on products delivered.





(m)
            Cost
      of revenues





Cost of
revenues consists primarily of material costs, employee compensation,
depreciation and related expenses, which are directly attributable to the
production of products.  Write-down of inventory to lower of cost or
market is also recorded in cost of revenues.





(n)
            Advertising





The
Company expensed all advertising costs as incurred.  There were no
advertising expenses for the years ended December 31, 2008 and
2007.





(o)
            Retirement
      benefit plans





The
employees of the Company are members of a state-managed retirement benefit plan
operated by the government of the PRC.  The Company is required to
contribute a specified percentage of payroll costs to the retirement benefit
scheme to fund the benefits. The only obligation of the Company with respect to
the retirement benefit plan is to make the specified contributions.





Retirement
benefits in the form of contributions under defined contribution retirement
plans to the relevant authorities are charged to the statements of income as
incurred. The retirement benefit expenses for the years ended December 31, 2008
and 2007 were $75,049 and $0 respectively.


F-13


YUHE
INTERNATIONAL, INC.


(Formerly
known as First Growth Investors Inc.)





NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


(Stated
in US Dollars)





2.
            Summary
      of significant accounting policies -
continued





(p)
            Income
      tax





The
Company accounts for income taxes using an asset and liability approach and
allows for recognition of deferred tax benefits in future
years.  Under the asset and liability approach, deferred taxes are
provided for the net tax effects of temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes and the
amounts used for income tax purposes.  A valuation allowance is
provided for deferred tax assets if it is more likely than not these items will
either expire before the Company is able to realize their benefits, or that
future realization is uncertain.





The
Company is operating in the PRC, and in accordance with the relevant tax laws
and regulations of PRC, the corporation income tax rate is 25%. Weifang Yuhe
Poultry Co., Ltdis
a poultry company, and in accordance with the relevant regulations regarding the
favorable tax treatment for an outstanding poultry company, the Company is
entitled to a tax free treatment.





The
corporate income tax for the subsidiary, Weifang Taihong Feed Co., Ltd is
25%.





(q)
            Shipping
      and handling fees





Shipping
and handling fees are expensed when incurred.  During the years ended
December 31, 2008 and 2007, Shipping and handling charges included in the
selling expenses were $11,686 and $0 respectively.





(r)
            Foreign
      currency translation





The
accompanying financial statements are presented in United States dollars. The
functional currency of the Company is the Renminbi (RMB).  The
financial statements are translated into United States dollars from RMB at
year-end exchange rates as to assets and liabilities and average exchange rates
as to revenues and expenses. Capital accounts are translated at their historical
exchange rates when the capital transactions occurred.





The RMB
is not freely convertible into foreign currency and all foreign exchange
transactions must take place through authorized institutions.  No
representation is made that the RMB amounts could have been, or could be,
converted into $ at the rates used in translation.


F-14


YUHE
INTERNATIONAL, INC.


(Formerly
known as First Growth Investors Inc.)





NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


(Stated
in US Dollars)





2.
            Summary
      of significant accounting policies -
continued





(s)
            Comprehensive
      income





Comprehensive
income is defined to include all changes in equity except those resulting from
investments by owners and distributions to owners.  Among other
disclosures, all items that are required to be recognized under current
accounting standards as components of comprehensive income are required to be
reported in a financial statement that is presented with the same prominence as
other financial statements.  The component of comprehensive income
includes foreign currency translation adjustment.





(t)
            Fair
      value of financial instruments




SFAS No.
107, “Disclosures about Fair Value of Financial Instruments” (“SFAS 107”)
requires entities to disclose the fair values of financial instruments except
when it is not practicable to do so. Under SFAS No. 107, it is not practicable
to make this disclosure when the costs of formulating the estimated values
exceed the benefit when considering how meaningful the information would be to
financial statement users.





The fair
values of all assets and liabilities do not differ materially from their
carrying amounts. None of the financial instruments held are derivative
financial instruments and none were acquired or held for trading purposes during
the years ended December 31, 2008 or 2007.





(u)
            Basic
      and diluted earnings per share





The
Company reports basic earnings per share in accordance with SFAS No. 128,
“Earnings Per Share”. Basic earnings per share are computed using the weighted
average number of shares outstanding during the periods presented. The weighted
average number of shares of the Company represents the common stock outstanding
during the reporting periods.





Diluted
earnings per share are based on the assumption that all dilutive options were
converted or exercised. Dilution is computed by applying the treasury stock
method. Under this method, options are assumed to be exercised at the time of
issuance, and as if funds obtained thereby were used to purchase common stock at
the average market price during the year.


F-15


YUHE
INTERNATIONAL, INC.


(Formerly
known as First Growth Investors Inc.)





NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


(Stated
in US Dollars)





2.
            Summary
      of significant accounting policies -
continued





(v)
            Statutory
      reserve





In
accordance with the relevant laws and regulations of the PRC and the articles of
association of the Company’s PRC subsidiaries, PRC Yuhe and Taihong are required
to allocate 10% of their net income reported in the PRC statutory accounts,
after offsetting any prior years’ losses, to the statutory surplus reserve, on
an annual basis.  When the balance of such reserve reaches 50% of the
respective registered capital of the subsidiaries, any further allocation is
optional.  The statutory surplus reserves can be used to offset prior
years’ losses, if any, and may be converted into registered capital, provided
that the remaining balances of the reserve after such conversion is not less
than 25% of registered capital. The statutory surplus reserve is
non-distributable.





(w)
            Recent
      accounting pronouncements





In
December 2007, the FASB issued SFAS No. 141R, “Business Combinations” (“SFAS No.
141R”). SFAS No. 141R amends SFAS 141 and provides revised guidance for
recognizing and measuring identifiable assets and goodwill acquired, liabilities
assumed, and any noncontrolling interest in the acquiree. It also provides
disclosure requirements to enable users of the financial statements to evaluate
the nature and financial effects of the business combination. It is effective
for fiscal years beginning on or after December 15, 2008 and will be applied
prospectively. The Company is currently evaluating the impact of adopting SFAS
No. 141R on its consolidated financial statements.





In
December 2007, the Financial Accounting Standards Board (“FASB”) issued SFAS No.
160, “Noncontrolling Interests in Consolidated Financial Statements — an
amendment of ARB No. 51” (“SFAS No. 160”). SFAS No. 160 requires that ownership
interests in subsidiaries held by parties other than the parent, and the amount
of consolidated net income, be clearly identified, labeled, and presented in the
consolidated financial statements. It also requires once a subsidiary is
deconsolidated, any retained noncontrolling equity investment in the former
subsidiary be initially measured at fair value. Sufficient disclosures are
required to clearly identify and distinguish between the interests of the parent
and the interests of the noncontrolling owners. It is effective for fiscal years
beginning on or after December 15, 2008 and requires retroactive adoption of the
presentation and disclosure requirements for existing minority interests. All
other requirements shall be applied prospectively. The Company is currently
evaluating the impact of adopting SFAS No. 160 on its consolidated financial
statements.


F-16


YUHE
INTERNATIONAL, INC.


(Formerly
known as First Growth Investors Inc.)





NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


(Stated
in US Dollars)





2.
            Summary
      of significant accounting policies -
continued





In March
2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments
and Hedging Activities,” which requires enhanced disclosures about an entity’s
derivative and hedging activities. This Statement is effective for financial
statements issued for fiscal years and interim periods beginning after November
15, 2008. Since FAS 161 only provides for additional disclosure requirements,
there will be no impact on the Company’s results of operations and financial
position.





In May
2008, the FASB issued Statement of Financial Accounting Standards No. 162, The Hierarchyof Generally Accepted Accounting
Principles(“SFAS 162"). This Standard identifies the sources of
accounting principles and the framework for selecting theprinciples to be used
in the preparation of financial statements of nongovernmental entities that are
presented in conformity withgenerally accepted
accounting principles. FAS 162 directs the hierarchy to the entity, rather than
the independent auditors, as theentity is responsible
for selecting accounting principles for financial statements that are presented
in conformity with generallyaccepted accounting
principles. The Standard is effective 60 days following SEC approval of the
Public Company AccountingOversight Board
amendments to remove the hierarchy of generally accepted accounting principles
from the auditing standards. FAS162 is not expected to
have an impact on the consolidated financial statements.





In May
2008, the FASB issued SFAS No. 163, Accounting for Financial Guarantee Insurance
Contracts, an interpretation of FASB Statement No. 60 (SFAS
163).  This statement clarifies accounting for financial guarantee
insurance contracts by insurance enterprises under FASB Statement No. 60,
Accounting and Reporting by Insurance Enterprises.  SFAS 163 is
effective for fiscal years and interim periods within those years, beginning
after December 15, 2008.  Because the Company does not issue financial
guarantee insurance contracts, it does not expect the adoption of this standard
to have an effect on its financial position or results of
operations.





In April
2008, the FASB issued FASB Staff Position (FSP) FAS 142-3, Determination of the Useful Life of
Intangible Assets, which amends the factors that should be considered in
developing renewal or extension assumptions used to determine the useful life of
a recognized intangible asset under FASB Statement No. 142, Goodwill and Other Intangible
Assets.This Staff Position is effective for financial statements issued
for fiscal years beginning after December 15, 2008, and interim periods within
those fiscal years. Early adoption is prohibited. Application of this FSP is not
currently applicable to the Company as the Company’s intangible assets consist
of land used rights which has a fixed useful life of 50 years.


F-17


YUHE
INTERNATIONAL, INC.


(Formerly
known as First Growth Investors Inc.)





NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


(Stated
in US Dollars)





2.
            Summary
      of significant accounting policies -
continued





In June
2008, the FASB issued FSP EITF 03-6-1, Determining Whether Instruments
Granted Share-Based Payment Transactions are Participating Securities.
This FSP provides that unvested share-based payment awards that contain
nonforfeitable rights to dividends or dividend equivalents (whether paid or
unpaid) are participating securities and shall be included in the computation of
earnings per share pursuant to the two-class method.





This FSP
is effective for financial statements issued for fiscal years beginning after
December 15, 2008, and interim periods within those years.  All
prior-period EPS data presented shall be adjusted retrospectively (including
interim financial statements, summaries of earnings, and selected financial
data) to conform with the provisions of this FSP.  Early application
is not permitted. The Company is currently evaluating the impact of adopting
EITF 03-6-1 on its consolidated financial statements.





3.
            Acquisition
      of subsidiaries





On
January 31, 2008, Bright Stand acquired 100% common stock of Weifang
Yuhe Poultry Co., Limited for $11,306,522, RMB 81,450,000, and 43.75% of Weifang
Taihong Feed Co., Ltd for $312,530, RMB 2,244,000,  and total
amount is $11,619,052.





The
Company adopted SFAS No. 141, Business Combinations, which requires the use of
the purchase method of accounting for any business combinations initiated after
June 30, 2002. The results of PRC Yuhe and Taihong and the estimated fair market
values of the assets and liabilities have been included in the Company’s
consolidated financial statements from the date of acquisition. The purchase
price for PRC Yuhe and Taihong was allocated to the assets acquired and
liabilities assumed of PRC Yuhe and Taihong. All assets and liabilities assumed,
based on their fair values as follows:


F-18


YUHE
INTERNATIONAL, INC.


(Formerly
known as First Growth Investors Inc.)





NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


(Stated
in US Dollars)





3.
            Acquisition
      of subsidiaries - continued





Accounts
      receivable
                                                                    
                                                                    $
                                                                    1,475Other
      receivables
                                                                    
                                                                    
                                                                    3,001,699Deposits
      paid
                                                                    
                                                                    
                                                                    1,084,265Deferred
      expenses
                                                                    
                                                                    
                                                                    602,918Advance
      to suppliers
                                                                    
                                                                    
                                                                    305,013Inventories
                                                                    
                                                                    
                                                                    4,624,425Due
      from related companies
                                                                    
                                                                    
                                                                    4,008,506Unlisted
      investment
                                                                    
                                                                    
                                                                    279,738Plant
      and equipment
                                                                    
                                                                    
                                                                    15,323,245Intangible
      assets
                                                                    
                                                                    
                                                                    2,832,869Accounts
      payable
                                                                    
                                                                    
                                                                    (4,800,664
                                                                    )Accrued
      expenses
                                                                    
                                                                    
                                                                    (473,020
                                                                    )Payroll
      and related liabilities
                                                                    
                                                                    
                                                                    (545,565
                                                                    )Other
      tax payable
                                                                    
                                                                    
                                                                    (125,645
                                                                    )Advances
      from customers
                                                                    
                                                                    
                                                                    (209,694
                                                                    )Other
      payables
                                                                    
                                                                    
                                                                    (1,770,862
                                                                    )Due
      to related company
                                                                    
                                                                    
                                                                    (320,913
                                                                    )Notes
      payable
                                                                    
                                                                    
                                                                    (10,549,316
                                                                    )Other
      assumed liabilities/Other payable
                                                                    
                                                                    
                                                                    (2,520,531
                                                                    )Net
      assets acquired
                                                                    
                                                                    $
                                                                    10,747,943Less
      : Purchase Consideration (net of cash received)
                                                                    
                                                                    
                                                                    (10,567,946
                                                                    )Negative
      goodwill being transfer to construction in progress
                                                                    
                                                                    
                                                                    179,997


F-19


YUHE
INTERNATIONAL, INC.


(Formerly
known as First Growth Investors Inc.)





NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


(Stated
in US Dollars)





3.
            Acquisition
      of subsidiaries - continued





The
following table presents the unaudited results of operations of the Company as
if the Yuhe acquisitions had been consummated as of January 1, 2008 and 2007 and
the results are shown for the years ended December 31, 2008 and 2007 including
certain pro forma adjustments, including depreciation and amortization on the
assets acquired, and other adjustments.





For the year ended
                  
                  
                  For the year endedDecember 31,
                  
                  
                  December 31,2008
                  
                  
                  2007(Pro forma)
                  
                  
                  (Pro forma)Revenues
                  
                  $
                  36,117,611
                  
                  
                  $
                  22,075,224Net
      income
                  
                  $
                  10,666,419
                  
                  
                  $
                  5,885,060Earnings
      per shareBasic
                  
                  $
                  0.75
                  
                  
                  $
                  0.68Diluted
                  
                  $
                  0.74
                  
                  
                  $
                  0.68Weighted
      average shares outstandingBasic
                  
                  
                  14,233,268
                  
                  
                  
                  8,626,318Diluted
                  
                  
                  14,476,504
                  
                  
                  
                  8,626,318





4.
            Inventories





Inventories
consist of the following:





December 31
                  
                  
                  December 312008
                  
                  
                  2007Raw
      materials
                  
                  $
                  5,281,429
                  
                  
                  $
                  -Work
      in progress
                  
                  
                  1,272,217
                  
                  
                  
                  -Finished
      goods
                  
                  
                  91,315
                  
                  
                  
                  -$
                  6,644,961
                  
                  
                  $
                  -


F-20


YUHE
INTERNATIONAL, INC.


(Formerly
known as First Growth Investors Inc.)





NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


(Stated
in US Dollars)





5.
            Other
      receivables, net





Other
receivables are unsecured, interest free and have no fixed repayment
date.





During
the years ended December 31, 2008 and 2007, bad debt recovery was $373,042 and
$0 respectively.





Allowance
is made when collection of the full amount is no longer
probable.  Management reviews and adjusts this allowance periodically
based on historical experience, current economic climate as well as its
evaluation of the collectability of outstanding accounts. The Company evaluates
the credit risks of its customers utilizing historical data and estimates of
future performance.





6.
            Notes
      receivable, net





Notes
receivable, net consists of the following:





December 31,
                  
                  
                  December 31,2008
                  
                  
                  2007Notes
      receivables
                  
                  $
                  119,682
                  
                  
                  $
                  -119,682
                  
                  
                  
                  -Less:
      Allowances
                  
                  
                  (45,612
                  )
                  
                  
                  -$
                  74,070
                  
                  
                  $
                  -





Notes
receivable are unsecured, interest free and have no fixed repayment
date.





Management
provides for an allowance when collection of the full amount is no longer
probable by establishing an allowance equivalent to 30% of gross amount of notes
receivables due over 6 months and 60% of gross amount of notes receivables due
over 1 year. Full provision will be made for notes receivables due over 2
years.





During
the years ended December 31, 2008 and 2007, the recovery of bad debts was
$439,958 and $0 respectively.


F-21


YUHE
INTERNATIONAL, INC.


(Formerly
known as First Growth Investors Inc.)





NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


(Stated
in US Dollars)





7.
              Unlisted
      investments





Unlisted
investments at December 31, 2008 represent the 3% investments in Hanting Rural
Credit Cooperative, “Hanting”, recorded at cost.  It is stated at cost
because the Company does not have significant influence or control over Hanting.
Under the cost method, the Company records the investment at cost, and
recognizes income dividends received that are distributed from net accumulated
earnings of the investee since the date of acquisition by the Company. The net
accumulated earnings of the investee subsequent to the date of investment are
recognized by the Company only to the extent distributed by the investee as
dividends. Dividends received in excess of earnings subsequent to the date of
investment are considered a return of investment and are recorded as reductions
of cost of the investment. A series of operating losses of an investee or other
factors may indicate that a decrease in value of the investment has occurred
which is other than temporary and should accordingly be
recognized.





For the
years ended December 31, 2008 and 2007, the Company recorded $12,251 and $0 as
income from unlisted investment for dividends received from
Hanting.  Management of the Company has reviewed the investment in
Hanting for impairment and determined there is no indication that the carrying
amount of Hanting may not be recoverable.





8.
            Plant
      and equipment, net





Plant and
equipment consists of the following:


December 31,
                  
                  
                  December 31,2008
                  
                  
                  2007At
      costBuildings
                  
                  $
                  14,951,197
                  
                  
                  $
                  -Machinery
                  
                  
                  5,064,593
                  
                  
                  
                  -Motor
      vehicles
                  
                  
                  119,786
                  
                  
                  
                  -Furniture
      and equipment
                  
                  
                  82,815
                  
                  
                  
                  -20,218,391
                  
                  
                  
                  -Less:
      accumulated depreciation
                  
                  
                  (1,678,071
                  )
                  
                  
                  -Construction
      in progress
                  
                  $
                  8,571,956
                  
                  
                  $
                  -27,112,276
                  
                  
                  
                  -





During
the year ended December 31, 2008, depreciation expenses amounted to $1,668,059
among which $1,431,939 and $236,120 were recorded as cost of sales and
administrative expense respectively.  During the year ended December
31, 2007, depreciation expenses amounted to $0.


F-22


YUHE
INTERNATIONAL, INC.


(Formerly
known as First Growth Investors Inc.)





NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


(Stated
in US Dollars)





8.
            Plant
      and equipment, net - Continued





Capitalized
interest expense included in construction in progress totaled $437,221 for the
year ended December 31, 2008.





As of
December 31, 2008, buildings and machinery of the Company with net book value of
$14,391,536 were pledged as collateral under certain loan
arrangements.





9.
            Deposits
      paid for acquisition of long term
assets





Deposits
paid consist of the following:




December 31,
                                        
                                        
                                        December 31,2008
                                        
                                        
                                        2008Deposits
      paid for purchase of land use right
                                        
                                        $
                                        1,458,959
                                        
                                        
                                        $Deposits
      paid for construction in progress
                                        
                                        
                                        6,274,903Deposits
      paid for acquisition of farm
                                        
                                        
                                        2,480,231Deposits
      paid for capital commitment
                                        
                                        
                                        10,214,093Less:
      Transfer to construction in progress
                                        
                                        
                                        (8,755,134
                                        )Deposits
      paid for purchase of equipment
                                        
                                        
                                        822,029Total
      Deposits paid for acquisition of long term assets
                                        
                                        $
                                        2,280,988
                                        
                                        
                                        $





10.
            Intangible
      assets, net





Intangible
assets consist of the following:





December 31,
                    
                    
                    December 31,2008
                    
                    
                    2007Land
      use rights, at cost
                    
                    $
                    2,969,714
                    
                    
                    $
                    -Less:
      accumulated amortization
                    
                    
                    (59,962
                    )
                    
                    
                    -$
                    2,909,752
                    
                    
                    $
                    -





As of
December31, 2008,
land use rights of the Company were pledged as collateral under certain loan
arrangements.





During
the years ended December31, 2008 and 2007,
amortization expenses included in the cost of sales were $59,209 and $0
respectively.


F-23


YUHE
INTERNATIONAL, INC.


(Formerly
known as First Growth Investors Inc.)





NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


(Stated
in US Dollars)





11.
            Due
      from related companies





December 31,
                  
                  
                  December 31,2008
                  
                  
                  2007Hexing
      Green Agriculture Co., Ltd., "Hexing Green", - Mr. Gao Zhentao, a director
      of the Company is also a director of Hexing Green
                  
                  $
                  75,754
                  
                  
                  $
                  -Shandong
      Yuhe Food Co., Ltd, "Yuhe Group"- Mr. Gao Zhentao, a director of the
      Company is also a director of Yuhe Group
                  
                  
                  3,580,553
                  
                  
                  
                  -Shandong
      Yuhe New Agriculture of Sciences, "Shandong Yuhe"- Mr. Gao Zhentao, a
      director of the Company is also a director of Shandong
Yuhe
                  
                  
                  50,257
                  
                  
                  
                  -Weifang
      Jiaweike Food Co., Ltd, "Weifang Jiaweike" - Mr. Gao Zhentao, a director
      of the Company is also a director of Weifang Jiaweike
                  
                  
                  25
                  
                  
                  
                  -Weifang
      Yuhe Poultry Co., Ltd, "PRC Yuhe" - Mr. Gao Zhentao, a director of the
      Company is also a director of PRC Yuhe
                  
                  
                  -
                  
                  
                  
                  1,000,000$
                  3,706,589
                  
                  
                  $
                  1,000,000





The
amounts due from related companies are unsecured, interest free and have no
fixed repayment date.





12.
            Other
      payable





December 31,
                  
                  
                  December 31,2008
                  
                  
                  2007Interest
      payable
                  
                  $
                  69,021
                  
                  
                  $
                  -Deposits
      received
                  
                  
                  473,448
                  
                  
                  
                  -Others
                  
                  
                  395,066
                  
                  
                  
                  -$
                  937,535
                  
                  
                  $
                  -





Deposit
received represent deposits collected from customers as security for
non-payment. Other
payable represents apartment rental reimbursement to staff and insurance
payable.


F-24


YUHE
INTERNATIONAL, INC.


(Formerly
known as First Growth Investors Inc.)





NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


(Stated
in US Dollars)





13.
            Loan
      from director





Loan from
director totaled $291,792 at December 31, 2008 represents bank loan borrowed by
a director on behalf of the Company.  The loan is due on November 9,
2009 and bears interest at 8.19% per annum.





14.
            Due
      to related companies





December 31,
                  
                  
                  December 31,2008
                  
                  
                  2007Weifang
      Hexing Breeding Co., Ltd. "Weifang Hexing" - Gao Zhentao, a director of
      the Company is also a director of Weifang Hexing
                  
                  $
                  185,885
                  
                  
                  $
                  -Others
                  
                  
                  24,748
                  
                  
                  
                  -$
                  210,633
                  
                  
                  $
                  -





The
amounts due to related companies are unsecured, interest free and have no fixed
repayment date.  These loans are used for working capital
purposes.





15.
            Long-term
      loans





The
long-term loans are denominated in Chinese Renminbi and are presented in US
dollars as follows:





December 31,
                            
                            
                            December 31,2008
                            
                            
                            2007Loans
      from Nansun Rural Credit, interest rate at 10.46% to 13.82% per annum,
      $291,792 due on December 9, 2009, remaining balance due on March 10, May
      17 and May 28, 2010
                            
                            $
                            8,753,757
                            
                            
                            
                            -Loan
      from Shuangyang Rural Credit, interest rate at 9.83% per annum, due on
      October 13, 2010
                            
                            
                            948,324
                            
                            
                            
                            -Loan
      from Hanting Kaiyuan Rural Credit Cooperative, interest rate at 11.09% per
      annum, due from November 28, 2008 to January 10, 2009
                            
                            
                            1,065,040
                            
                            
                            
                            -10,767,121
                            
                            
                            
                            -Less:
      current portion of long-term loans
                            
                            
                            (1,356,832
                            )
                            
                            
                            -$
                            9,410,289
                            
                            
                            
                            -


F-25


YUHE
INTERNATIONAL, INC.


(Formerly
known as First Growth Investors Inc.)





NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


(Stated
in US Dollars)





15.
            Long-term
      loans - continued





Future
maturities of long-term loans as at December31, 2008 are as
follows


December 312009
                  
                  $
                  1,356,8322010
                  
                  $
                  9,410,289





16.
            Payroll
      and payroll related liabilities





December 31,
                                                    
                                                    
                                                    December 31,2008
                                                    
                                                    
                                                    2007Salary
                                                    
                                                    $
                                                    1,142,094
                                                    
                                                    
                                                    $
                                                    -Employee
      benefits
                                                    
                                                    
                                                    97,520
                                                    
                                                    
                                                    
                                                    -Others
                                                    
                                                    
                                                    157,607
                                                    
                                                    
                                                    
                                                    -$
                                                    1,397,221
                                                    
                                                    
                                                    $
                                                    -





Payroll
and payroll related liabilities represent accrued payroll and welfare benefits
to employees.





17.
            Income
      tax





The
Company is operating in the PRC, and in accordance with the relevant tax laws
and regulations of PRC, the corporation income tax rate is 25%. However, the
Company is an agricultural company, and in accordance with the relevant
regulations regarding the tax exemption, the Company is tax-exempt as long as it
is registered as an agricultural entity.





Taihong
is operating in the PRC, and in accordance with the relevant tax laws and
regulations of PRC, the corporation income tax rate is 25%.





On
January 1, 2008, the Company adopted FIN 48, which prescribes a
more-likely-than-not threshold for financial statement recognition and
measurement of a tax position taken in the tax return. This interpretation also
provides guidance on de-recognition of income tax assets and liabilities,
classification of current and deferred income tax assets and liabilities,
accounting for interest and penalties associated with tax positions, accounting
for income taxes in interim periods and income tax disclosures.


F-26


YUHE
INTERNATIONAL, INC.


(Formerly
known as First Growth Investors Inc.)





NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


(Stated
in US Dollars)





17.
              Income
      tax - continued





Until
December 31, 2008, the directors considered that the Company had no uncertain
tax positions which affected its consolidated financial position and results of
operations or cash flow, and will continue to evaluate for the uncertain
position in future. There are no estimated interest costs and penalties provided
in the Company’s financial statements for the year ended December 31,
2008.





The
Company uses the asset and liability method, where deferred tax assets and
liabilities are determined based on the expected future tax consequences of
temporary differences between the carrying amounts of assets and liabilities for
financial and income tax reporting purposes. Taihong has a net operating loss
carry forward and resulted in deferred tax asset of $60,204 as of December 31,
2008.  Taihong historically experiences net losses before
income taxes, and management does not expect Taihong to generate net income
before taxes in the future as its business is to supply feed to PRC
Yuhe.  As such, a full valuation allowance of $60,204 is recorded
against the deferred tax asset.





The
provision for income taxes consists of the following:





December 31,
                  
                  
                  December 31,2008
                  
                  
                  2007Current
      tax-
      PRC
                  
                  
                  -
                  
                  
                  
                  --
      Change in deferred tax asset
                  
                  
                  60,204
                  
                  
                  
                  --
      Change in valuation allowance
                  
                  
                  (60,204
                  )
                  
                  
                  --
                  
                  
                  
                  -





All of
the Company’s income (loss) before income taxes is from PRC sources. Actual
income tax expenses reported in the consolidated statements of income and
comprehensive income differ from the amounts computed by applying the PRC
statutory income tax rate of 25% and 33% for the fiscal years of 2008 and 2007
respectively to income (loss) before income taxes for the years ended December
31, 2008 and 2007 for the following reasons:





December 31,
                                
                                
                                December 31,2008
                                
                                
                                2007Income
      (loss) before income taxes
                                
                                $
                                10,524,885
                                
                                
                                $
                                (2,212
                                )Computed  “expected”
      income tax asset at 25%
                                
                                
                                2,631,221
                                
                                
                                
                                -Tax
      effect on net taxable temporary differences
                                
                                
                                (60,204
                                )
                                
                                
                                -Effect
      of cumulative tax losses
                                
                                
                                258,236
                                
                                
                                
                                -Effect
      of tax holiday
                                
                                
                                (2,829,253
                                )
                                
                                
                                -$
                                -
                                
                                
                                $
                                -


F-27


YUHE
INTERNATIONAL, INC.


(Formerly
known as First Growth Investors Inc.)





NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


(Stated
in US Dollars)





18.
            Fair
      value of financial instruments





The fair
value of a financial instrument is the amount at which the instrument could be
exchanged in a current transaction between willing parties. The carrying amounts
of financial assets and liabilities, such as cash and cash equivalents, trade
accounts receivable, other receivables, accounts payable, and other payables,
approximate their fair values because of the short maturity of these instruments
and market rates of interest.





19.
              Common
      stock and warrants





(a)
            Common
      Stock





On March
12, 2008, the Company issued 126,857,134 shares, equivalent to approximately
8,626,318 post –split shares, of its common stock, par value $0.001 per share,
to the sole stockholder of Bright Stand to effect the Reverse Merger
Acquisition. At the same time, the Company issued 85,714,282, equivalent to
approximately 5,829,018 post-split shares, shares of common stock to the
investors for gross proceeds of $18 million in the private
placement.





The
Company's issued and outstanding number of common stock immediately prior to the
Reverse merger Acquisition is 16,000,000 shares, equivalent to 1,087,994
post-split shares, shares.





Effective
on April 4, 2008, the Company effected a 1-for-14.70596492 reverse stock split
of its common stock.





After the
reverse acquisition, the total common stock issued and outstanding of the
Company is 15,543,330 post-split shares.





On March
12, 2008, the Company’s majority stockholder, Mr. Yamamoto, entered into an
escrow agreement with the private placement investors. Mr. Yamamoto will deliver
a certain number of shares of the Company’s common stock owned by him to the
investors pro-rata in accordance with their respective investment amount for no
additional consideration if:





(i)         the
Company’s after tax net income for its fiscal year ending on December 31, 2008
is less than $9,000,000 and fiscal year ending on December 31, 2009 is less than
95% of $13,000,000; and





(ii)         the
Company’s earnings per share reported in the fiscal year ending on December 31,
2009 is less than $0.74 on a fully diluted basis (the “Low Performance
Events”).


F-28





YUHE
INTERNATIONAL, INC.


(Formerly
known as First Growth Investors Inc.)





NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


(Stated
in US Dollars)





19.
              Common
      stock and warrants -
continued





Mr.
Yamamoto has placed an aggregate of 49,411,763 shares, equivalent to 3,359,889
post-split shares, of common stock, “Make Good Shares”, into an escrow account
pursuant to the terms of the Make Good Escrow Agreement by and among us, Mr.
Yamamoto, the Investors and the escrow agent named therein. In the event the
Company does not achieve the targets in 2008 and 2009, Make Good Shares will be
conveyed to the Investors pro-rata in accordance with their respective
investment amount for no additional consideration. In the event that the
foregoing Low Performance Events do not occur, the Make Good Shares will be
transferred to Mr. Yamamoto.





(b)
              Warrants





The
Company granted warrants to acquire an aggregate of 6,999,999 shares, equivalent
to 476,014 post-split shares, of common stock to Roth Capital Partners, LLC and
WLT Brothers Capital, Inc., for the services in connection with the private
placement on March 12, 2008. The warrants have a strike price equal to $3.706,
have a term of three years starting from March 12, 2008 and permit cashless or
cash exercise at all times that they are exercisable. The warrants are
exercisable at any time 6 months after their issuance. The Company valued the
options by Black-Scholes option-pricing model with the amount of $2,398,975
which recorded as cost of raising capital against additional paid-in
capital.





The
Company estimated the fair value of each warrant award on the date of grant
using the Black-Scholes option-pricing model and the assumption noted in the
following table. Expected volatility is based on the historical and implied
volatility of a peer group of publicly traded entities. The expected term of
options gave consideration to historical exercises, post-vesting cancellations
and the options’ contractual term. The risk-free rate for the expected term of
the option is based on the U.S. Treasury Constant Maturity at the time of grant.
The assumptions used to value options granted during the year ended December 31,
2008 were as follows:





Year Ended
                        December 31, 2008Risk
      free interest rate
                      
                      
                      3
                      %Expected
      volatility
                      
                      
                      109
                      %Expected
      life (years)
                      
                      
                      3





On
October 27, 2008, the Company issued 178,848 of common shares to Roth Capital
Partners, LLC based on its cashless exercise of 333,198 warrants issued to
it.  The total number of warrants outstanding as at December 31, 2008
was 142,816.


F-29


YUHE
INTERNATIONAL, INC.


(Formerly
known as First Growth Investors Inc.)





NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


(Stated
in US Dollars)





19.
              Common
      stock and warrants -
continued





(c)
            Additional
      paid-in capital





Prior to
the Reverse Merger, the stockholder of Bright Stand contributed additional
capital of $12,149,766 to Bright Stand for the acquisition of PRC Yuhe.
Subsequent to the contribution of capital, Bright Stand entered into a reverse
acquisition with Yuhe International, Inc. and raised $18 million gross proceeds
in the private placement as described in Note 19 (a).





20.
              Obligations under registration
      rights agreements





The
Company entered into a Registration Rights Agreement with certain investors on
March 12, 2008 in the private placement. The Company is required to file a
resale registration statement on Form S-1 or any other appropriate form (i)
within 60 days following the closing for purposes of registering the resale of
these shares, (ii) within 15 days with respect to any additional registration
statement, (iii) within 15 days with respect to any additional registration
statements required to be filed due to SEC Restrictions, (iv) within 30 days
following the date on which it becomes eligible to utilize Form S-3 to register
the resale of common stock, or (v) within 45 days following the date the Make
Good Shares are delivered by Mr. Yamamoto to the investors.





The
Company will be required to pay the investors liquidated damages if it fails to
file a registration statement by the above filing deadlines or if it does not
promptly respond to comments received from the SEC. The liquidated damages
accrue at a rate of 0.5% per month of the aggregate investment proceeds which
are $18 million received from the investors, capped at 5% of the total
investment proceeds, or $900,000. The Company’s Registration Statement was
declared effective on December 29, 2008, and therefore it has not recorded
a liability for that potential obligation as at December 31, 2008.





21.
            Stock
      options





On June
13, 2008, the Company granted to the Chief Financial Officer (CFO) of the
Company an option to purchase 150,000 shares of the Company’s common stock at an
exercise price of $3.708 per share for the 3 year’s employment. The options
shall vest with respect to 33.3% of the total number of shares purchasable upon
exercise thereof one year after the grant date and 33.3% on the second and third
anniversary of the grant date, Mr. Hu will be fully vested in the option by that
date and shall cease to vest if the executive ceases to be Chief Financial
Officer of the Company for any reason.




F-30




YUHE
INTERNATIONAL, INC.


(Formerly
known as First Growth Investors Inc.)





NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


(Stated
in US Dollars)




21.
            Stock
      options - continued





On the
same date, the Company granted each of the three independent directors of the
Company an option to purchase 77,717 share of the Company’s common stock at an
exercise price of $3.708 per share for the 3 year’s employment. The options
shall vest with respect to 33.3% of the total number of shares purchasable upon
exercise thereof one year after the grant date and 33.3% on the second and third
anniversary of the grant date, the directors will be fully vested in the option
by that date and shall cease to vest if the three independent directors cease to
be independent directors of the Company for any reason.





The
options granted to the CFO and the three independent directors will expire on
the fifth anniversary of the grant date and cease to vest if they cease to be
the CFO or independent directors of the company for any reason.





During
the year ended December 31, 2008, the Company granted 383,151 stock options. The
Company recognizes compensation expense, net of estimated forfeitures, over the
requisite service period, which is the period during which the grantee is
required to provide services in exchange for the award.  The Company
has elected to recognize compensation cost for awards with only a service
condition that has a graded vesting schedule on a straight-line basis over the
requisite service period for the entire award.





The
Company uses the Black-Scholes option pricing model to calculate the grant-date
fair value of an award, with the following assumptions: no dividend yield,
expected volatility of 109.40%, and a risk-free interest rate of 3.00%. In
determining volatility of the Company’s options, the Company used the average
volatility of the Company’s stock. Based on the Black-Scholes option pricing
model, the entire option was valued at $2,186,499. In accordance with SFAS No.
123R, the Company has recorded stock-based compensation expense for the year
ended December 31, 2008 of $401,359 in connection with the issuance of this
option.


F-31


YUHE
INTERNATIONAL, INC.


(Formerly
known as First Growth Investors Inc.)





NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


(Stated
in US Dollars)





21.
            Stock
      options - continued





The
following table summarizes all Company stock option transactions between January
1, 2008 and December 31, 2008


Option
                    Shares
                
                
                Vested
                    Shares
                
                
                Weighted
                    Average
                    Exercise
                    Price
                
                
                Remaining
                    Contractual
                    TermBalance,
      January 1, 2008
                
                
                -
                
                
                
                -
                
                
                $
                -
                
                
                $
                -Granted
      or vested during the year ended December 31, 2008
                
                
                383,151
                
                
                
                -
                
                
                $
                3.708
                
                
                $
                4.55Expired
      during the year ended December 31, 2008
                
                
                -
                
                
                
                -
                
                
                
                -
                
                
                
                -Balance,
      December 31, 2008
                
                
                383,151
                
                
                
                -
                
                
                $
                3.708
                
                
                $
                5





The
weighted average grant date fair value of options granted was $7.35 per share.
The total number of stock options outstanding as at December 31, 2008 was
383,151 shares.





22.
            Significant
      concentrations and risk





(a)
            Customer
      Concentrations





The
Company does not have concentrations of business with any customer constituting
greater than 10% of the Company’s gross sales.





The
Company has not experienced any significant difficulty in collecting its
accounts receivable in the past and is not aware of any financial difficulties
being experienced by its major customers.





The
Company has the following concentrations of business with each supplier
constituting greater than 10% of the Company’s purchase:


For
      the year endedDecember
      31,2008
                    
                    
                    2007Ma
      Zhuping
                    
                    
                    27.60
                    %
                    
                    
                    -


F-32


YUHE
INTERNATIONAL, INC.


(Formerly
known as First Growth Investors Inc.)





NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


(Stated
in US Dollars)





22.
            Significant
      concentrations and risk - continued





(b)
            Credit
      Risk





Financial
instruments that potentially subject the Company to significant concentration of
credit risk consist primarily of cash and cash equivalents.  As of
December 31, 2008, substantially all of the Company’s cash and cash equivalents
were held by major financial institutions located in the PRC, which management
believes are of high credit quality.





(c)
            Company’s
      operations are in China





All of
the Company’s products are produced in China.  The Company’s
operations are subject to various political, economic, and other risks and
uncertainties inherent in China.  Among other risks, the Company’s
operations are subject to the risks of transfer of funds; domestic and
international customs and tariffs; changing taxation policies; foreign exchange
restrictions; and political conditions and governmental
regulations.





23.
              Business
      and geographical segments





The
Company’s operations are classified into two principal reportable segments that
provide different products or services.  PRC Yuhe is engaged in the
business of breeding chickens while Taihong is engaged in the business of feed
production, in which most of the products were used internally.  Separate
management of each segment is required because each business unit is subject to
different production and technology strategies.





Reportable
Segments


For the year ended Dec 31, 2008
                  
                  
                  For the year ended Dec 31, 2007
                  
                  
                  For the years ended Dec 31,Production of
                    chicks
                  
                  
                  Production of
                    feeds
                  
                  
                  Corporate
                  
                  
                  Production of
                    chicks
                  
                  
                  Production
                    of feeds
                  
                  
                  Corporate
                  
                  
                  Total2008
                  
                  
                  2007External
      revenue
                  
                  $
                  34,166,334
                  
                  
                  $
                  459,948
                  
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  -
                  
                  
                  $
                  34,626,282
                  
                  
                  $
                  -Intersegment
      revenue
                  
                  
                  -
                  
                  
                  
                  11,885,562
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  11,885,562
                  
                  
                  
                  -Interest
      income
                  
                  
                  245,573
                  
                  
                  
                  34
                  
                  
                  
                  4,131
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  249,738
                  
                  
                  
                  -Interest
      expense
                  
                  
                  (33,739
                  )
                  
                  
                  (668,834
                  )
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (70
                  )
                  
                  
                  (702,573
                  )
                  
                  
                  (70
                  )Depreciation
      and amortization
                  
                  
                  (1,611,941
                  )
                  
                  
                  (115,327
                  )
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (1,727,268
                  )
                  
                  
                  -Net
      profit/(loss) after tax
                  
                  
                  11,317,014
                  
                  
                  
                  240,818
                  
                  
                  
                  (1,032,947
                  )
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  (2,212
                  )
                  
                  
                  10,524,885
                  
                  
                  
                  (2,212
                  )Expenditures
      for long-lived assets
                  
                  
                  12,582,823
                  
                  
                  
                  108,771
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  12,691,594
                  
                  
                  
                  -





Note:
Intersegment revenue of $11,885,562 was eliminated in
consolidation.


F-33


YUHE
INTERNATIONAL, INC.


(Formerly
known as First Growth Investors Inc.)





NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


(Stated
in US Dollars)





23.
              Business
      and geographical segments -
continued





The
Company’s operations are located in the PRC. All revenue is from customers in
the PRC.  All of the company’s assets are located in the PRC.
Accordingly, no analysis of the Company's sales and assets by geographical
market is presented.





24.
              Commitments
      and contingencies





Operating
Leases - In the normal course of business, the Company leases the land for the
hen house under operating lease agreements. The Company rents land, primarily
for the feeding of the chickens. The operating lease agreements generally
contain renewal options that may be exercised at the Company’s discretion after
the completion of the base rental terms. The Company was obligated under
operating leases requiring minimum rentals as follows:


F-34


YUHE
INTERNATIONAL, INC.


(Formerly
known as First Growth Investors Inc.)





NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


(Stated
in US Dollars)





24.
              Commitments
      and contingencies – continued





As
of  December 31,





2009
                    
                    $
                    89,9012010
                    
                    
                    89,9012011
                    
                    
                    89,9012012
                    
                    
                    89,9012013
                    
                    
                    89,901Thereafter
                    
                    
                    89,9011,752,587Total
      minimun lease payments
                    
                    
                    2,291,993




During
the years ended December 31, 2008 and 2007, rental expenses were $155,349 and $0
respectively.





Construction
of Breeding Farm No. 1





On August
15, 2008, PRC Yuhe completed construction work and facilities to set up the
southern farm of breeding farm No 1.  On August 30, 2008, PRC Yuhe
purchased 100,000 sets of parent breeders and began to feed.  By the end of
December 2008, PRC Yuhe has spent RMB 29 million, approximately equivalent to
$4.5 million, to build breeding farm No 1.  The breeding farm can be split
into the southern and the northern regions.  PRC Yuhe looks forward to
completing the northern farm construction work and facilities by July 2009; and
beginning to breed parent broilers in the northern region by the end of
2009.  The residual scheduled payment is RMB 6 million, equivalent to $0.9
million, for the building and facilities; and RMB 4.9 million, approximately
equivalent to $0.75 million, in machineries.  The capacity of the northern
factory is 140,000 sets of parent broilers





Construction
of Breeding Farm Nos. 2, 3, 5, 6, and 7





On
December 6, 2008, PRC Yuhe entered into a construction agreement with a
contractor to build and renovate five of its breeding farms for a total
consideration of RMB2.6 million, approximately equivalent to $379,000. The
construction period is estimated to be from February 2009 to April
2009.





Construction
of Steel Structural Surface for Hatchery Farm No. 3





On
December 10, 2008, PRC Yuhe entered into a construction agreement with a
contractor to build the steel structure for its hatchery farm No. 3 for a
total consideration of RMB3.9 million, approximately equivalent to $564,000. The
construction period is estimated to be from February 2009 to March
2009.


F-35


YUHE
INTERNATIONAL, INC.


(Formerly
known as First Growth Investors Inc.)





NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS


(Stated
in US Dollars)





25.
            Equipment
      Leasing and Rental Arrangement





On
November 11, 2008, PRC Yuhe entered into equipment leasing agreement and
property rental agreement, collectively, the “Agreements”, with Shandong
Nongbiao Purina Feed Co., Ltd., “Shandong Nongbiao Purina”. Shandong Nongbiao
Purina will construct a feed production facility on a property leased from PRC
Yuhe and become the exclusive feed supplier for PRC Yuhe. Pursuant to the terms
and conditions of the Agreements, Shandong Nongbiao Purina will lease certain
equipment for feed production from, and install them at the premises owned by
PRC Yuhe. The lease term for both the equipment leasing agreement and property
rental agreement is 10 years. After  completion of the feed production
facility, the lease term will commence on the date of the production
begins.  Shandong Nongbiao Purina shall pay to PRC Yuhe an annual
rental payment for the leased land, premises and facilities of RMB 1,500,000,
approximately equivalent to $219,000. The rent payable by Shandong Nongbiao
Purina under the rental agreement will be offset against the prepaid equipment
rental costs of RMB10,000,000, approximately equivalent to
$1,459,000.  As at December 31, 2008, Shangdong Nongbiao Purina
advanced $400,000 (RMB2,740,000) to PRC Yuhe as rental payment and was recorded
as advances from customers.





In
connection with the execution of the Agreements, Shandong Yuhe Food Group Co.,
Ltd., “Yuhe Group”, a PRC company based in Shandong Province, would be the
guarantor of PRC Yuhe for RMB 4,500,000, approximately equivalent to $657,000,
for the first five years and for RMB 3,000,000, approximately equivalent to
$438,000, for the next five years. No guarantee fee is required according to the
above Agreements.


F-36





YUHE
INTERNATIONAL, INC.





UNAUDITED
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS




F-37


YUHE
INTERNATIONAL, INC.





UNAUDITED
PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS





Basis
of Presentation





On March
12, 2008, Yuhe International, Inc. entered into a Share Exchange Agreement with
Bright Stand International Co. Ltd. and its stockholders, pursuant to which Yuhe
International, Inc. acquired all of the issued and outstanding capital stock of
Bright Stand International Co. Ltd. in exchange for a total of 8,626,236 shares
of the Company’s common stock, constituting 56% shares of Yuhe International,
Inc. issued and outstanding common stock at the time of the merger agreement,
$0.001 par value per share.





Yuhe
International, Inc. completed the acquisition of Bright Stand International Co.
Ltd., pursuant to the Merger Agreement, in March 2008. The acquisition was
accounted for as a reverse merger effected by a share exchange, wherein Bright
Stand International Co. Ltd. is considered the acquirer for accounting and
financial reporting purposes.





The
unaudited pro forma consolidated statement of operations reflects the results of
operations of the company had the merger consummated on January 1, 2007. These
pro forma consolidated statements of operations have been prepared for
comparative purposes only and do not purport to be indicative of the results of
operations which actually would have resulted had the transaction occurred on
the date indicated and are not necessarily indicative of the results that may be
expected in the future.





Due to
the fact that there was not any trading and shareholding relationship between
Yuhe International, Inc. with Bright Stand International Co. Ltd. before the
share exchange, in the opinion of management, no pro forma adjustment directly
attributable to the share exchange contemplated by the Agreement is to be made
to the unaudited pro forma consolidated statements of operations of Yuhe
International, Inc.


F-38


YUHE
INTERNATIONAL, INC.


UNAUDITED
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS


FOR THE
YEARS ENDED DECEMBER 31, 2008 AND 2007





2008
                      
                      
                      2007Net
      revenues
                      
                      $
                      36,117,611
                      
                      
                      $
                      22,075,224Cost
      of revenue
                      
                      
                      (22,910,160
                      )
                      
                      
                      (13,502,545
                      )Gross
      profit
                      
                      
                      13,207,451
                      
                      
                      
                      8,572,679Operating
      expensesSelling
                      
                      
                      (454,457
                      )
                      
                      
                      (312,927
                      )General
      and administrative expenses
                      
                      
                      (2,661,285
                      )
                      
                      
                      (1,112,758
                      )Total
      operating expenses
                      
                      
                      (3,115,742
                      )
                      
                      
                      (1,425,685
                      )Income
      from operations
                      
                      
                      10,091,709
                      
                      
                      
                      7,146,994Non-operating
      income (expense)Bad
      debts recovery (expense)
                      
                      
                      1,032,893
                      
                      
                      
                      (231,569
                      )Interest
      income
                      
                      
                      249,743
                      
                      
                      
                      796Other
      income
                      
                      
                      102,518
                      
                      
                      
                      198Interest
      expenses
                      
                      
                      (788,740
                      )
                      
                      
                      (924,915
                      )Other
      expenses
                      
                      
                      (21,704
                      )
                      
                      
                      (106,444
                      )Total
      other income (expenses)
                      
                      
                      574,710
                      
                      
                      
                      (1,261,934
                      )Net
      Income before income tax
                      
                      
                      10,666,419
                      
                      
                      
                      5,885,060Income
      Tax
                      
                      
                      -
                      
                      
                      
                      -Net
      income
                      
                      $
                      10,666,419
                      
                      
                      
                      5,885,060Earnings
      per shareBasic
                      
                      $
                      0.75
                      
                      
                      $
                      0.68Diluted
                      
                      $
                      0.74
                      
                      
                      $
                      0.68Weighted
      average shares outstandingBasic
                      
                      
                      14,233,268
                      
                      
                      
                      8,626,318Diluted
                      
                      
                      14,476,504
                      
                      
                      
                      8,626,318




F-39


YUHE
INTERNATIONAL, INC.


UNAUDITED
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS


FOR THE
YEARS ENDED DECEMBER 31, 2008 AND 2007





Pro forma for the
                                period from
                                January 1, 2008 to
                                January 31, 2008
                              
                              
                              As reported from
                                February 1, 2008 to
                                December 31, 2008
                              
                              
                              Pro forma
                                adjusment
                              
                              
                              2008 Pro forma
                                TotalNet
      revenue
                              
                              $
                              1,491,329
                              
                              
                              $
                              34,626,282
                              
                              
                              $
                              
                              
                              
                              $
                              36,117,611Cost
      of revenue
                              
                              
                              (1,337,438
                              )
                              
                              
                              (21,572,722
                              )
                              
                              
                              
                              
                              
                              
                              (22,910,160
                              )Gross
      profit
                              
                              
                              153,891
                              
                              
                              
                              13,053,560
                              
                              
                              
                              
                              
                              
                              
                              13,207,451Operating
      expensesSelling
                              
                              
                              (28,997
                              )
                              
                              
                              (425,460
                              )
                              
                              
                              
                              
                              
                              
                              (454,457
                              )General
      and administrative
                              
                              
                              (122,695
                              )
                              
                              
                              (2,538,590
                              )
                              
                              
                              
                              
                              
                              
                              (2,661,285
                              )Total
      operating income (expenses)
                              
                              
                              (151,692
                              )
                              
                              
                              (2,964,050
                              )
                              
                              
                              
                              
                              
                              
                              (3,115,742
                              )Income
      from operations
                              
                              
                              2,199
                              
                              
                              
                              10,089,510
                              
                              
                              
                              
                              
                              
                              
                              10,091,709Non-operating
      income (expense)Bad
      Debts recovery
                              
                              
                              219,893
                              
                              
                              
                              813,000
                              
                              
                              
                              
                              
                              
                              
                              1,032,893Interest
      income
                              
                              
                              5
                              
                              
                              
                              249,738
                              
                              
                              
                              
                              
                              
                              
                              249,743Other
      income
                              
                              
                              5,604
                              
                              
                              
                              96,914
                              
                              
                              
                              
                              
                              
                              
                              102,518Interest
      expenses
                              
                              
                              (86,167
                              )
                              
                              
                              (702,573
                              )
                              
                              
                              
                              
                              
                              
                              (788,740
                              )Other
      expenses
                              
                              
                              -
                              
                              
                              
                              (21,704
                              )
                              
                              
                              
                              
                              
                              
                              (21,704
                              )Total
      other income (expense)
                              
                              
                              139,335
                              
                              
                              
                              435,375
                              
                              
                              
                              
                              
                              
                              
                              574,710Net
      Income before income tax
                              
                              
                              141,534
                              
                              
                              
                              10,524,885
                              
                              
                              
                              
                              
                              
                              
                              10,666,419Income
      Tax
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              
                              
                              
                              
                              -Net
      income
                              
                              $
                              141,534
                              
                              
                              $
                              10,524,885
                              
                              
                              $
                              
                              
                              
                              $
                              10,666,419Earnings
      per shareBasic
                              
                              $
                              0.02
                              
                              
                              $
                              0.74
                              
                              
                              $
                              
                              
                              
                              $
                              0.74Diluted
                              
                              $
                              0.02
                              
                              
                              $
                              0.73
                              
                              
                              $
                              
                              
                              
                              $
                              0.73Weighted
      average shares outstandingBasic
                              
                              
                              8,626,318
                              
                              
                              
                              14,233,268
                              
                              
                              
                              
                              
                              
                              
                              14,233,268Diluted
                              
                              
                              8,626,318
                              
                              
                              
                              14,476,504
                              
                              
                              
                              
                              
                              
                              
                              14,476,504




F-40





Exhibit
Index


Exhibit
                    Number
                  
                  Description of Document3.1
                  
                  Articles
      of Incorporation of the registrant as filed with the Secretary of State of
      Nevada, as amended to date. [Incorporated by reference to Exhibit 3.1 to
      the registrant’s current report on Form 8-K filed on April 10,
      2007]4.1
                  
                  Registration
      Rights Agreement dated March 12, 2008 by and among First Growth Investors,
      Inc., and certain investors. [Incorporated by reference to Exhibit 10.4 to
      the registrant’s current report on Form 8-K filed on March 17,
      2008]5.1
                  
                  Opinion
      of Thomas G. Kimble & Associates, PC as to the legality of the shares.
      [Incorporated by reference to exhibit 5.1 to the registrant’s Registration
      Statement on Form S-1 filed on May 12, 2008]5.2
                  
                  Opinion
      of Long An Law Firm. [Incorporated by reference to exhibit 5.2 to the
      registrant’s Registration Statement on Form S-1 filed on May 12,
      2008]10.1
                  
                  Stock
      Purchase Agreement dated November 6, 2007 between First Growth Investors,
      Inc. and Halter Financial Investments, L.P. [Incorporated by
      reference to Exhibit 10.1 to the registrant’s current report on Form 8-K
      filed on November 6, 2007]10.2
                  
                  Equity
      Transfer Agreement dated March 12, 2008 between First Growth Investors,
      Inc. and Kunio Yamamoto. [Incorporated by reference to Exhibit 10.2 to the
      registrant’s current report on Form 8-K filed on March 17,
      2008]10.3
                  
                  Securities
      Purchase Agreement dated March 12, 2008 by and among First Growth
      Investors, Inc., Bright Stand International Limited, Weifang Yuhe Poultry
      Co., Ltd., Kunio Yamamoto and certain investors. [Incorporated by
      reference to Exhibit 10.3 to the registrant’s current report on Form 8-K
      filed on March 17, 2008]10.4
                  
                  Make
      Good Escrow Agreement dated March 12, 2008 by and among First Growth
      Investors, Inc., Kunio Yamamoto, certain investors, Roth Capital Partners,
      LLC and Tri-State Title and Escrow, LLC. [Incorporated by reference to
      Exhibit 10.5 to the registrant’s current report on Form 8-K filed on March
      17, 2008]10.5
                  
                  Holdback
      Escrow Agreement dated March 12, 2008 by and among First Growth Investors,
      Inc., certain investors, and Tri-State Title and Escrow, LLC.
      [Incorporated by reference to Exhibit 10.6 to the registrant’s current
      report on Form 8-K filed on March 17, 2008]10.6
                  
                  Warrant
      dated Mach 12, 2008 issued by First Growth Investors, Inc. to Roth Capital
      Partners, LLC [Incorporated by reference to Exhibit 10.7 to the
      registrant’s current report on Form 8-K filed on March 17,
      2008]










10.7
                        
                        Make
      Good Escrow Agreement dated March 12, 2008 by and among First Growth
      Investors, Inc., Kunio Yamamoto, HFG International, Limited, and Interwest
      Transfer Company, Inc. [Incorporated by reference to Exhibit 10.8 to the
      registrant’s current report on Form 8-K filed on March 17,
      2008]10.8
                        
                        Lock-up
      Agreement dated March 12, 2008 between Kunio Yamamoto and First Growth
      Investors, Inc. [Incorporated by reference to Exhibit 10.9 to the
      registrant’s current report on Form 8-K filed on March 17,
      2008]10.9
                        
                        Audited
      Financial Statements of First Growth Investors, Inc. for the Year Ended
      December 31, 2005. [Incorporated by reference to the registrant’s current
      report on Form 10-KSB filed on April 4, 2006]10.10
                        
                        Audited
      Financial Statements of First Growth Investors, Inc. for the Year Ended
      December 31, 2006. [Incorporated by reference to the registrant’s current
      report on Form 10K-SB filed on April 2, 2007]10.11
                        
                        Audited
      Financial Statements of First Growth Investors, Inc. for the Year Ended
      December 31, 2007. [Incorporated by reference to the registrant’s current
      report on Form 10K-SB filed on March 31, 2008]10.12
                        
                        Labour
      Contract dated July 15, 2000 entered into between Weifang Taihong Feed
      Co., Ltd. and Gao Aiping.  [Incorporated by reference to Exhibit
      10.12 to the registrant’s Registration Statement on Form S-1/A filed on
      December 19, 2008]10.13
                        
                        Labour
      Contract dated December 25, 2000 entered into between Weifang Taihong Feed
      Co., Ltd. and Wang Jianbo.  [Incorporated by reference to
      Exhibit 10.13 to the registrant’s Registration Statement on Form S-1/A
      filed on December 19, 2008]10.14
                        
                        Labour
      Contract dated July 10, 2001 entered into between Weifang Yuhe Poultry Co.
      Ltd. and Zhao Beijing.  [Incorporated by reference to Exhibit
      10.14 to the registrant’s Registration Statement on Form S-1/A filed on
      December 19, 2008]10.15
                        
                        Commitment
      to Product Quality and Customer Services Agreement dated February 12, 2004
      entered for and on behalf of Weifang Yuhe Poultry Co.
      Ltd.  [Incorporated by reference to Exhibit 10.15 to the
      registrant’s Registration Statement on Form S-1/A filed on December 19,
      2008]10.16
                        
                        Contract
      of land dated April 12, 2005 entered into between Yejiazhuang Village,
      Dabucum Village and Weifang Yuhe Poultry Co.,
      Ltd.  [Incorporated by reference to Exhibit 10.16 to the
      registrant’s Registration Statement on Form S-1/A filed on December 19,
      2008]10.17
                        
                        Lease
      Agreement dated June 25, 2005 entered into between Standing Weifang Farm
      and Weifang Yuhe Poultry Co., Ltd.  [Incorporated by reference
      to Exhibit 10.17 to the registrant’s Registration Statement on Form S-1/A
      filed on December 19,
2008]










10.18
                        
                        Labour
      Contract dated July 11, 2005 entered into between Weifang Yuhe Poultry Co.
      Ltd. and Ding Wengui.  [Incorporated by reference to Exhibit
      10.18 to the registrant’s Registration Statement on Form S-1/A filed on
      December 19, 2008]10.19
                        
                        Labour
      Contract dated October 15, 2005 entered into between Weifang Yuhe Poultry
      Co. Ltd. and Jiang Yingjun.  [Incorporated by reference to
      Exhibit 10.19 to the registrant’s Registration Statement on Form S-1/A
      filed on December 19, 2008]10.20
                        
                        Summary
      of loan agreements with Nansun Rural Credit in respect of loan agreement
      dated November 28, 2005.  [Incorporated by reference to Exhibit
      10.20 to the registrant’s Registration Statement on Form S-1/A filed on
      December 19, 2008]10.21
                        
                        Feed
      Purchase Contract dated January 1, 2006 entered into between Weifang
      Taihong Feed Co., Ltd. and Weifang Yuhe Poultry Co.,
      Ltd.  [Incorporated by reference to Exhibit 10.21 to the
      registrant’s Registration Statement on Form S-1/A filed on December 19,
      2008]10.22
                        
                        Labour
      Contract dated March 10, 2006 entered into between Weifang Yuhe Poultry
      Co., Ltd. and Tan Yi. [Incorporated by reference to Exhibit 10.22 to the
      registrant’s Registration Statement on Form S-1/A filed on December 19,
      2008]10.23
                        
                        Summary
      of Loan Agreement dated November 10, 2006 with Hanting Rural Credit
      Cooperative. [Incorporated by reference to Exhibit 10.23 to the
      registrant’s Registration Statement on Form S-1/A filed on December 19,
      2008]10.24
                        
                        Summary
      of Loan Agreement dated May 12, 2007 with Shuangyang Rural Credit.
      [Incorporated by reference to Exhibit 10.24 to the registrant’s
      Registration Statement on Form S-1/A filed on December 19,
      2008]10.25
                        
                        Summary
      of Loan Agreement dated July 1, 2007 with Hanting Kaiyuan Rural Credit
      Cooperative. [Incorporated by reference to Exhibit 10.25 to the
      registrant’s Registration Statement on Form S-1/A filed on December 19,
      2008]10.26
                        
                        Labour
      Contract dated December 1, 1998 entered into between Weifang Yuhe Poultry
      Co. Ltd. and Han Chengxiang.  [Incorporated by reference to
      Exhibit 10.26 to the registrant’s Registration Statement on Form S-1/A
      filed on December 19, 2008]10.27
                        
                        Labour
      Contract dated June 13, 2008 entered into between Yuhe International, Inc.
      and Han Chengxiang.  [Incorporated by reference to Exhibit 10.27
      to the registrant’s Registration Statement on Form S-1/A filed on December
      19, 2008]10.28
                        
                        Labour
      Contract dated June 13, 2008 entered into between Yuhe International, Inc.
      and Jiang Yingjun. [Incorporated by reference to Exhibit 10.12 to the
      registrant’s Registration Statement on Form S-1/A filed on December 19,
      2008]










10.29
              
              Employment
      Agreement dated June 13, 2008 entered into between Yuhe International,
      Inc. and Gao Zhentao [Incorporated by reference to Exhibit 10.1 to the
      registrant’s current report on Form 8-K filed on June 13,
      2008]10.30
              
              Employment
      Agreement dated June 13, 2008 entered into between Yuhe International,
      Inc. and Hu Gang [Incorporated by reference to Exhibit 10.2 to the
      registrant’s current report on Form 8-K filed on June 13,
      2008]10.31
              
              Supplemental
      Feed Purchase Agreement dated August 5, 2008 entered into between Weifang
      Taihong Feed Co., Ltd. and Weifang Yuhe Poultry Co.,
      Ltd.  [Incorporated by reference to Exhibit 10.12 to the
      registrant’s Registration Statement on Form S-1/A filed on December 19,
      2008]




10.32
                  
                  Form
      of Stock Option Agreement [Incorporated by reference to Exhibit 10.1 to
      the registrant’s quarterly report on Form 10-Q filed on August 14,
      2008]10.33
                  
                  Summaries
      of Oral Loan Agreements as disclosed under section “Transactions with
      Related Persons”.  [Incorporated by reference to Exhibit 10.33
      to the registrant’s Registration Statement on Form S-1/A filed on December
      19, 2008]10.34
                  
                  Capital
      Transfer Agreement dated November 28, 2007.  [Incorporated by
      reference to Exhibit 10.12 to the registrant’s Registration Statement on
      Form S-1/A filed on December 19, 2008]10.35
                  
                  Translation
      of the Equipment Leasing Agreement dated November 11, 2008 in English.
      [Incorporated by reference to Exhibit 99.1 to the registrant’s 8-K filed
      on November 21, 2008]10.36
                  
                  Translation
      of the Tenancy Agreement dated November 11, 2008 in English. [Incorporated
      by reference to Exhibit 99.2 to the registrant’s 8-K filed on November 21,
      2008]*14.1
                  
                  Code
      of Ethics.23.1
                  
                  Consent
      of Thomas G. Kimble and Associates, PC, included in Exhibit
      5.1.[Incorporated by reference to Exhibit 23.2 to the registrant’s
      Registration Statement S-1 filed on May 12, 2008]23.2
                  
                  Consent
      of Long An Law Firm.[Incorporated by reference to Exhibit 23.3 to the
      registrant’s Registration Statement on Form S-1 filed on May 12,
      2008]*24.1
                  
                  Power
      of Attorney (included on the signature page of this registration
      statement).










*31.1
              
              Certification
      of the Chief Executive Officer pursuant to Rules 13a-14(a) and
      15(d)-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act
      of 2002*31.2
              
              Certification
      of the Chief Financial Officer pursuant to Rules 13a-14(a) and
      15(d)-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act
      of 2002*32.1
              
              Certification
      of the Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as
      adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.*32.2
              
              Certification
      of the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as
      adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
      2002.










*  
Filed herewith