U.
        S.
        Securities and Exchange Commission
 Washington,
        D. C. 20549
 
 FORM
        10-QSB
 
 [X]
              QUARTERLY
                  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
                  OF
                  1934
 
 For
        the
        quarterly period ended September 30, 2007
 
 [   ]
              TRANSITION
                  REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
                  OF
                  1934
 
 For
        the
        transition period from _____ to _____
 
 Commission
        File No. 3-52472
 
 SHANDONG
        ZHOUYUAN SEED AND NURSERY CO., LTD.
 (Name
        of
        Small Business Issuer in its Charter)
 
 Delaware
              58-2258912(State
                  or Other Jurisdiction of
                incorporation
                  or organization)
              (I.R.S.
                  Employer I.D. No.)
 
 
 238
        Jianxindong Street, Laizhou, Shandong Province, P.R. China
 (Address
        of Principal Executive Offices)
 
 Issuer's
        Telephone Number: 86 0535-2212279
 
 Indicate  by
        check mark  whether the  Registrant  (1) has filed
        all reports required to be filed by Sections 13 or 15(d) of
        the  Securities Exchange Act of
        1934  during  the  preceding  12
        months  (or for such shorter  period  that the
        Registrant was required to file such reports),  and (2) has been
        subject to such filing requirements for the past 90 days.
 
 Yes X                  No
        ___
 
 Indicate
        by check mark whether the registrant is a shell company (as defined in Rule
        12b-2 of the Exchange Act)  Yes
        ___     No X
 
 APPLICABLE
        ONLY TO CORPORATE ISSUERS:  Indicate the number of shares outstanding
        of each of the Registrant's classes of voting stock, as of the latest
        practicable date:
 November
        19, 2007
 Common
        Voting Stock: 70,001,635
 
 Transitional
        Small Business Disclosure Format (check one):   Yes
        ___           NoX
 
 
     
  **SHANDONG
        ZHOUYUAN SEED AND NURSERY CO., LTD.**
 **F/K/A
        PINGCHUAN PHARMACEUTICALS, INC.**
 **CONSOLIDATED
        BALANCE SHEET**
 
 September
                  30,2007(unaudited)ASSETSCurrent
                  Assets:Cash
                  and cash equivalents
              
              $
              6,978Accounts
                  receivable, net (Note 4)
              
              
              12,869Inventory
                  (Note 5)
              
              
              219,649Other
                  receivable
              
              
              32,240Advance
                  to suppliers
              
              
              113,194Total
                  current assets
              
              
              384,930Property,
                  Plant, and Equipment, net (Note 6)
              
              
              1,803,522Land
                  use right, net (Note 7)
              
              
              442,406Acquired
                  seed patents, net (Note 8)
              
              
              565,260Receivable
                  from sale of land use right  (Note 9)
              
              
              317,6271,325,293Total
                  Assets
              
              $
              3,513,745LIABILITIES
                  AND STOCKHOLDERS' EQUITYCurrent
                  Liabilities:Bank
                  loans (Note 10)
              
              $
              1,410,025Short-term
                  loans
              
              
              40,887Accounts
                  payable and accrued expenses
              
              
              508,039Pension
                  and employee benefit payable
              
              
              238,443Taxes
                  payable
              
              
              121,371Interest
                  payable
              
              
              267,063Deferred
                  revenue
              
              
              11,315Court
                  judgment payable (Note 14)
              
              
              204,187Due
                  to employees
              
              
              33,758Customer
                  security deposit
              
              
              87,942Total
                  Current Liabilities
              
              
              2,923,030Minority
                  interest
              
              
              317,958Stockholders'
                  Equity:Preferred
                  stock, $0.001 par value, 5,000,000 shares authorized; none issued
                  and
                  outstanding as of September 30, 2007
              
              
              -Common
                  stock, $0.001 par value,
                  150,000,000 shares authorized; 70,001,635 shares issued and
                  outstanding as of September 30, 2007
              
              
              70,002Additional
                  paid-in capital
              
              
              3,144,237Accumulated
                  deficiency
              
              
              (2,402,975
              )Deferred
                  compensation
              
              
              (611,333
              )Accumulated
                  other comprehensive income
              
              
              72,826Stockholders'
                  Equity
              
              
              272,757Total
                  Liabilities and Stockholders' Equity
              
              $
              3,513,745
 
 **See
        Notes to Financial Statements**
 
 
 2
  **SHANDONG
        ZHOUYUAN SEED AND NURSERY CO., LTD.**
 **F/K/A
        PINGCHUAN PHARMACEUTICALS, INC.**
 **CONSOLIDATED
        STATEMENTS OF OPERATIONS AND OTHER COMPREHENSIVE INCOME
        (LOSS)**
 
 
 
 For
                  the Three Months Ended
              
              
              For
                  the Nine Months EndedSeptember
                  30,
              
              
              September
                  30,2007
              
              
              2006
              
              
              2007
              
              
              2006(unaudited)
              
              
              (unaudited)
              
              
              (unaudited)
              
              
              (unaudited)RevenuesSale
                  of seeds
              
              $
              152,215
              
              
              $
              20,972
              
              
              $
              611,564
              
              
              $
              345,237Total
                  revenue
              
              
              152,215
              
              
              
              20,972
              
              
              
              611,564
              
              
              
              345,237Cost
                  of good soldCost
                  of seeds sold
              
              
              101,957
              
              
              
              35,038
              
              
              
              457,149
              
              
              
              290,181Amortization
                  of seed patents
              
              
              34,370
              
              
              
              32,703
              
              
              
              101,684
              
              
              
              97,547Total
                  cost of sales
              
              
              136,327
              
              
              
              67,741
              
              
              
              558,833
              
              
              
              387,728Gross
                  Profit
              
              
              15,888
              
              
              
              (46,769
              )
              
              
              52,731
              
              
              
              (42,491
              )Operating
                  ExpensesSelling
                  expenses
              
              
              4,462
              
              
              
              10,447
              
              
              
              16,670
              
              
              
              40,639Payroll
              
              
              15,622
              
              
              
              8,812
              
              
              
              56,960
              
              
              
              38,397Pension
                  and employee benefit
              
              
              8,197
              
              
              
              8,147
              
              
              
              24469
              
              
              
              25930Depreciation
                  expenses
              
              
              26,663
              
              
              
              22,190
              
              
              
              78,055
              
              
              
              77,707Amortization
                  expenses
              
              
              2,559
              
              
              
              2,435
              
              
              
              7,571
              
              
              
              7,263Consultant
                  fees
              
              
              114,334
              
              
              
              -
              
              
              
              228,667
              
              
              
              -Travel
                  and entertainment
              
              
              5,221
              
              
              
              5,876
              
              
              
              18,815
              
              
              
              14,502Other
                  general and administrative
              
              
              17,866
              
              
              
              26,228
              
              
              
              56,461
              
              
              
              48,492Total
                  Operating Expenses
              
              
              194,924
              
              
              
              84,135
              
              
              
              487,668
              
              
              
              252,930Income
                  (Loss) from Operation
              
              
              (179,036
              )
              
              
              (130,904
              )
              
              
              (434,937
              )
              
              
              (295,421
              )Other
                  Income (Expenses)Interest
                  income
              
              
              2,579
              
              
              
              1,169
              
              
              
              14,690
              
              
              
              5,806Interest
                  expenses
              
              
              (47,684
              )
              
              
              (41,869
              )
              
              
              (136,477
              )
              
              
              (114,844
              )Court
                  judgment (Note 14)
              
              
              (2,687
              )
              
              
              -
              
              
              
              (204,187
              )
              
              
              -Other
                  income (expenses)
              
              
              24,338
              
              
              
              18,858
              
              
              
              18,442
              
              
              
              16,060Total
                  other income (expenses)
              
              
              (23,454
              )
              
              
              (21,842
              )
              
              
              (307,532
              )
              
              
              (92,978
              )Income
                  (Loss) before provision for income tax
              
              
              (202,490
              )
              
              
              (152,746
              )
              
              
              (742,469
              )
              
              
              (388,399
              )Provision
                  for Income Tax
              
              
              (202,490
              )
              
              
              (152,746
              )
              
              
              (742,469
              )
              
              
              (388,399
              )Income
                  before Minority Interest
              
              
              34,680
              
              
              
              63,565
              
              
              
              132,200
              
              
              
              158,015Minority
                  Interest
              
              
              (167,810
              )
              
              
              (89,181
              )
              
              
              (610,269
              )
              
              
              (230,384
              )Net
                  IncomeOther
                  Comprehensive Income (Loss)
              
              
              7,295
              
              
              
              8,480
              
              
              
              20,200
              
              
              
              17,233Effects
                  of Foreign Currency Conversion
              
              $
              (160,515
              )
              
              $
              (80,701
              )
              
              $
              (590,069
              )
              
              $
              (213,151
              )Comprehensive
                  Income (Loss)Basic
                  and fully diluted earnings (loss) per share
              
              $
              (0.00
              )
              
              $
              (0.00
              )
              
              $
              (0.01
              )
              
              $
              (0.00
              )Weighted
                  average shares outstanding
              
              
              66,999,401
              
              
              
              55,000,000
              
              
              
              66,999,401
              
              
              
              55,000,000
 
 
 **See
        Notes to Financial Statements.**
 
   3
  **SHANDONG
        ZHOUYUAN SEED AND NURSERY CO., LTD.**
 **F/K/A
        PINGCHUAN PHARMACEUTICALS, INC.**
 **CONSOLIDATED
        STATEMENTS OF CASH FLOWS**
 
 For
                  the Nine Months EndedSeptember
                  30,2007
              
              
              2006(unaudited)
              
              
              (unaudited)Operating
                  ActivitiesNet
                  (loss)
              
              $
              (610,269
              )
              
              $
              (230,384
              )Adjustments
                  to reconcile net (loss) to net cash provided by operating
                  activities:Minority
                  interest
              
              
              (132,200
              )
              
              
              (158,015
              )Depreciation
              
              
              78,055
              
              
              
              77,707Amortization
              
              
              109,255
              
              
              
              104,810Common
                  stocks issued for consultant service
              
              
              840,000
              
              
              
              -Deferred
                  consultant compensation
              
              
              (611,333
              )
              
              
              -Changes
                  in operating assets and liabilities:(Increase)/Decrease
                  in accounts receivable
              
              
              (1,151
              )
              
              
              27,800(Increase)/Decrease
                  in inventory
              
              
              73,063
              
              
              
              31,267(Increase)/Decrease
                  in other receivable
              
              
              (3,118
              )
              
              
              177,692(Increase)/Decrease
                  in advance to suppliers
              
              
              (5,383
              )
              
              
              (62,790
              )(Increase)/Decrease
                  in judgment receivable
              
              
              29,486
              
              
              
              -Increase/(Decrease)
                  in accounts payable and accrued expenses
              
              
              61,414
              
              
              
              (130,604
              )Increase/(Decrease)
                  in pension and employee benefit payable
              
              
              17,949
              
              
              
              27,925Increase/(Decrease)
                  in taxes payable
              
              
              4,400
              
              
              
              (2,367
              )Increase/(Decrease)
                  in interest payable
              
              
              124,004
              
              
              
              93,275Increase/(Decrease)
                  in court judgment payable
              
              
              204,187
              
              
              
              -Increase/(Decrease)
                  in deferred revenue
              
              
              (17,631
              )
              
              
              7,303Increase/(Decrease)
                  in customer security deposit
              
              
              944
              
              
              
              86,651Net
                  cash provided by operating activities
              
              
              161,672
              
              
              
              50,270Investing
                  ActivitiesPurchase
                  of fixed assets
              
              
              (86,089
              )
              
              
              (11,394
              )Net
                  cash (used) by investing activities
              
              
              (86,089
              )
              
              
              (11,394
              )Financing
                  ActivitiesShort-term
                  loans
              
              
              -
              
              
              
              -Payback
                  of short-term loans
              
              
              (92,219
              )
              
              
              (7,669
              )Loans
                  from employees
              
              
              -
              
              
              
              -Payback
                  of loans from employees
              
              
              (2,805
              )
              
              
              (5,058
              )Net
                  cash provided (used) by financing activities
              
              
              (95,024
              )
              
              
              (12,727
              )Increase
                  (decrease) in cash
              
              
              (19,441
              )
              
              
              26,149Effects
                  of exchange rates on cash
              
              
              23,819
              
              
              
              (1,140
              )Cash
                  at beginning of period
              
              
              2,600
              
              
              
              11,582Cash
                  at end of period
              
              $
              6,978
              
              
              $
              36,591Supplemental
                  Disclosures of Cash Flow Information:Cash
                  paid (received) during year for:Interest
              
              $
              (18,111
              )
              
              $
              (21,569
              )Income
                  taxes
              
              $
              -
              
              
              $
              -
  
 **See
        Notes to Financial Statements.**
  4
  **SHANDONG
        ZHOUYUAN SEED AND NURSERY CO., LTD.**
 **F/K/A
        PINGCHUAN PHARMACEUTICALS, INC.**
 **NOTES
        TO FINANCIAL STATEMENTS**
 
 
  **Note
                  1-**
              **BASIS
                  OF PRESENTATION**
 
 The
        consolidated financial statements of Shandong Zhouyuan Seed and Nursery Co.,
        Ltd. ( the "Company"), included
        herein were prepared, without audit, pursuant to rules and regulations of
        the
        Securities and Exchange Commission. Because certain information and notes
        normally included in financial statements prepared in accordance with accounting
        principles generally accepted in the United States of America were condensed
        or
        omitted pursuant to such rules and regulations, these financial statements
        should be read in conjunction with the financial statements and notes thereto
        included in the audited financial statements of the Company as included in
        the
        Company's Form 10-KSB for the year ended December 31, 2006.
  **Note
                  2-**
              **ORGANIZATION
                  AND OPERATIONS**
 
 Shandong
        Zhouyuan Seed and Nursery
        Co.,Ltd. f/k/a Pingchuan Pharmaceuticals, Inc. (“Pingchuan”) was organized under
        the laws of the State of North Carolina on July 20, 199. The Company currently
        engages in the business of development, production and distribution of hybrid
        crop seeds in the People's Republic of China ("PRC'), through its whole owned
        subsidiary, Infolink Pacific Limited("Infolink").
 
 On
        January 30, 2007, Pingchuan issued
        to Mr. Wang, Zhigang and Ms. You, Li 55,000,000 shares ofits capital
        stock in exchange for all of the capital stock of Infolink.
 
 Infolink
        was incorporated on September
        28, 2006 in British Virgin Islands (“BVI”) under the BVI Business Companies Act,
        2004, for the purpose of seeking and consummating a merger or acquisition
        with a
        business entity organized as a private corporation, partnership, or sole
        proprietorship asdefined by Statement of Financial Accounting Standards
        (SFAS) No. 7.
 
 On
        October 18, 2006, Mr. Li Han Xun and
        Ms. You Li (collectively the "Trustees"), both of whom are citizens of the
        People's Republic of China ("PRC") and owned a 60% equity ownership interest
        inShandong Zhouyuan Seed and Nursery Co., Ltd. ( "Zhouyuan" ), executed
        Trust and Indemnity Agreements with Infolink, pursuant which the Trustees
        assigned to Infolink all of the beneficial interest in the Trustee's equity
        ownership interest in Zhouyuan. These arrangements have been undertaken solely
        to satisfy PRC regulations, which prohibits foreign companies from owning
        or
        operating the business of sale and development of crop seeds in
        PRC.
 
 
 
 
 
 
 
 
 
  5
  **SHANDONG
        ZHOUYUAN SEED AND NURSERY CO., LTD.**
 **F/K/A
        PINGCHUAN PHARMACEUTICALS, INC.**
 **NOTES
        TO FINANCIAL STATEMENTS**
  
 
 **Note
                  2-**
              **ORGANIZATION
                  AND OPERATIONS (continued)**
 
 Through
        the agreements described in the preceeding paragraph Infolink is deemed a
        60%
        beneficiary resulting in Zhouyuan
        being deemed a subsidiary of Infolink under the requirements of Financial
        Interpretation 46 (Revised) "Consolidation of Variable Interest Entities"
        issued
        by the Financial Accounting Standards Board ("FASB"). The Agreements provided
        for effective control of Zhouyuan to be transferred to Infolink at October
        18,
        2006. Infolink did not have any operating activity prior to the share exchange
        with Zhouyuan. The majority shareholders of Infolink and Zhouyuan were
        substantially the same. These transactions have been accounted for on a basis
        similar to a reorganization between entities under common control. Accordingly,
        Infolink's consolidated financial statements are prepared by including the
        consolidated financial statements of Zhouyuan through October 18, 2006, and
        subsequently Infolink's consolidated financial statements include the financialstatements of Zhouyuan
 
 Zhouyuan
        was incorporated in Laizhou
        City, Shandong Province, PRC on October 26, 2001.  Zhouyuan engages in
        the business of development, production and distribution of hybrid crop seedsin PRC.
 
 Under
        the Company Law of PRC, two
        formerly state owned companies, Laizhou Yongzhou Seed Ltd and Laizhou
        Agriculture Science Research and Development Ltd., were reformed and merged
        into
        one company named Laizhou Huiyuan Seed Ltd ("Huiyuan") on October 26, 2001.
        On
        December 24,2002, Huiyuan changed its name to Shandong Zhouyuan Seed and
        Nursery Co., Ltd.
 
 Zhouyuan
        owns 80% of Laizhou Tianzhe
        Seed Research and Development Ltd. ("Tianzhe"), which was incorporated in
        Laozhou City, Shandong Province, PRC on October 24, 2004 under theCompany Law of PRC. Tianzhe engages in the research and development
        of
        crop seeds.
 
 The
        merger of Zhouyuan with Infolink
        resulted in a capital transaction accounted for as a reverse merger. The
        transaction was treated for accounting purposes as a recapitalization of
        the
        accounting acquirer (Infolink) and a reorganization of the accounting acquiree
        (Pingchuan). Accordingly, the historical financial statements presented prior
        to
        the merger are the historical financial statements ofInfolink, which
        includes Infolink's wholly-owned subsidiary, Zhouyuan.
 
 Infolink,
        Zhouyuan, and Tianzhe are hereafter referred to as the "Company".
 
 
 
 
 
 
 
 
 
  6
  **SHANDONG
        ZHOUYUAN SEED AND NURSERY CO., LTD.**
 **F/K/A
        PINGCHUAN PHARMACEUTICALS, INC.**
 **NOTES
        TO FINANCIAL STATEMENTS**
 
 
 
 **Note
                  2-**
              **ORGANIZATION
                  AND OPERATIONS (continued)**
 
 **Going
        Concern**
 
 As
        reflected in the accompanying consolidated financial statements, the Company
        has
        an accumulated deficit of $2,402,975 at September 30, 2007 that includes
        operating losses of $322,586 and $610,269 for the year ended December 31,
        2006
        and the nine months ended September 30, 2007, respectively. Additionally,
        the
        Company was in default on bank loans and interest payments, totaling $1,677,088,
        as of September 30, 2007. These factors raise substantial doubt about its
        ability to continue as a going concern. In view of the matters described
        above,
        recoverability of a major portion of the recorded asset amounts shown in
        the
        accompanying consolidated balance sheet is dependent upon continued operations
        of the Company, which in turn is dependent upon the Company's ability to
        raise
        additional capital, obtain financing and succeed in its future operations.
        The
        financial statements do not include any adjustments relating to the
        recoverability and classification of recorded asset amounts or amounts and
        classification of liabilities that might be necessary should the Company
        be
        unable to continue as a going concern
 
 Management
        has taken the following steps to revise its operating and financial
        requirements, which it believes are sufficient to provide the Company with
        the
        ability to continue as a going concern. The Company is actively pursuing
        additional funding and a potential merger or acquisition candidate and strategic
        partners, which would enhance stockholders' investment. Management believes
        that
        the above actions will allow the Company to continue operations through the
        next
        fiscal year.
 
 **Note
                  3-**
              **SIGNIFICANT
                  ACCOUNTING POLICIES**
 
 **Basis
        of Presentation**
 
 The
        accompanying consolidated financial statements are prepared in accordance
        with
        generally accepted accounting principles in the United States of America
        ("US
        GAAP"). This basis of accounting differs from that used in the statutory
        accounts of the Company, which are prepared in accordance with the "Accounting
        Principles of China " ("PRC GAAP"). Certain accounting principles, which
        are
        stipulated by US GAAP, are not applicable in the PRC GAAP. The difference
        between PRC GAAP accounts of the Company and its US GAAP financial statements
        is
        immaterial.
 
 The
        Company maintains its books and accounting records in PRC currency "Renminbi"
        ("RMB"), which is determined as the functional currency.  Assets and
        liabilities of the Company are translated at the prevailing exchange rate
        at the
        end of the accounting period. Contributed capital accounts are translated
        using
        the historical rate of exchange when capital is injected. Income statement
        accounts are translated at the average rate of exchange during the accounting
        period Translation adjustments arising from the use of different exchange
        rates
        from period to period are include in the cumulative translation adjustment
        account in shareholders' equity. Gain and losses resulting from foreign currency
        transactions are included in operations.
 
  7
  **SHANDONG
        ZHOUYUAN SEED AND NURSERY CO., LTD.**
 **F/K/A
        PINGCHUAN PHARMACEUTICALS, INC.**
 **NOTES
        TO FINANCIAL STATEMENTS**
 
   **Note
                  3-**
              **SIGNIFICANT
                  ACCOUNTING POLICIES
                  (continued)**
 
 **Basis
        of Presentation (continued)**
 
 Translation
        adjustments resulting from this process are included in accumulated other
        comprehensive income (loss) in
        the consolidated statement of shareholders ’ equity and amounted to $72,862 and
        $52,626 as of September 30, 2007 and December 31, 2006, respectively. The
        balance sheet amounts with the exception of equity at September 30, 2007
        were
        translated at 7.51RMB to $1.00 USD as compared to 7.80 RMB at December 31,
        2006.
        The equity accounts were stated at their historical rate. The average
        translation rates applied to income statement accounts for the nine months
        endedSeptember 30, 2007 was 7.67 RMB as compared to 7.96 RMB for the year
        ended December 31, 2006.
  **Use
        of Estimates**
 
 The
        preparation of financial statements
        in conformity with generally accepted accounting principles requires management
        to make estimates and assumptions that affect the reported amounts of assets
        and
        liabilities and disclosure of contingent assets and liabilities at the date
        of
        the financial statements, and the reported amounts of revenue and expenses
        during the reporting period. Actual results whenultimately realized
        could differ from those estimates.
 
 **Cash
        and Cash Equivalents**
 
 Cash
        and cash equivalents include cash
        on hand, deposits in banks with maturities of three months or less, and all
        highly liquid investments which are unrestricted as to withdrawal or use,
        and
        which haveoriginal maturities of three months or less.
 
 **Accounts
        Receivable**
 
 Accounts
        receivable are recorded at the
        invoiced amount and do not bear interest. The Company extends unsecured credit
        to its customers in the ordinary course of business but mitigates the associated
        risks by performing credit checks and actively pursuing past due accounts.
        An
        allowance for doubtful accounts is established and determined based on
        managements' assessment of known requirements, aging of receivables, payment
        history, the customer's current credit worthiness, and theeconomic
        environment.
 
 **Concentrations
        of Credit Risk**
 
 Financial
        instruments that subject the
        Company to concentrations of credit risk consist primarily ofcash and
        cash equivalents. The Company maintains its cash and cash equivalents with
        high-quality institutions. Deposits held with banks may exceed the amount
        of
        insurance provided on such deposits. Generally these deposits may be redeemed
        upon demand and therefore bear minimal risk.
 
 
 
 
  8
  **SHANDONG
        ZHOUYUAN SEED AND NURSERY CO., LTD.**
 **F/K/A
        PINGCHUAN PHARMACEUTICALS, INC.**
 **NOTES
        TO FINANCIAL STATEMENTS**
 
 
 
 **Note
                  3-**
              **SIGNIFICANT
                  ACCOUNTING POLICIES
                  (continued)**
 
 **Fair
        Value of Financial Instruments**
 
 The
        carrying value of financial instruments including cash and cash equivalents,
        receivables, accounts payable and
        accrued expenses, approximates their fair value at September 30, 2007 due
        to therelatively short-term nature of these instruments.
 
 **Advance
        to Suppliers**
 
 The
        Company purchases seeds from the
        suppliers throughout the operating cycle. The majority of the seeds is purchased
        from the growers from the end of November through the following February.
        Pursuant to some purchase contracts, the Company may advance certain amount
        of
        purchase price togrowers.
 
 **Inventories**
 
 Inventories
        are stated at the lower of
        cost or market value. Actual cost is used to value raw materialsand
        supplies. Finished goods and work in process are valued at First-In-First-Out
        (FIFO) method.
 
 **Valuation
        of Long-Lived assets**
 
 The
        Company periodically analyzes its
        long-lived assets for potential impairment, assessing the appropriateness
        of
        lives and recoverability of unamortized balances through measurement of
        undiscounted operating cash flows on a basis consistent with accounting
        principles generally acceptedin the United States of
        America.
 
 **Property,
        Plant and Equipment**
 
 Property,
        plant and equipment are
        carried at cost. The cost of repairs and maintenance is expensed asincurred; major replacements and improvements are
        capitalized.
 
 When
        assets are retired or disposed of,
        the cost and accumulated depreciation are removed from theaccounts, and
        any resulting gains or losses are included in income in the year of
        disposition.
 
 Depreciation
        is calculated on a
        straight-line basis over the estimated useful life of the assets. Thepercentages or depreciable life applied are:
 
 Property
                  and plant
              30
                  yearsMachines
                  and equipment
              7
                  yearsOffice
                  equipment
              5
                  yearsMotor
                  vehicles
              5
                  years
 
 
 
  9
  **SHANDONG
        ZHOUYUAN SEED AND NURSERY CO., LTD.**
 **F/K/A
        PINGCHUAN PHARMACEUTICALS, INC.**
 **NOTES
        TO FINANCIAL STATEMENTS**
 
 
 
 **Note
                  3-**
              **SIGNIFICANT
                  ACCOUNTING POLICIES
                  (continued)**
 
 **Land
        Use Right**
 
 All
        land
        belongs to the State in PRC. Enterprises and individuals can pay the State
        a fee
        to obtain a right to use a piece
        of land for commercial purpose or residential purpose for a period of 50
        years
        or70 years, respectively.  The right of land usage can be
        sold, purchased, and exchange in the market.
 
 The
        Company obtained the right to use a
        piece of land at which its headquarter building is located for a period of
        50
        years, from December 30, 1998 to December 30, 2045, and a piece of land at
        which
        its packing facilities and warehouse are located for a period of 50 years
        from
        September 10, 2003 to September 10, 2053. We amortize the cost of these and
        usage rights over a period of 50 years, usingstraight-line method with
        no residual value.
 
 **Acquired
        Seed Patents, net**
 
 Acquired
        intangible assets consist
        primarily of purchased technology rights and are stated at cost less accumulated
        amortization. Amortization is calculated on a straight-line basis over the
        estimateduseful lives of these assets of an average of 10 years and
        recorded in cost of revenues.
 
 **Short-term
        Loans**
 
 Short-term
        loans are temporally loans
        from third parties to finance the Company’s operation due to lack of cash
        resources. These loans are unsecured, non-interest bearing and have no fixed
        terms of repayment, therefore, deemed payable on demand. Cash flows from
        these
        activities are classified ascash flows from financing
        activates.
 
 
 **Due
        to Employees**
 
 Due
        to employees are temporally
        short-term loans from our employees to finance the Company’ s operation due to
        lack of cash resources. These loans are unsecured, non-interest bearing and
        have
        no fixed terms of repayment, therefore, deemed payable on demand. Cash flows
        from these activities areclassified as cash flows from financing
        activates.
 
 
 
 
 
 
 
 
 
  10
  **SHANDONG
        ZHOUYUAN SEED AND NURSERY CO., LTD.**
 **F/K/A
        PINGCHUAN PHARMACEUTICALS, INC.**
 **NOTES
        TO FINANCIAL STATEMENTS**
 
 
 
 **Note
                  3-**
              **SIGNIFICANT
                  ACCOUNTING POLICIES
                  (continued)**
 
 **Revenue
        Recognition**
 
 The
        Company derives its revenue primarily from the sale of various branded
        conventional seeds and branded
        seeds with biotechnology traits. Revenue is recognized when pervasive evidence
        of an arrangement exists, products have been delivered, the price is fixed
        or
        determinable, collectibility is reasonably assured and the right of return
        has
        expired. The estimated amounts of revenues billed inexcess of revenues
        recognized are recorded as deferred revenues.
 
 **Research
        and Development Costs**
 
 Research
        and development costs relating
        to the development of new products and processes, including significant
        improvements and refinements to existing products, are expensed as incurred.
        The
        Research and development cost was immaterial for the Company for the nine
        months
        endedSeptember 30, 2007 and 2006, and was included into general and
        administration expenses.
 
 **Advertising
        Costs**
 
 Advertising
        costs are expensed as
        incurred and included as part of selling and marketing expenses. Advertising
        expenses were $1,625 and $1,156 for the nine months ended September 30, 2007
        and2006, respectively.
 
 **Pension
        and Employee Benefits**
 
 Full
        time
        employees of the PRC entities participate in a government mandated
        multi-employer defined
        contribution plan pursuant to which certain pension benefits, medical care,
        unemploymentinsurance, employee housing fund and other welfare benefits
        are provided to employees. Chinese labor regulations require the Company
        to
        accrue for these benefits based on certain percentages of the employees'
        salaries. The total provisions for such employee benefits were $24,469 and
        $25,930 for the nine months ended September 30, 2007 and 2006,
        respectively.
 
 **Reverse
        Stock Split**
 
 Effective
        on January 2, 2007, the Company filed with the Secretary of State of the
        State
        of North Carolina Articles of Amendment to its Articles of Incorporation.
        The
        amendment effected a reverse stock split of the Company's common stock in
        the
        ratio of 1:6. All share and per share information included in these consolidated
        financial statements have been adjusted to reflect this reverse stock
        split.
 
 
 
 
 
  11
  **SHANDONG
        ZHOUYUAN SEED AND NURSERY CO., LTD.**
 **F/K/A
        PINGCHUAN PHARMACEUTICALS, INC.**
 **NOTES
        TO FINANCIAL STATEMENTS**
 
  
 **Note
                  3-**
              **SIGNIFICANT
                  ACCOUNTING POLICIES
                  (continued)**
 
 **Statutory
        Reserves**
 
 Pursuant
        to the laws applicable to the PRC, PRC entities are required to make
        appropriations to three non-distributable reserve
        funds, the
        statutory surplus reserve, statutory public welfare fund, and discretionary
        surplus reserve, based on after-tax net earnings as determined in accordance
        with the PRC GAAP. Appropriation to the statutory surplus reserve should
        be at
        least 10% of the after-tax net earnings until the reserve is equal to 50%
        of the
        Company's registered capital. Appropriation to the statutory public welfare
        fund
        is 10% of the after-tax net earnings. The statutory public welfare fund is
        established for the purpose of providing employee facilities and other
        collective benefits to the employees and is non-distributable other than
        in
        liquidation. No appropriations to the discretionary surplus reserve are made
        at
        the discretion of the Board of Directors. The statutory surplus reserve fund
        and
        statutory public welfare fund are included into retained earnings in the
        balance
        sheetpresented Since the Company has been accumulating deficiency no
        such reserve funds have been
  **Income
        Taxes**
 
 The
        Company accounts for income taxes
        in interim periods as required by Accounting Principles Board Opinion No.
        28
        "Interim Financial Reporting" and as interpreted by FASB Interpretation No.
        18,
        "Accounting for Income Taxes in Interim Periods". The Company has determined
        an
        estimated annual effect tax rate. The rate will be revised, if necessary,
        as of
        the end of each successive interimperiod during the Company's fiscal
        year to its best current estimate.
 
 
 The
        estimated annual effective tax rate
        is applied to the year-to-date ordinary income (or loss) at theend of
        the interim period.
 
 
 **Earnings
        (Loss) Per Share**
 
 The
        Company reports earnings per share
        in accordance with the provisions of SFAS No. 128, “ Earnings Per Share.” SFAS
        No. 128 requires presentation of basic and diluted earnings per share in
        conjunction with the disclosure of the methodology used in computing such
        earnings per share. Basic earnings (loss) per share is computed by dividing
        income (loss) available to common shareholders by the weighted-average number
        of
        common shares outstanding during the period. Diluted earnings per share is
        computed similar to basic earnings per share except that the denominator
        is
        increased to include the number of additional common shares that would have
        been
        outstanding if the potential common shares had been issued and if the additional
        common shares were dilutive. There are nopotentially dilutive securities
        for the nine months ended September 30, 2007 and 2006,
        respectively.
 
 
 
 
 
 
  12
  **SHANDONG
        ZHOUYUAN SEED AND NURSERY CO., LTD.**
 **F/K/A
        PINGCHUAN PHARMACEUTICALS, INC.**
 **NOTES
        TO FINANCIAL STATEMENTS**
 
 
  **Note
                  4-**
              **ACCOUNTS
                  RECEIVABLE**
 
 Accounts
        receivable consists of the following:
 
 September
                  30,
                2007(unaudited)Accounts
                  receivable
              
              $
              14,445Less:
                  Allowance for bad
                  debt Accounts receivable, net
              
              
              (1,576
              )$
              12,869
 
 We
        use
        indirect method to write off accounts receivable. The bad debt expenses was
        $0
        and $0 for the nine months ended September 30, 2007 and 2006,
        respectively.
 
 **Note
                  5-**
              **INVENTORIES**
 
 Inventories
        consist of following:
 September
                  30,2007(unaudited)Finished
                  goods
              
              
              121,149Supply
                  and packing materials
              
              
              98,500219,649
 
 **Note
                  6-**
              **PROPERTY
                  AND EQUIPMENT**
 
 The
        following is a summary of property, plant and equipment-at cost, less
        accumulated depreciation:
 
 September
                  30,2007(unaudited)Property
                  and plant
              
              $
              1,855,324Machines
                  and equipment
              
              
              187,161Office
                  equipment
              
              
              20,503Motor
                  vehicles
              
              
              95,5622,158,550Less:
                  Accumulated depreciation
              
              
              (394,195
              )1,764,355Add:
                  Construction in progress
              
              
              39,167Total
              
              $
              1,803,522
 
 Depreciation
        expense charged to operations was $78,055 and $77,707 for the nine months
        ended
 September
        30, 2007 and 2006, respectively.
 
  13
  **SHANDONG
        ZHOUYUAN SEED AND NURSERY CO., LTD.**
 **F/K/A
        PINGCHUAN PHARMACEUTICALS, INC.**
 **NOTES
        TO FINANCIAL STATEMENTS**
 
 
 
 **Note
                  7-**
              **LAND
                  USE RIGHT**
 
 The
        following is a summary of land use right, less amortization:
 
 September
                  30,2007(unaudited)Land
                  use right
              
              
              480,876Less:
                  Amortization
              
              
              (38,470
              )442,406
 
 Amortization
        expense charged to operations was $7,571 and $7,263 for the nine months
        ended
 September
        30, 2007 and 2006, respectively.
 
 **Note
                  8-**
              **ACQUIRED
                  SEED PATENTS**
 
 The
        following is a summary of acquired seed patents, less amortization:
 September
                  30,2007(unaudited)Acquired
                  seed patents
              
              $
              1,384,311Less:
                  Amortization
              
              
              (819,051
              )$
              565,260
 
 Amortization
        expense charged to operations was $101,684 and $97,547 for the nine months
        ended
        September 30, 2007 and 2006, respectively.
 
 **Note
                  9-**
              **RECEIVABLE
                  FROM SALE OF LAND USE
                  RIGHT**
 
 In
        2004,
        the Company sold land use rights to a real estate development company for
        $1,228,858. The real estate development company owes the Company $317,627
        as of
        September 30, 2007. The parties agreed that the real estate development company
        would pay interest annually at 7.488% on $133,021 (RMB 1,000,000) and the
        rest
        of the balance bears no interest.
 
 The
        receivable from sale of land use right consists of the following:
 
 September
                  30,2007(unaudited)Balance
                  bearing interest at 7.488%
              
              
              133,021Balance
                  bearing no interest
              
              
              184,606317,627
 
  14
  **SHANDONG
        ZHOUYUAN SEED AND NURSERY CO., LTD.**
 **F/K/A
        PINGCHUAN PHARMACEUTICALS, INC.**
 **NOTES
        TO FINANCIAL STATEMENTS**
 
 
 
 
 
 **Note
                  10-**
              **BANK
                  LOANS**
 
 Bank
        loans consist of the following as of September 30, 2007:
 
 Financial
                    Institutions
                
                Loan
                  Amount
                
                Duration
                
                Annual
                  Interest
                    Rate
                
                CollateralAgricultural
                    Bank of  China
                
                $545,387
                
                04/21/04--04/21/05
                
                6.903%
                
                Headquarter
                    Building and land usage rightAgricultural
                    Bank of  China
                
                532,085
                
                11/26/04--11/26/05
                
                7.488%
                
                Guaranteed
                    by a real estate development companyAgricultural
                    Bank of  China
                
                266,042
                
                01/09/06--01/07/07
                
                7.488%
                
                Usage
                    right of the land located in Chenggang StreetAgricultural
                    Bank of  China
                
                66,511
                
                11/26/04--11/26/05
                
                7.488%
                
                Guaranteed
                    by a real estate development company$
                    1,410,025
 
 The
        Company was in default on these bank loans, totally $1,410,025 , as of September
        30, 2007. The Company was also in default on bank loan interest payments
        of
        $267,063 as of September 30, 2007.
 
 In
        2004, the Company sold the usage
        right of a piece of land, which the Company used to secure its bank loans,
        to a
        real estate development company. The real estate company agreed to guarantee
        these bankloans.
 
 Interest
        expense for these bank loans
        was $134,468 and $114,844 for the nine months ended September30, 2007
        and 2006, respectively.
 
 
 
 
 
 
 
 
  15
  **SHANDONG
        ZHOUYUAN SEED AND NURSERY CO., LTD.**
 **F/K/A
        PINGCHUAN PHARMACEUTICALS, INC.**
 **NOTES
        TO FINANCIAL STATEMENTS**
 
   **Note
                  12-**
              **COMMON
                  STOCK**
 
 On
        April 5,2005, the Company engaged a
        consultant for a eighteen-month period ended October 4, 2008.The terms
        of the agreement are for the consultant to receive 800,000 shares of common
        stock valued at $0.28 per share,
        totaling $224,000, which will be amortized over the beneficial period. The
        consultantassists the Company in establish two distribution centers in
        the Center Region, PRC.
 
 
 On
        April
        5,2005, the Company engaged another consultant for a twenty-four-month period
        ended April 4, 2009. The terms of
        the agreement are for the consultant to receive 1,200,000 shares of common
        stockvalued at $0.28 per share, totaling $336,000, which will be amortized
        over the beneficial period. The consultant assists the Company in website
        design, building, maintenance, and hosting.
 
 
 On
        April 5,2005, the Company engaged
        another consultant for a twenty-four-month period ended April4, 2009.
        The terms of the agreement are for the consultant to receive 1,000,000 shares
        of
        common stock valued at $0.28 per
        share, totaling $280,000, which will be amortized over the beneficial period.
        Theconsultant assists the Company in establish two distribution centers
        in the Southwest Region, PRC.
 
 
 **Note
                  13-**
              **COMMITMENTS
                  AND CONTINGENCIES**
 
 The
        Company faces a number of risks and challenges not typically associated with
        companies in North America and Western Europe, since its assets exist solely
        in
        the PRC, and its revenues are derived from its operations therein. The PRC
        is a
        developing country with an early stage market economic system, overshadowed
        by
        the state. Its political and economic systems are very different from the
        more
developed countries and are
        in a
        state of change. The PRC also faces many social, economic andpolitical
        challenges that may produce major shocks and instabilities and even crises,
        in
        both its domestic arena and in its relationships with other countries, including
        the United States. Such shocks, instabilities and crises may in turn
        significantly and negatively affect the Company's performance.
 
 
 **Note
                  14-**
              **LITIGATION**
 
 On
        August 1, 2006 Greentree Financial
        Group, Inc. ("Greentree"), a former consultant to a subsidiary of the Company,
        filed a breach of contract complaint in the Superior Court in Mecklenberg
        County, NorthCarolina for non payment of contractual obligations for
        2004 and 2005. The claim is for $49,000 in cash and $40,000 worth of stock
        as
        compensatory damages or $80,000 in liquidated damages. The Company failed
        to
        appear to the Court, and the Court rendered a judgment, which orders the
        the
        Company to pay the plaintiff a sum of $201,500, with interest thereon at
        the
        rate of 8.000% per annum from the date ofEntry of the Judgment until
        paid; and for the costs of this action, in full, to be taxed by the Clerk.
        The
        Company will appeal the case.
 
 
 
  16
  **ITEM
        2.  MANAGEMENT DISCUSSION AND ANALYSIS**
 
 ***A
        Warning Concerning Forward- Looking
        Statements*****
 
 The
        information in this discussion
        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, as amended.  These forward-looking statements include
        statements regarding our capital needs, business strategy and
        expectations.  Any statements contained herein that are not statements
        of historical facts may be deemed to be forward-looking
        statements.  Readers are cautioned that there are risks and
        uncertainties which may cause actual future results to differ from the results
        anticipated in these forward-looking statements.  Some of the more
        significant risks are set forth below in the section titled “Risk Factors That
        May Affect Future Results.”
 
 These
        factors and other risks, known
        and unanticipated, may cause Zhouyuan’s results to differ significantly from
        those anticipated in this report.  Readers are cautioned not to place
        undue reliance on the forward-looking statements in this report, which reflect
        management's opinions only as of the date hereof. We disclaim any obligation
        to
        publicly update these statements, or disclose any difference between its
        actual
        results and those reflected in these statements.
 
 **Results
        of Operations**
 
 Our
        lack
        of financial resources has made it difficult for us to establish the broad
        marketing network necessary to achieve widespread distribution of our
        seeds.  But because seeds are a relatively low margin product,
        profitable operations depend on high volume sales.  The result of our
        limited distribution has been that we have realized negative gross profit
        in
        each of the past two fiscal years.  The revenue from our sales during
        that period exceeded the cost of the seeds by less than 20%, leaving
        insufficient net revenue to offset the amortization of our intellectual
        property.
 
 In
        the
        first nine months of 2007 our sales revenue increased by 77% from the level
        achieved in the first nine months of 2006.  In the three months ended
        September 30, 2007, the rate of improvement was more dramatic, due to the
        near
        absence of revenue in the third quarter of 2006.  Nevertheless, our
        revenue from seed sales for the nine months ended September 30, 2007 exceeded
        the cost of the seeds by only $154,415, of which $50,258 was the spread realized
        in the third quarter.  After amortizing the value of our seed patents,
        we were left with a gross margin of only $52,731 for the first nine months
        of
        2007 and only $15,888 for the third quarter.  Clearly, in order to
        generate sufficient gross margin to sustain our operations, we will have
        to
        increase our sales significantly.
 
 To
        sustain operations, we pared down a portion of our discretionary spending
– our
        selling expenses – from $40,639 in the nine months ended September 30, 2006 to
        $16,670 in the nine months ended September 30, 2007.  This decision
        was necessitated by our lack of revenue, but had the inevitable result of
        reducing our already modest revenue.  The benefits of that contraction
        were more than offset, however, by two events:
 
  17
  ·
              In
                  April 2007 we contracted to issue 3,000,000 shares of common stock
                  to
                  three consultants, who will assist us in developing our business
                  plan.  The market value of those shares will be amortized as
                  expense over the duration of the consulting agreements.  As a
                  result, we incurred a $228,667 consulting fees expense in the nine
                  months
                  ended September 30, 2007, including $114,334 in the third
                  quarter.  The remainder of the value of the shares, $611,333,
                  was recorded as “deferred compensation” on our balance sheet, and will be
                  amortized in future periods.
 
 ·
              In
                  August a judgment for $201,500 was entered against our parent corporation
                  in a North Carolina court.  The judgment was in favor of the
                  company that assisted us in becoming a public company in
                  2004.  We intend to appeal from the
                  judgment.  Nevertheless, we have recorded the entire amount of
                  the judgment as an expense in the period ended September 30,
                  2007.
 
 The
        net
        result of our inadequate revenue and recent expenses was that we realized
        a net
        loss before minority interest of $742,469 in the nine months ended September
        30,
        2007, compared to a net loss before minority interest of $388,399 in the
        nine
        months ended June 30, 2006.  Our net loss before minority interest for
        the quarter ended September 30, 2007 was $202,490, compared to a net loss
        before
        minority interest of $152,746 in the third quarter of 2006.
 
 Our
        statement of operations records an adjustment for “minority
        interest.”  For the first nine months of 2007 the minority interest
        adjustment reduced our net loss by $132,200; in the third quarter the reduction
        was $34,680.  This represents the reversal of the portion of the loss
        incurred by our operating subsidiary, Zhouyuan, that is attributable to the
        40%
        of Zhouyuan in which the Delaware parent corporation has no equity
        interest.  If Zhouyuan realizes income in the future, a proportionate
        reduction in our consolidated income will be recorded for the same
        reason.
 
 Our
        business operates entirely in
        Chinese Renminbi, but we report our results in our SEC filings in U.S.
        Dollars.  The conversion of our accounts from RMB to Dollars results
        in translation adjustments, which are reported as a middle step between net
        income and comprehensive income.  The net income or net loss is added
        to the retained earnings on our balance sheet; while the translation adjustment
        is added to a line item on our balance sheet labeled “accumulated other
        comprehensive income,” since it is more reflective of changes in the relative
        values of U.S. and Chinese currencies than of the success of our
        business.  For the first nine months of 2007 we recorded $20,200 in
        unrealized gains on foreign currency translation.
 
 Liquidity
        and Capital
        Resources
 
 At
        September 30, 2007 we had a working
        capital deficit of $2,538,100, representing an increase of $441,867 in our
        deficit since December 31, 2006.  We had only $6,978 in liquid assets,
        and only $12,869 in accounts receivable (net of allowance).  At the
        same time we owed the Agricultural Bank of China $1,410,025 plus $267,063
        in
        accrued interest, and had other past-due obligations that far exceeded our
        ability to pay.
 
  18
  We
        remain in default with respect to
        our obligations to the Bank.  Negotiations are ongoing with respect to
        a restructuring of the debt.  At the same time, we cannot sustain
        operations for any significant period of time unless we obtain additional
        capital.  Our efforts to attract capital are hindered, however, by our
        default to the Bank.  The survival of our business, therefore, depends
        on our ability to develop a comprehensive debt relief and financing
        package.  Unfortunately, because our operations have produced only a
        trickle of cash during the past two years, we can only achieve financing
        if we
        convince the investor that an investment in our company can be leveraged
        into a
        significant increase in revenues and cash flows.
 
 On
        May
        16, 2007 we entered into an Agreement on Joint Development of Zhouyuan Building
        Project.  The counterparty to the agreement was Jixi Xingcheng Real
        Estate Development Ltd.  The agreement provides that the parties will
        cooperate in the development of the building and underlying land now owned
        by
        Shandong Zhouyuan, with Jixi Xingcheng bearing financial and managerial
        responsibility for the construction project and the sale of the resulting
        units.  The agreement provides that, after completion of the planning
        and design proposals, the parties will mutually determine the allocation
        of
        profits from the project according to their respective investments in the
        project.  If successful, this project could significantly enhance our
        cash flow.  We cannot determine at this time, however, whether the
        project will be successful.
 
 In
        the
        event that we are unable to achieve a restructuring of our debt, it is likely
        that we will be required to sell our real property.  This will have
        the effect of terminating the development project, eliminating the revenue
        stream that we could obtain by leasing a portion of the property, and would
        necessitate that we ourselves commence payment of lease fees.  This
        would cause a further deterioration of our financial results.
 
 We
        believe that our business plan is
        sound, and that our products are marketable.  With adequate capital,
        we believe that Zhouyuan can be prosperous and profitable.  We have no
        assurance, however, that the necessary capital can be achieved.
 
 ***Off-Balance
        Sheet Arrangements***
 
 We
        do not
        have any off-balance sheet arrangements that have or are reasonably likely
        to
        have a current or future effect on our financial condition or results of
        operations.
 
 **Risk
        Factors That May Affect Future
        Results**
 
 You
        should carefully consider the risks
        described below before buying our common stock.  If any of the risks
        described below actually occurs, that event could cause the trading price
        of our
        common stock to decline, and you could lose all or part of your
        investment.
 
 *There
        is no assurance that we will be
        able to generate profits from our business.*
   19
  To
        date we have been unsuccessful in
        establishing a sufficient market for our seeds to assure us of
        profitability.  In 2006 our sales were 34% lower than in 2005, and in
        neither year were sales at a level that could sustain
        profits.  Although sales levels are higher in the current year than in
        2007, we are still not near a revenue level at which we can be
        profitable.  Unless we are able to obtain sufficient capital
        investment to permit us to expand operations, it is unlikely that we will
        be
        able to operate at a profitable level.  We have no commitment from any
        source for financing, and there is no assurance that we will be able to obtain
        the necessary financing.  Without financing, it is likely that our
        business will fail.
 
 *If
        we are unable to settle our bank
        obligations, we may lose control of our business.*
  We
        are currently in default with
        respect to principal and interest payments due on $1.6 million in obligations
        to
        the Agricultural Bank of China.  Our current financial situation does
        not permit us to satisfy the debt as written.  We have been in
        negotiations with the Bank regarding a restructuring of the debt.  If
        those negotiations do not reach a satisfactory conclusion, we may lose the
        realty that we pledged to secure the debt and may face a judgment that could
        force us into bankruptcy.
 
 *We
        will be unable to compete
        effectively unless we maintain a technological advantage over our
        competitors.*
  The
        physics of seed generation has been
        advancing rapidly in the past forty years.  Innovations in design of
        seeds and methods of growing seeds are constant.  Our ability to
        compete effectively in this market will depend on our ability to stay in
        the
        vanguard of technological change.  However, we compete against many
        larger enterprises that have considerable resources to apply to research
        and
        development.  If we are unable to gain access to the latest
        discoveries in seeds, we will not be able to compete effectively, and our
        business will fail.
  *Our
        business and growth will suffer if
        we are unable to hire and retain key personnel that are in high
        demand.*
  Our
        future success depends on our
        ability to attract and retain highly skilled marketing personnel, chemists,
        manufacturing technicians and engineers.  Qualified individuals are in
        high demand in China, and there are insufficient experienced personnel to
        fill
        the demand.  Therefore we may not be able to successfully attract or
        retain the personnel we need to succeed.
 
 *We
        may have difficulty establishing adequate management and financial controls
        in
        China.*
  The
        People’s Republic of China has only
        recently begun to adopt the management and financial reporting concepts and
        practices that investors in the United States are familiar with.  We
        may have difficulty in hiring and retaining employees in China who have the
        experience necessary to implement the kind of management and financial controls
        that are expected of a United States public company.  If we cannot
        establish such controls, we may experience difficulty in collecting financial
        data and preparing financial statements, books of account and corporate records
        and instituting business practices that meet U.S. standards.
 
  20
  *We
        may be unable to protect our proprietary and technology
        rights.*
  The
        Company's success will depend in part on its ability to protect its proprietary
        rights and technologies.  Zhouyuan relies on a combination of patents,
        trademark laws, trade secrets, confidentiality provisions and other contractual
        provisions to protect its proprietary rights.  However, these measures
        afford only limited protection.  Zhouyuan’s failure to adequately
        protect its proprietary rights may adversely affect our competitive
        prospects.  Despite our efforts to protect our proprietary rights,
        unauthorized parties may attempt to copy aspects of Zhouyuan’s products or to
        obtain and use trade secrets or other information that it regards as
        proprietary.
  Zhouyuan’s
        means of protecting its proprietary rights in the People’s Republic of China may
        not be adequate.  The system of laws and the enforcement of existing
        laws in China may not be as certain in implementation and interpretation
        as in
        the United States.  The Chinese judiciary is relatively inexperienced
        in enforcing corporate and commercial law, leading to a higher than usual
        degree
        of uncertainty as to the outcome of any litigation.  The inability to
        enforce or obtain a remedy for theft of our proprietary information may have
        a
        material adverse impact on our business operations.
 
 *Government
        regulation may hinder
        our ability to function efficiently*.
  The
        national, provincial and local
        governments in the People’s Republic of China are highly
        bureaucratized.  The day-to-day operations of our business require
        frequent interaction with representatives of the Chinese government institutions
        in order to obtain and maintain the licenses needed to market hybrid seeds
        in
        China.  The effort to obtain the registrations, licenses and permits
        necessary to carry out our business activities can be
        daunting.  Significant delays can result from the need to obtain
        governmental approval of our activities.  These delays can have an
        adverse effect on the profitability of our operations.  In addition,
        compliance with regulatory requirements applicable to manufacturing operations
        and production may increase the cost of our operations, which would adversely
        affect our profitability.
 
 *We
        are subject to the risk of
        natural disasters*.
  Our
        revenue stream depends on our
        ability to deliver seeds at the beginning of their growing
        season.  Our supply of seeds and their timely availability can be
        negated by drought, flood, storm, blight, or the other woes of
        farming.  Any such event or a combination thereof could render us
        unable to meet the demands of our distribution network.  This could
        have a long-term negative effect on our ability to grow our business, in
        addition to the near-term loss of income.
 
 *Capital
        outflow policies in China
        may hamper our ability to pay dividends to shareholders in the United
        States.*
  The
        People’s Republic of China has
        adopted currency and capital transfer regulations. These regulations require
        that we comply with complex regulations for the movement of capital. Although
        Chinese governmental policies were introduced in 1996 to allow the
        convertibility of RMB into foreign currency for current account items,
        conversion of RMB into foreign exchange for capital items, such as foreign
        direct investment, loans or securities, requires the approval of the State
        Administration of Foreign Exchange. We may be unable to obtain all of the
        required conversion approvals for our operations, and Chinese regulatory
        authorities may impose greater restrictions on the convertibility of the
        RMB in
        the future. Because most of our future revenues will be in RMB, any inability
        to
        obtain the requisite approvals or any future restrictions on currency exchanges
        will limit our ability to pay dividends to our shareholders.
 
  21
  *Currency
        fluctuations may adversely
        affect our operating results.*
  Zhouyuan
        generates revenues and incurs
        expenses and liabilities in Renminbi, the currency of the People’s Republic of
        China.  However, as a subsidiary of the Parent Corporation, it will
        report its financial results in the United States in U.S. Dollars.  As
        a result, our financial results will be subject to the effects of exchange
        rate
        fluctuations between these currencies.  From time to time, the
        government of China may take action to stimulate the Chinese economy that
        will
        have the effect of reducing the value of Renminbi.  In addition,
        international currency markets may cause significant adjustments to occur
        in the
        value of the Renminbi.  Any such events that result in a devaluation
        of the Renminbi versus the U.S. Dollar will have an adverse effect on our
        reported results.  We have not entered into agreements or purchased
        instruments to hedge our exchange rate risks.
 
 *We
        have limited business insurance
        coverage.*
  The
        insurance industry in China is
        still at an early stage of development. Insurance companies in China offer
        limited business insurance products, and do not, to our knowledge, offer
        business liability insurance. As a result, we do not have any business liability
        insurance coverage for our operations. Moreover, while business disruption
        insurance is available, we have determined that the risks of disruption and
        cost
        of the insurance are such that we do not require it at this time. Any business
        disruption, litigation or natural disaster might result in substantial costs
        and
        diversion of resources.
 
 *The
        Parent Corporation is not likely to
        hold annual shareholder meetings in the next few years.*
  Management
        does not expect to hold
        annual meetings of shareholders in the next few years, due to the expense
        involved.  The current members of the Board of Directors were
        appointed to that position by the previous directors.  If other
        directors are added to the Board in the future, it is likely that the current
        directors will appoint them.  As a result, the shareholders of the
        Parent Corporation will have no effective means of exercising control over
        the
        operations of the Parent Corporation or Zhouyuan.
 
 **ITEM
        3.  CONTROLS AND PROCEDURES**
 
 *Evaluation
        of Disclosure Controls
        and Procedures*.  Wang Zhigang, our Chief Executive Officer, and
        Zhang Chunman, our Chief Financial Officer, carried out an evaluation of
        the
        effectiveness of the Company’s disclosure controls and procedures as of
        September 30, 2007.  Pursuant to Rule13a-15(e) promulgated by the
        Securities and Exchange Commission pursuant to the Securities Exchange Act
        of
        1934, “disclosure controls and procedures” means controls and other procedures
        that are designed to insure that information required to be disclosed by
        the
        Company in the reports that it files with the Securities and Exchange Commission
        is recorded, processed, summarized and reported within the time limits specified
        in the Commission’s rules.  “Disclosure controls and procedures”
include, without limitation, controls and procedures designed to insure that
        information the Company is required to disclose in the reports it files with
        the
        Commission is accumulated and communicated to our Chief Executive Officer
        and
        our Chief Financial Officer as appropriate to allow timely decisions regarding
        required disclosure.  Based on their evaluation, Messrs. Wang and
        Zhang concluded that the Company’s system of disclosure controls and procedures
        was effective as of September 30, 2007 for the purposes described in this
        paragraph.
 
  22
  *Changes
        in Internal
        Controls*.  There was no change in internal controls over
        financial reporting (as defined in Rule 13a-15(f) promulgated under the
        Securities Exchange Act or 1934) identified in connection with the evaluation
        described in the preceding paragraph that occurred during the Company’s third
        fiscal quarter that has materially affected or is reasonably likely to
        materially affect the Company’s internal control over financial
        reporting.
 
 **PART
        II   -   OTHER INFORMATION**
 
 *Item
                  1*
              *Legal
                  Proceedings*
 
 On
        April 6, 2006 GreenTree Financial
        Group, Inc. commenced an action in the General Court of Justice of the State
        of
        North Carolina (County of Mecklenberg) titled “GreenTree Financial Group, Inc.
        v. Pingchuan Pharmaceuticals, Inc.”  GreenTree Financial Group alleged
        that it performed services under contract for Pingchuan Pharmaceutical, Inc.
        (the predecessor to Shandong Zhouyuan Seed and Nursery Co., Ltd.), and was
        owed
        $118,500 and other relief.  On August 1, 2007 judgment was entered
        against Shandong Zhouyuan in the amount of $201,500.
 
 *Item
                  6.*
              *Exhibits*
  31.1
              Rule
                  13a-14(a) Certification - CEO
 31.2
              Rule
                  13a-14(a) Certification - CFO
 32
              Rule
                  13a-14(b) Certification
 
 
 
 
  23
  **SIGNATURES**
 
 Pursuant
        to the  requirements  of the Securities  Exchange
        Act of 1934, the Registrant  has
        duly  caused  this  Report  to
        be  signed  on its  behalf by the undersigned
        thereunto duly authorized.
 
 SHANDONG
                  ZHOUYUAN SEED AND NURSERY CO., LTD.Date:
                  November 19, 2007
              By:
                  /s/ Wang ZhigangWang
                  Zhigang, Chief Executive OfficerBy:
                  /s/ Zhang ChunmanZhang
                  Chunman, Chief Financial Officer
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
  24