##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended June 30, 2011
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the transition period from  to
 
 Commission File number: 0-54096
 SMSA Treemont Acquisition Corp.
  Nevada
    
    27-2969090(State of incorporation)
    
    (IRS Employer Identification No.)
 Ruixing Industry Park
Dongping County
Shandong Province, 271509
Peoples Republic of China  (Address of principal executive offices) (Zip Code)
  þ o
 o o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company þ
 o þ
  o þ




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##### 



SMSA Treemont Acquisition Corp.
   PagePart I  Financial InformationItem 1  Financial Statements
    
    
    2Item 2  Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    24Item 3  Quantitative and Qualitative Disclosures About Market Risk
    
    
    30Item 4  Controls and Procedures
    
    
    31Part II  Other InformationItem 1  Legal Proceedings
    
    
    31Item 2  Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    31Item 3  Defaults Upon Senior Securities
    
    
    31Item 4  (Removed and Reserved)
    
    
    31Item 5  Other Information
    
    
    32Item 6  Exhibits
    
    
    32Signatures
    
    
    34
   1




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PART
I  FINANCIAL INFORMATION
 
 ITEM
1. FINANCIAL STATEMENTS
 SMSA TREEMONT ACQUISITION CORP.
 CONDENSED CONSOLIDATED BALANCE SHEET
 (UNAUDITED)
 30 JUNE
    
    
    31 DECEMBERNotes
    
    2011
    
    
    2010US$
    
    
    US$ASSETSCurrent AssetsCash
    
    
    
    
    2,698,647
    
    
    
    6,634,012Restricted Cash
    
    
    
    
    
    
    
    
    226,494Notes receivable
    
    3
    
    
    175,560
    
    
    
    2,236,468Accounts receivable, net
    
    3
    
    
    884,824
    
    
    
    255,870Inventories, net
    
    
    
    
    2,114,662
    
    
    
    1,954,879Advances to third party suppliers
    
    
    
    
    501,444
    
    
    
    907,796Other receivables
    
    
    
    
    294,376
    
    
    
    105,081Amounts due from related parties
    
    11
    
    
    980,517
    
    
    
    Deferred tax assets
    
    7
    
    
    271,447
    
    
    
    265,254Total Current Assets
    
    
    
    
    7,921,477
    
    
    
    12,585,854Non-current AssetsProperty, plant and equipment, net
    
    4
    
    
    10,043,430
    
    
    
    2,973,276Land use rights, net
    
    5
    
    
    2,510,867
    
    
    
    2,542,749Total Non-current Assets
    
    
    
    
    12,554,297
    
    
    
    5,516,025TOTAL ASSETS
    
    
    
    
    20,475,774
    
    
    
    18,101,879
   2




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SMSA TREEMONT ACQUISITION CORP.

CONDENSED CONSOLIDATED BALANCE SHEET (continued)
(UNAUDITED)
 30 JUNE
    
    
    31 DECEMBERNotes
    
    2011
    
    
    2010US$
    
    
    US$LIABILITIES AND SHAREHOLDERS EQUITYCurrent LiabilitiesShort-term bank borrowings
    
    6
    
    
    5,949,069
    
    
    
    8,078,276Accounts payable to third parties
    
    
    
    
    1,410,429
    
    
    
    827,993Notes payable
    
    
    
    
    1,545,213
    
    
    
    Advance from third party customers
    
    
    
    
    347,616
    
    
    
    167,704Payroll and welfare payable
    
    
    
    
    36,074
    
    
    
    19,305Accrued expenses
    
    
    
    
    132,425
    
    
    
    106,179Amounts due to related parties
    
    11
    
    
    2,340,448
    
    
    
    2,249,526Income tax payable
    
    7
    
    
    402,076
    
    
    
    150,218VAT and miscellaneous taxes payable
    
    8
    
    
    136,267
    
    
    
    948,065Other payables to third parties
    
    9
    
    
    94,120
    
    
    
    205,481Total Current Liabilities
    
    
    
    
    12,393,737
    
    
    
    12,752,747Non-current liabilitiesDeferred tax liabilities
    
    7
    
    
    164,609
    
    
    
    172,363Total Non-current Liabilities
    
    
    
    
    164,609
    
    
    
    172,363Total Liabilities
    
    
    
    
    12,558,346
    
    
    
    12,925,110Shareholders EquityCommon
stock, $.0001 par value, 13,294,500 shares authorized, issued
and outstanding
    
    
    
    
    13,295
    
    
    
    13,295Additional paid-in capital
    
    
    
    
    2,440,323
    
    
    
    2,416,446Statutory reserves
    
    10
    
    
    966,648
    
    
    
    522,591Accumulated other comprehensive income
    
    
    
    
    (481,718
    )
    
    
    (427,019
    )Retained earnings
    
    
    
    
    4,978,880
    
    
    
    2,651,456Total Shareholders Equity
    
    
    
    
    7,917,428
    
    
    
    5,176,769TOTAL LIABILITIES AND
SHAREHOLDERS EQUITY
    
    
    
    
    20,475,774
    
    
    
    18,101,879
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SMSA TREEMONT ACQUISITION CORP.
 CONDENSED CONSOLIDATED INCOME STATEMENT
 (UNAUDITED)
 THREE MONTHS ENDED
    
    
    SIX MONTHS ENDED30 JUNE
    
    
    30 JUNENotes
    
    2011
    
    
    2010
    
    
    2011
    
    
    2010US$
    
    
    US$
    
    
    US$
    
    
    US$RevenuesCornstarch
    
    
    
    
    16,572,603
    
    
    
    8,511,331
    
    
    
    29,723,798
    
    
    
    15,414,788Glucose
    
    
    
    
    2,906,547
    
    
    
    2,188,986
    
    
    
    5,818,429
    
    
    
    4,259,224Others
    
    
    
    
    30,087
    
    
    
    42,176
    
    
    
    88,846
    
    
    
    52,394Total Revenues
    
    
    
    
    19,509,237
    
    
    
    10,742,493
    
    
    
    35,631,073
    
    
    
    19,726,406Cost of SalesCornstarch
    
    
    
    
    14,697,383
    
    
    
    7,438,699
    
    
    
    25,871,925
    
    
    
    13,484,608Glucose
    
    
    
    
    2,219,458
    
    
    
    1,909,866
    
    
    
    4,399,795
    
    
    
    3,591,133Others
    
    
    
    
    30,533
    
    
    
    33,673
    
    
    
    89,292
    
    
    
    43,891Total Cost of Sales
    
    
    
    
    16,947,374
    
    
    
    9,382,238
    
    
    
    30,361,012
    
    
    
    17,119,632Gross Profit
    
    
    
    
    2,561,863
    
    
    
    1,360,255
    
    
    
    5,270,061
    
    
    
    2,606,774Operating expensesSelling and distribution
    
    
    
    
    247,862
    
    
    
    264,209
    
    
    
    541,383
    
    
    
    506,816General and administrative
    
    
    
    
    371,567
    
    
    
    63,358
    
    
    
    488,014
    
    
    
    118,703Total Operating Expenses
    
    
    
    
    619,429
    
    
    
    327,567
    
    
    
    1,029,397
    
    
    
    625,519Interest income
    
    
    
    
    1,034
    
    
    
    
    
    
    
    2,344
    
    
    
    Interest expenses
    
    
    
    
    223,345
    
    
    
    45,979
    
    
    
    398,519
    
    
    
    132,326Other expenses, net
    
    
    
    
    80,415
    
    
    
    19,248
    
    
    
    121,704
    
    
    
    13,637Income Before Income Tax
Expenses
    
    
    
    
    1,639,708
    
    
    
    967,461
    
    
    
    3,722,785
    
    
    
    1,835,292Income tax expenses
    
    7
    
    
    404,798
    
    
    
    261,634
    
    
    
    951,304
    
    
    
    481,610NET INCOME
    
    
    
    
    1,234,910
    
    
    
    705,827
    
    
    
    2,771,481
    
    
    
    1,353,682Basic and diluted
weighted average shares
outstanding
    
    
    
    
    13,294,500
    
    
    
    13,294,500
    
    
    
    13,294,500
    
    
    
    13,294,500Basic net earnings per
share
    
    
    
    
    0.09
    
    
    
    0.05
    
    
    
    0.21
    
    
    
    0.10
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SMSA TREEMONT ACQUISITION CORP.
 CONDENSED CONSOLIDATED CASH FLOW STATEMENT
 (UNAUDITED)
 SIX MONTHS ENDED30 JUNE2011
    
    
    2010US$
    
    
    US$CASH FLOWS FROM OPERATING ACTIVITIESNet income
    
    
    2,771,481
    
    
    
    1,353,682Adjustment to reconcile net income to net cash
provided by operating activitiesDepreciation of property, plant and equipment
    
    
    383,091
    
    
    
    381,217Amortization of land use rights
    
    
    31,882
    
    
    
    30,885Gain from disposals of fixed assets and other
    
    
    48,518
    
    
    
    Changes in operating assets and liabilitiesAccounts receivable to third parties
    
    
    (628,954
    )
    
    
    (1,688,502
    )Notes receivable
    
    
    2,060,907
    
    
    
    224,966Advances to third party suppliers, net
    
    
    406,352
    
    
    
    12,085Other receivables
    
    
    (189,295
    )
    
    
    1,260,224Amounts due from related parties
    
    
    (980,517
    )
    
    
    (2,577,344
    )Inventories
    
    
    (159,783
    )
    
    
    38,127Accounts payable to third parties
    
    
    582,436
    
    
    
    (418,112
    )Notes payable
    
    
    1,545,213
    
    
    
    (2,196,772
    )Tax payable
    
    
    251,858
    
    
    
    609,812Advances from third party customers
    
    
    179,912
    
    
    
    19,667Payroll and welfare payable
    
    
    16,768
    
    
    
    Other payables to third parties
    
    
    (923,159
    )
    
    
    830,092Amounts due to related parties
    
    
    90,922
    
    
    
    (160,411
    )Accrued expenses
    
    
    26,246
    
    
    
    81,839Deferred tax assets
    
    
    13,208
    
    
    
    19,656Deferred tax liabilities
    
    
    (27,155
    )
    
    
    (26,868
    )Net cash provided by /(used in) operating
activities
    
    
    5,499,932
    
    
    
    (2,205,757
    )
   5




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SMSA TREEMONT ACQUISITION CORP.

CONDENSED CONSOLIDATED CASH FLOW STATEMENT (continued)
(UNAUDITED)
 SIX MONTHS ENDED30 JUNE2011
    
    
    2010US$
    
    
    US$CASH FLOWS FROM INVESTING
ACTIVITIESRelease of restricted cash
    
    
    226,494
    
    
    
    2,416,449Purchases of property and equipment
    
    
    (7,501,763
    )
    
    
    (150,814
    )Net cash provided by (used in)
investing activities
    
    
    (7,275,269
    )
    
    
    2,265,636CASH FLOWS FROM FINANCING ACTIVITIESBank loan repaid
    
    
    (5,349,520
    )
    
    
    (5,922,557
    )Proceeds from additional paid-in capital
    
    
    23,877
    
    
    
    Proceeds from short-term bank borrowings
    
    
    3,056,868
    
    
    
    6,440,781Net cash provided by (used in) financing
activities
    
    
    (2,268,775
    )
    
    
    518,224Effect of foreign exchange rate changes
    
    
    108,747
    
    
    
    (46,378
    )Net increase/(decrease) in cash
    
    
    (3,935,365
    )
    
    
    531,725Cash, beginning of year
    
    
    6,634,012
    
    
    
    881,229Cash, end of year
    
    
    2,698,647
    
    
    
    1,412,954Supplementary disclosure of cash flow
information:Interest expense paid
    
    
    398,519
    
    
    
    132,326Income taxes paid
    
    
    713,393
    
    
    
    120,989
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SMSA TREEMONT ACQUISITION CORP.
 NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 1.
    
    CORPORATE INFORMATION AND BASIS OF PRESENTATION
 a)
    
    Corporate information
 SMSA Treemont Acquisition Corp. (the Company) was originally incorporated in the State of
Nevada on 3 May 2010.
 Xiangrui Pharmaceutical International Limited (Xiangrui) was incorporated in the British
Virgin Islands on 29 November 2010. Taian Yisheng Management & Consulting Co., Ltd (WFOE)
was incorporated by Xiangrui on 6 May 2011 as a wholly foreign owned enterprise in China.
Xiangrui is a holding company that has no operations or assets other than its ownership of all
of the capital stock of the WFOE.
 On 9 May 2011, the WFOE entered into a series of variable interest entity contractual
agreements (the VIE Agreements) with Shandong Xiangrui Pharmacy Co., Ltd., (Shandong
Xiangrui), a PRC company and its shareholders. The VIE Agreements are comprised of a series
of agreements, including an Exclusive Technical and Consulting Service Agreement, Management
Fee Payment Agreement, Equity Interest Pledge Agreement, Exclusive Equity Interest Purchase
Agreement, Operating Agreement and Proxy Agreement, through which the WFOE has the right to
advise, consult, manage and operate the Company for an annual consulting services fee in the
amount of the Companys yearly net income before tax. In order to further reinforce the
WFOEs rights to control and operate the Company, the Companys shareholders have entrusted
their shareholders rights in the Company to a person designated by the WFOE.
 As a result of entering the abovementioned agreements, the WFOE deems to control Shandong
Xiangrui as a Variable Interest Entity as required by Financial Accounting Standards Board
(FASB) Accounting Standards Codification (ASC) 810-10 Consolidated of Variable Interest
Entities.
 On 13 May 2011, the Company entered into the Share Exchange Agreement with Xiangrui and its
sole shareholder, Mr. Xu. Pursuant to the Share Exchange Agreement the Company issued
12,363,885 newly created shares to Mr. Xu, and became the sole shareholder of Xiangrui. The shares the Company issued to Mr. Xu constitute 93% of our issued and outstanding capital stock
on a fully-diluted basis as of and immediately after the consummation of the transactions
contemplated by the Share Exchange Agreement. Meantime, the Company issued 400,000 shares at
par value to New Fortress Group Ltd., a British Virgin Islands entity, and the consideration
had not been received.
 This transaction has been accounted as a reverse acquisition and recapitalization of the
Company whereby Xiangrui is deemed to be the accounting acquirer (legal acquiree) and the
Company the accounting acquiree (legal acquirer). The historical financial statements for
periods prior to 13 May 2011 are those of consolidated results of Xiangrui and the Company.
 2.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
 a)
    
    Principles of Consolidation
 The accompanying consolidated financial statements include the financial statements of the
Company, Xiangrui, WFOE and Shandong Xiangrui (the Group)
  
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SMSA TREEMONT ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(UNAUDITED)
 2.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
 a)
    
    Principles of Consolidation (continued)
 The Group has adopted FIN 46R which requires a VIE to be consolidated by a company if that
company is subject to a majority of the risk of loss for the VIE or is entitled to receive a
majority of the VIEs residual returns.
 b)
    
    Basis of preparation
 In the opinion of management, the unaudited condensed financial statements have been prepared
and presented in accordance with the accounting principles generally accepted in the United
States of America (US GAAP) for interim financial information and with the instruction to Form
10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all the information
and footnotes required by US GAAP. However, the information included in these interim
financial statements reflects all adjustments (consisting solely normal recurring adjustments)
which are, in the opinion of management, necessary for the fair presentation of financial
position and the results of operations. Results shown for interim periods are not necessarily
indicative of the results to be obtained for the full year.
 c)
    
    Use of estimates
 The preparation of financial statements in conformity with US GAAP requires management to make
estimates and assumptions that affect the reported amounts of assets and liabilities,
disclosures of contingent assets and liabilities at the balance sheet dates and the reported
amounts of revenues and expenses during the reporting periods. Significant estimates and
assumptions reflected in the financial statements include, but are not limited to, revenue
recognition, allowance for doubtful accounts, provision for inventories, useful lives of
property and equipment and intangible assets, income tax and tax related valuation allowance,
and contingencies. Actual results could differ significantly from those estimates.
 d)
    
    Foreign currency
 The functional currency of Shandong Xiangrui is Chinese Renminbi (RMB), as determined based on
the criteria of FASB ASC 830 Foreign Currency Matters. The Group uses the U.S. dollar for
financial reporting purpose.
 Shandong Xiangrui translates assets and liabilities into U.S. dollars using the applicable
exchange rate quoted by the Peoples Bank of China at the balance sheet date. The income and
expenses items are translated using average rates during the reporting period. Adjustments
resulting from the translation of financial statements from RMB into U.S. dollars are recorded
in shareholders equity as part of accumulated other comprehensive income  translation
adjustments. The exchange rates used for the translation are listed below.
 Period end exchange rate
    
    
    Year end exchange rateUS$:RMB
    
    
    US$:RMBJune 30, 2011
    
    
    6.4716
    
    
    
    N/ADecember 31,2010
    
    
    N/A
    
    
    
    6.6227
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SMSA TREEMONT ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(UNAUDITED)
 2.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
 d)
    
    Foreign currency (continued)
 Three months average
    
    
    Six months averageUS$:RMB
    
    
    US$:RMBSecond quarter of 2011
    
    
    6.4850
    
    
    
    N/AFirst half of 2011
    
    
    N/A
    
    
    
    6.5426Second quarter of 2010
    
    
    6.8151
    
    
    
    N/AFirst half of 2010
    
    
    N/A
    
    
    
    6.7538
 e)
    
    Fair value of financial instruments
 The Group adopted ASC 820 Fair Value Measurements and Disclosures. ASC 820 defines fair value,
establishes a framework for measuring fair value, and requires disclosures to be provided on
fair value measurement.
 ASC 820 establishes a three-tier fair value hierarchy, which prioritizes the inputs used in
measuring fair value as follows:
 
    
    Level 1  Observable inputs that reflect quoted prices (unadjusted) for identical
assets or liabilities in active markets.
    
    Level 2  Include other inputs that are directly or indirectly observable in the
marketplace; and
    
    Level 3  Unobservable inputs which are supported by little or no market activity,
therefore requiring an entity to develop its own assumptions.
 The carrying values of cash and cash equivalents, accounts receivable, other current assets,
accounts payable, other current liabilities, and amounts due to employees approximate their
fair value due to their short-term maturities.
 f)
    
    Cash
 The Group considers all cash on hand and demand deposits as cash.
 g)
    
    Restricted cash
 Restricted cash represents amounts held by banks, which are not available for the Group use, as
secure for issuance of letters of credit.
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SMSA TREEMONT ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(UNAUDITED)
 2.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES(CONTINUED)
 h)
    
    Notes and accounts receivable
 Notes receivable represent bank notes which are paid by third party commercial banks upon due
thus are believed to have low credit risk. Provisions are made against notes and accounts
receivable for estimated losses resulting from the inability of collecting payments from our
customers. The Group periodically assesses notes and accounts receivable balances to determine
whether an allowance for doubtful accounts should be made based upon historical bad debt
analysis, specific customer creditworthiness, and current economic trends. Notes and accounts
receivable in the balance sheets are stated net of such provision, if any.
 i)
    
    Inventories
 Inventories are stated at the lower of cost or net realizable value at balance sheet date. Cost
of inventories is determined using the weighted average method. Provisions are made for
excessive, slow moving and obsolete inventories as well as inventories whose carrying value
exceeds their net realizable value. Net realizable value is the estimated selling price in the
ordinary course of business, less estimated costs and expenses and related taxes necessary to
make the sale. Provision for inventories is determined on an
individual item basis. Raw
material costs are based on purchase costs while work-in-progress and finished goods comprise
direct materials, direct labor and an allocation of manufacturing overhead costs.
 j)
    
    Property, plant and equipment
 Property, plant and equipment are stated at cost less accumulated depreciation and are
depreciated on a straight-line basis over the estimated useful lives detailed as follows:
 Estimated
    
    Estimated
    
    
    
    
    
    
    AnnualCategory
    
    useful life
    
    
    residual value
    
    
    depreciation rateBuildings
    
    20 years
    
    
    5
    %
    
    
    4.75
    %Machinery
    
    5-10 years
    
    
    5
    %
    
    
    9.5%19
    %Office equipments
    
    5-10 years
    
    
    5
    %
    
    
    9.5%-19
    %Vehicles
    
    10 years
    
    
    5
    %
    
    
    9.5
    %
 Expenditures for major additions or improvement that extend the useful lives of property and
equipment are capitalized as additions to the related assets. Expenditure for minor
replacements, maintenance and repairs that do not improve or extend the lives of the assets are
charged to expense when incurred. Retirement, sales and disposals of assets are recorded by
removing the cost and accumulated depreciation, with any resulting gain or loss reflected in
the statements of income.
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SMSA TREEMONT ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(UNAUDITED)
 2.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
 k)
    
    Property, plant and equipment
 All direct and indirect costs that are related to the construction of property and equipment
and incurred before the assets are ready for their intended use are capitalized as construction
in progress. Construction in progress is transferred to specific property and equipment
accounts and commences depreciation when these assets are ready for their intended use.
Interest costs are capitalized if they are incurred during the acquisition, construction or
production of a qualifying asset and such costs could have been avoided if expenditures for the
assets have not been made. Capitalization of interest costs commences when the activities to
prepare the asset are in progress and expenditures and borrowing costs are being incurred.
Interest costs are capitalized until the assets are ready for their intended use.
Capitalization of interest costs is suspended during extended periods in which activities
related to the acquisition or construction of the qualifying assets are interrupted.
 l)
    
    Land use rights
 Prepayments for land use rights represent amounts paid for the right to use land in China and
are recorded at cost less accumulated amortization. Amortization is recorded on a
straight-line basis over the terms of the respective land use rights agreements, which are 50
years.
 m)
    
    Revenue recognition
 The Group recognizes revenue pursuant to ASC 605 Revenue Recognition, where persuasive
evidence of an arrangement exists (demonstrated via contract with purchasers), delivery has
occurred, the sellers price is fixed or determinable and collectibility is reasonably
assured. This generally occurs when the customer receives the product or at the time title
passes to the customer. Customers generally do not have the right to return product unless
damaged or defective. The Group does not provide discount for early payments or any other
allowances on sales.
 n)
    
    Shipping and handling costs
 Shipping and handling costs are included in selling expenses. The shipping and handling costs
for the six-month period ended June 30, 2011 and 2010 were US$317,347 and US$236,833,
respectively.
 o)
    
    Cost of goods sold
 Cost of goods sold consists primarily of purchase costs of raw material, direct labor costs
and overhead expenses attributable to production and machine depreciation.
 p)
    
    Advertising expenditures
 Advertising expenditures are expensed as incurred. There were no advertising costs incurred in
the reporting period.
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SMSA TREEMONT ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(UNAUDITED)
 2.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
 q)
    
    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, ASC 220
Comprehensive Incomerequires that all items that are required to be recognized under current
accounting standards as components of comprehensive income be reported in a financial statement
that is displayed with the same prominence as other financial statements. The Group has chosen
to report comprehensive income in the Statements of Stockholders Equity. The Groups other
comprehensive income represents foreign currency translation adjustments.
 r)
    
    Income taxes
 The Group uses the accrual method of accounting to determine income taxes for the year. The
Group has implemented Statement of Financial Accounting Standards (SFAS) No. 109, Accounting
for Income Taxes. Income tax liabilities computed according to the United States and Peoples
Republic of China (PRC) tax laws are provided for the tax effects of transactions reported in
the financial statements and consist of taxes currently due plus deferred taxes related
primarily to accumulated depreciation, allowance for doubtful accounts as well as the potential
impact of any net operating loss carryforwards and their potential utilization. The deferred
tax assets and liabilities represent the future tax return consequences of those differences,
which will be either taxable or deductible when the assets and liabilities are recovered or
settled. A valuation allowance is created to evaluate deferred tax assets if it is more likely
than not that these items will either expire before the Group is able to realize that tax
benefit, or that future realization is uncertain.
 The Groups operation in U.S. files income tax returns in the United States of America and
various states, as appropriate and applicable. As a result of the Companys bankruptcy action,
the Companys operation in U.S. is no longer subject to U.S. federal, state and local, as
applicable, income tax examinations by regulatory taxing authorities for any period prior to 1
August 2008. The Company does not anticipate any examinations of returns filed for periods
ending after 1 August 2008.
 All of Shandong Xiangruis operations are in China. Shandong Xiangruis operations in China
are subject to Chinas New Enterprise Income Tax (EIT) Law, which became effective on 1
January 2008 and has a uniform statutory tax rate of 25 percent.
 s)
    
    Value-added tax (VAT)
 In accordance with the relevant tax laws of China, value-added taxes (VAT) are levied on the
invoiced value of sales and are payable by the purchaser. The Company is required to remit the
VAT it collects to the tax authority, but can deduct the VAT it has paid on eligible
purchases. The difference between the amounts collected and paid is presented as VAT
recoverable or payable balance on the balance sheets.
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##### Table of Contents



SMSA TREEMONT ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(UNAUDITED)
 2.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
 t)
    
    Employee benefits
 Full-time employees of Shandong Xiangrui participate in a government-mandated
multi-employee defined contribution plan pursuant to which certain pension benefits, medical
care, unemployment insurance, employee housing fund and other welfare benefits are provided to
employees. Chinese labor regulations require Shandong Xiangrui make contributions to the
government for these benefits based on a specific percentage of the employees salaries up to a
maximum of three times the average annual salary for the city in which Shandong Xiangrui
operates for the prior year. Shandong Xiangrui has no legal obligation for the benefits beyond
the contributions made.
 u)
    
    Impairment of long-lived assets
 The Group evaluates its long-lived assets, including property and equipment for impairment
whenever events or changes in circumstances, such as a significant adverse change to market
conditions that will impact the future use of the assets, indicate that the carrying amount of
an asset may not be recoverable in accordance with ASC 360 Property, Plant and Equipment. When
these events occur, the Group assesses the recoverability of long-lived assets by comparing
the carrying amount of the assets to the expected future undiscounted cash flows resulting
from the use of the assets and their eventual disposition. If the sum of the expected
undiscounted cash flow is less than the carrying amount of the assets, the Group recognizes an
impairment loss based on the excess of the carrying amount of the assets over their fair
value. Fair value is generally determined by discounting the cash flows expected to be
generated by the assets, when the market prices are not readily available. No impairment of
long-lived assets was recognized for any of the years presented.
 v)
    
    Government grants
 We receive grants from the government. The grants received from government are recorded in the
financial statements in accordance with the purpose and the nature of the grant, either as
other income, a reduction of expenses, or a reduction of the cost of the capital investment.
The benefit of grants is recorded when performance is complete and all conditions as specified
in the agreement are fulfilled. Any refundable grant is accounted for as a liability.
 w)
    
    Income (Loss) per share
 Basic earnings (loss) per share is computed by dividing the net income (loss) available to
common stockholders by the weighted-average number of common shares outstanding during the
respective period presented in our accompanying financial statements.
 Fully diluted earnings (loss) per share is computed similar to basic income (loss) per share
except that the denominator is increased to include the number of common stock equivalents
(primarily outstanding options and warrants).
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SMSA TREEMONT ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(UNAUDITED)
 2.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
 w)
    
    Income (Loss) per share (continued)
 Common stock equivalents represent the dilutive effect of the assumed exercise of the
outstanding stock options and warrants, using the treasury stock method, at either the
beginning of the respective period presented or the date of issuance, whichever is later, and
only if the common stock equivalents are considered dilutive based upon the Groups net income
(loss) position at the calculation date.
 As of 30 June 2011, the Group had no outstanding stock warrants, options or convertible
securities which could be considered as dilutive for purposes of the loss per share
calculation.
 x)
    
    Recently issued accounting pronouncements
 In July 2010, the FASB issued ASU 2010-20 an accounting update to provide guidance to enhance
disclosures related to the credit quality of a companys financing receivables portfolio and
the associated allowance for credit losses (FASB ASC Topic 310). Pursuant to this accounting
update, a company is required to provide a greater level of disaggregated information about
its allowance for credit loss with the objective of facilitating users evaluation of the
nature of credit risk inherent in the Groups portfolio of financing receivables, how that
risk is analyzed and assessed in arriving at the allowance for credit losses, and the changes
and reasons for those changes in the allowance for credit losses. The revised disclosures as
of the end of the reporting period are effective for the Group beginning in the second quarter
of fiscal 2011, and the revised discourses related to activities during the reporting period
are effective for the Group beginning in the third quarter of fiscal 2011. The adoption of
such standard did not have a material impact on the Groups consolidated financial statements
and disclosures.
 In December 2010, the FASB issued ASU 2010-28 an accounting pronouncement related to
intangibles  goodwill and other (FASB ASC Topic 350), which requires a company to consider
whether there are any adverse qualitative factors indicating that an impairment may exist in
performing step 2 of the impairment test for reporting units with zero or negative carrying
amounts. The provisions for this pronouncement are effective for fiscal years, and interim
periods within those years, beginning after December 15, 2010, with no early adoption. We will
adopt this pronouncement for our fiscal year beginning July 1, 2011. The adoption of this
pronouncement is not expected to have a material impact on our consolidated financial
statements.
 In December 2010, the FASB issued ASU 2010-29 an accounting pronouncement related to business
combinations (FASB ASC Topic 815), which specifies that if a public entity presents
comparative financial statements, the entity should disclose revenue and earnings of the
combined entity as though the business combination(s) that occurred during the current year
had occurred as of the beginning of the comparable prior annual reporting period only. It also
expands the supplemental pro forma disclosures under Topic 805 to include a description of the
nature and amount of material, nonrecurring pro forma adjustments directly attributable to the
business combination included in the reported pro forma revenue and earnings. The amendments
in this Update are effective prospectively for business combinations for which the acquisition
date is on or after the beginning of the first annual reporting period beginning on or after
December 15, 2010. Early adoption is permitted. The adoption of this pronouncement is not
expected to have a material impact on our consolidated financial statements.
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SMSA TREEMONT ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(UNAUDITED)
 2.
    
    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
 y)
    
    Recently issued accounting pronouncements (continued)
 In January 2011, the FASB issued ASU 2011-01 an accounting pronouncement related to
receivables (FASB ASC Topic 310). The amendments in this update temporarily delay the
effective date of the disclosures about troubled debt restructurings in ASU 2010-20 for public
entities. The delay is intended to allow the Board time to complete its deliberations on what
constitutes a troubled debt restructuring. The effective date of the new disclosures about
troubled debt restructurings for public entities and the guidance for determining what
constitutes a troubled debt restructuring will then be coordinated. Currently, that guidance
is anticipated to be effective for interim and annual periods ending after 15 June 2011. The
adoption of this pronouncement is not expected to have a material impact on our consolidated
financial statements.
 3.
    
    NOTES AND ACCOUNTS RECEIVABLE, NET
 Accounts receivable is stated at net value. As of 30 June 2011, the allowance for doubtful
accounts recorded by the Group amounted to US$936,669.
 Notes receivable represent bank drafts that are non-interest bearing and due within six months.
Such bank drafts have been arranged with third party financial institutions by certain
customers to settle their purchases from us. The carrying amount of notes receivable
approximate their fair values due to their short maturities.
 4.
    
    PROPERTY , PLANT AND EQUIPMENT, NET
 30 JUNE
    
    
    31 DECEMBER2011
    
    
    2010US$
    
    
    US$Buildings
    
    
    2,368,933
    
    
    
    2,368,933Machinery
    
    
    6,652,819
    
    
    
    6,934,521Office equipment
    
    
    32,636
    
    
    
    18,911Motor vehicles
    
    
    60,172
    
    
    
    59,098Total
    
    
    9,114,560
    
    
    
    9,381,463Less: Accumulated depreciation
    
    
    (6,625,076
    )
    
    
    (6,484,434
    )Subtotal
    
    
    2,489,484
    
    
    
    2,897,029Construction in progress
    
    
    7,553,946
    
    
    
    76,247Property, plant and equipment, net
    
    
    10,043,430
    
    
    
    2,973,276
 As of 30 June 2011, Shandong Xiangrui pledged its building with net book value of US$1,152,612
to Citibank (China) Co., Ltd., Shanghai Branch to secure a long term bank loan provided by the
bank to Shandong RunYin Bio-Chemical Co., Ltd., a related party (Note 11).Depreciation expenses for the three months ended 30 June 2011 and 2010 were $254,304 and $184,370
and for the six months ended 30 June 2011 and 2010 were $383,091 and $381,217, respectively.
  15




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SMSA TREEMONT ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(UNAUDITED)
 5.
    
    LAND USE RIGHTS, NET
 As of 30 June 2011, Shandong Xiangrui pledged its land use rights with net book value of
US$646,372 to Citibank (China) Co., Ltd., Shanghai Branch to secure a long term bank loan
provided by the bank to Shandong RunYin Bio-Chemical Co., Ltd, a related party.
 Land use rights are summarized as follows:
 30 JUNE
    
    
    31 DECEMBER2011
    
    
    2010US$
    
    
    US$Land use rights, cost
    
    
    2,766,860
    
    
    
    2,766,860Less: accumulated amortization
    
    
    (255,993
    )
    
    
    (224,111
    )Land use rights, net
    
    
    2,510,867
    
    
    
    2,542,749
 6.
    
    BANK BORROWINGS
 The Group had the following outstanding short-term loans with banks:
 30 JUNE
    
    
    31 DECEMBER2011
    
    
    2010US$
    
    
    US$Rural Cooperative Bank of
Dongping, Shandong
    
    
    4,403,856
    
    
    
    2,793,422China Merchant Bank
    
    
    1,545,213
    
    
    
    Agricultural Develop Bank
    
    
    
    
    
    
    4,529,875Bank of Communications
    
    
    
    
    
    
    754,979Total
    
    
    5,949,069
    
    
    
    8,078,276
 The Groups bank borrowings are RMB denominated loans with fixed interest rates ranging from
4.86% to 7.02%. Interest expense on bank borrowings for the three months ended 30 June 2011
and 2010 was $223,345 and $38,650 and for six months ended 30 June 2011 and 2010 was $398,519
and $124,997, respectively. All bank loans are due within one year from balance sheet date.
 7.
    
    INCOME TAXES
 On 13 May 2011, income from the Companys foreign subsidiaries became subject to U.S. income
tax liability; however, this tax is deferred until foreign source income is repatriated to the
Company from earnings and profits after foreign income taxes, which has not yet occurred.
 All of Shandong Xiangruis operations are in the PRC, and in accordance with the relevant tax
laws and regulations of PRC, the corporate income tax rate is 25%.
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SMSA TREEMONT ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(UNAUDITED)
 7.
    
    INCOME TAXES (CONTINUED)
 Income before taxes and the provision for taxes consists of the following:
 THREE MONTHES ENDED 30 JUNE2011
    
    
    2010US$
    
    
    US$Income before taxes:US Federal
    
    
    
    
    
    
    US State
    
    
    
    
    
    
    BVI
    
    
    
    
    
    
    PRC
    
    
    1,639,708
    
    
    
    967,461Total income before taxes
    
    
    1,639,708
    
    
    
    967,461
 THREE MONTHES ENDED 30 JUNE2011
    
    
    2010US$
    
    
    US$Provision for income taxes:Current:US Federal
    
    
    
    
    
    
    US State
    
    
    
    
    
    
    BVI
    
    
    
    
    
    
    PRC
    
    
    402,440
    
    
    
    255,845Current income taxes
    
    
    402,440
    
    
    
    255,845DeferredUS Federal
    
    
    
    
    
    
    US State
    
    
    
    
    
    
    BVI
    
    
    
    
    
    
    PRC
    
    
    2,358
    
    
    
    5,789Deferred income taxes
    
    
    2,358
    
    
    
    5,789Total provision for income taxes
    
    
    404,798
    
    
    
    261,634
 SIX MONTHES ENDED 30 JUNE2011
    
    
    2010US$
    
    
    US$Income (loss) before taxes:US Federal
    
    
    
    
    
    
    US State
    
    
    (3,877
    )
    
    
    (6,095
    )BVI
    
    
    
    
    
    
    PRC
    
    
    3,726,662
    
    
    
    1,841,387Total income (loss) before taxes
    
    
    3,722,785
    
    
    
    1,835,292
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SMSA TREEMONT ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(UNAUDITED)
 7.
    
    INCOME TAXES (CONTINUED)
 SIX MONTHES ENDED 30 JUNE2011
    
    
    2010US$
    
    
    US$Provision for income taxes:Current:US Federal
    
    
    
    
    
    
    US State
    
    
    
    
    
    
    BVI
    
    
    
    
    
    
    PRC
    
    
    965,251
    
    
    
    488,822Current income taxes
    
    
    965,251
    
    
    
    488,822DeferredUS Federal
    
    
    
    
    
    
    US State
    
    
    
    
    
    
    BVI
    
    
    
    
    
    
    PRC
    
    
    (13,947
    )
    
    
    (7,212
    )Deferred income taxes
    
    
    (13,947
    )
    
    
    (7,212
    )Total provision for income taxes
    
    
    951,304
    
    
    
    481,610
 A reconciliation for the provision for income taxes with amounts determined by applying the
statutory income tax rate to income before income tax is as follows:
 THREE MONTHES ENDED 30 JUNE2011
    
    
    2010US$
    
    
    US$Profit before income tax
    
    
    1,639,708
    
    
    
    967,461Corporate income tax rate
    
    
    25
    %
    
    
    25
    %Computed tax at statutory rate
    
    
    409,927
    
    
    
    241,865Income exempted from taxation
    
    
    (5,129
    )
    
    
    Expenses not deductible for tax
purposes
    
    
    
    
    
    
    19,769Provision for income taxes
    
    
    404,798
    
    
    
    261,634
 SIX MONTHES ENDED 30 JUNE2011
    
    
    2010US$
    
    
    US$Profit before income tax
    
    
    3,722,785
    
    
    
    1,835,292Corporate income tax rate
    
    
    25
    %
    
    
    25
    %Computed tax at statutory rate
    
    
    930,696
    
    
    
    458,823Income exempted from taxation
    
    
    (6,098
    )Expenses not deductible for tax
purposes
    
    
    26,706
    
    
    
    22,787Provision for income taxes
    
    
    951,304
    
    
    
    481,610
 
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SMSA TREEMONT ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(UNAUDITED)
 7.
    
    INCOME TAXES (CONTINUED)
 Deferred income taxes reflect the net tax effects of temporary differences between the carrying
amount of assets and liabilities for financial reporting purposes and the amounts used for
income tax purposes. Components of the Groups deferred tax assets and liabilities are as
follows:
 30 JUNE
    
    
    31 DECEMBER2011
    
    
    2010US$
    
    
    US$Deferred tax assetsAllowance for doubtful accounts
    
    
    271,447
    
    
    
    265,254Total deferred tax assets
    
    
    271,447
    
    
    
    265,254Deferred tax liabilitiesDepreciation of property, plant and
equipments
    
    
    164,609
    
    
    
    172,363Total deferred tax liabilities
    
    
    164,609
    
    
    
    172,363
 Deferred assets are current assets while deferred liabilities are non-current liabilities.
No valuation allowance was provided for deferred tax assets in the periods presented.
 8.
    
    VAT AND MISCELLANEOUS TAXES PAYABLE
 Miscellaneous tax payables mainly comprise local supplementary taxes that levied as a
percentage of the total income tax and VAT tax paid. Details of VAT and miscellaneous taxes
payable are set forth in the following table:
 30 JUNE
    
    
    31 DECEMBER2011
    
    
    2010US$
    
    
    US$VAT
    
    
    111,293
    
    
    
    859,128Urban construction tax
    
    
    6,415
    
    
    
    46,064Education tax
    
    
    3,849
    
    
    
    25,837Local supplementary tax
    
    
    2,566
    
    
    
    8,613Land use tax
    
    
    2,905
    
    
    
    3,918Real estate tax
    
    
    4,010
    
    
    
    2,838Stamp duty
    
    
    2,829Personal income tax payable on
behalf of staffs
    
    
    2,400
    
    
    
    1,667Total
    
    
    136,267
    
    
    
    948,065
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SMSA TREEMONT ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(UNAUDITED)
 9.
    
    OTHER PAYABLE TO THIRD PARTIES
 Other payables to third parties consist of the following:
 30 JUNE
    
    
    31 DECEMBER2011
    
    
    2010US$
    
    
    US$Purchases of property and equipment
    
    
    77,884
    
    
    
    111,535Others
    
    
    16,236
    
    
    
    93,946Total
    
    
    94,120
    
    
    
    205,481
 10.
    
    STATUTORY RESERVES
 In accordance with the Company Law of the Peoples Republic of China, Shandong Xiangrui should
make appropriations from after-tax profit to non-distributable reserve funds. These reserve
funds include (i) a general reserve and (ii) a discretionary fund. Shandong Xiangrui adds an
annual statutory common reserve of at least 10% of its annual after-tax profit until such
reserve has reached 50% of its respective registered capital based on the enterprises
statutory accounts. The appropriations to discretionary fund are at Shandong Xiangruis
discretion. These reserve funds can only be used for specific purposes of enterprises expansion
and not distributable as cash dividends. Shandong Xiangrui provided 10% of statutory reserve
and 6% of discretionary reserve upon distributable profit. Details of those reserves are
presented as follows:
 30 JUNE
    
    
    31 DECEMBER2011
    
    
    2010US$
    
    
    US$Statutory reserve
    
    
    604,154
    
    
    
    326,619Discretionary reserve
    
    
    362,494
    
    
    
    195,972Total
    
    
    966,648
    
    
    
    522,591
 11.
    
    RELATED PARTY TRANSACTIONS
 The principal related parties with which the Group had transactions are listed as follows:
 Name
    
    RelationshipShandong Runyin Bio-chemical Co., Ltd.
    
    Affiliates under common controlRuixing Group Co., Ltd.
    
    Affiliates under common controlShandong Xinrui Chemical Devices Co., Ltd.
    
    Affiliates under common control
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SMSA TREEMONT ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(UNAUDITED)
 11.
    
    RELATED PARTY TRANSACTIONS (CONTINUED)
 For the six months ended 30 June 2011, and 2010, the Group engaged in the following
significant related party transactions:
 (a)
    
    Utility (steam and electricity) supply
 Steam supply received from
 SIX MONTHS ENDED 30 JUNE2011
    
    
    2010US$
    
    
    US$Shandong Runyin
Bio-chemical Co.,
Ltd.
    
    
    (i
    )
    
    
    982,686
    
    
    
    834,695
  SIX MONTHS ENDED 30 JUNE2011
    
    
    2010US$
    
    
    US$Shandong Runyin
Bio-chemical Co.,
Ltd.
    
    
    (i
    )
    
    
    998,990
    
    
    
    763,044
  SIX MONTHS ENDED 30 JUNE2011
    
    
    2010US$
    
    
    US$Shandong Xinrui
Chemical Devices
Co., Ltd.
    
    
    (i
    )
    
    
    
    
    
    
    273,167
 (b)
    
    Raw materials purchased from
 SIX MONTHS ENDED 30 JUNE2011
    
    
    2010US$
    
    
    US$Shandong Runyin
Bio-chemical Co., Ltd.
    
    
    
    
    
    
    1,362,750
    
    
    
    373,535
 (c)
    
    Plant facility lease from
 SIX MONTHS ENDED 30 JUNE2011
    
    
    2010US$
    
    
    US$Shandong Runyin
Bio-chemical Co.,
Ltd.
    
    (ii)
    
    
    4,700
    
    
    
    4,574
 (i)
    
    See Note 12 (a).(ii)
    
    In December 2008, Shandong Xiangrui entered into a rental contract with the
Shandong Runyin Bio-chemical Co., Ltd. for some plants, which are used for the production
of stearic and glycerol. The lease contract is renewed on a yearly basis. The lease
payment is around US$9,000 per year.  21




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SMSA TREEMONT ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(UNAUDITED)
 11.
    
    RELATED PARTY TRANSACTIONS (CONTINUED)
 As of 30 June 2011 and 31 December 2010, the Group had following balances with related parties:
 (e)
    
    Amounts due from related parties
 30 JUNE
    
    
    31 DECEMBER2011
    
    
    2010US$
    
    
    US$Shandong Runyin Bio-chemical Co., Ltd.
    
    
    980,517
    
    
    
    Total
    
    
    980,517
    
    
    
    
 (f)
    
    Amounts due to related parties
 JUNE 30,
    
    
    DECEMBER 312011
    
    
    2010US$
    
    
    US$Ruixing Group Co., Ltd.
    
    
    245,716
    
    
    
    297,285Shandong Runyin Bio-chemical Co., Ltd.
    
    
    2,094,732
    
    
    
    1,952,241Total
    
    
    2,340,448
    
    
    
    2,249,526
 12.
    
    COMMITMENTS AND CONTINGENCIES
 (a)
    
    Supply CommitmentIn January 2009, Shandong Xiangrui entered into a non-cancelable contract with Shandong
Runyin Bio-chemical Co., Ltd. to secure the steam and electricity supply for Shandong
Xiangruis cornstarch and glucose production. The non-cancelable utility supply contract
with the Shandong Runyin Bio-chemical Co., Ltd. expires in December 2014 with a price that
approximates market price. Total amount of the contract per year would be determined by
the actual quantity of utilities consumed by Shandong Xiangrui. Please refer to Note 11
for the actual value of supply consumed by Shandong Xiangrui in six months ended 30 June
2011 and 2010 respectively.(b)
    
    Loan GuaranteeAs of 30 June 2011, Shandong Xiangrui pledged its building with net book value of
US$2,510,867 to Citibank (China) Co., Ltd., Shanghai Branch to secure a long term bank
loan provided by the bank to Shandong RunYin Bio-Chemical Co., Ltd.As of 30 June 2011, Shandong Xiangrui pledged its land use rights with net book value of
US$646,372 to Citibank (China) Co., Ltd., Shanghai Branch to secure a long term bank loan
provided by the bank to Shandong RunYin Bio-Chemical Co., Ltd, a related party (Note 11).
  22




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##### Table of Contents



SMSA TREEMONT ACQUISITION CORP.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (continued)
(UNAUDITED)
 12.
    
    COMMITMENTS AND CONTINGENCIES (CONTINUED)
 (c)
    
    Capital Purchase CommitmentAs of 30 June 2011, Shandong Xiangrui entered into non-cancellable contracts with some
constructor and machinery suppliers for purchase of plant and machinery with amount of
US$793,576.(d)
    
    ContingenciesThe Group had no material contingent events during the reporting period.
 13.
    
    SEGMENT AND GEOGRAPHIC INFORMATION
 Business segments
 The main product of the Group is cornstarch, some of which are further processed into glucose
based on market demand or customer requests. The cornstarch and glucose production share the
same production line and facilities. The cornstarch and glucose production are not
individually assessed when the Groups chief operating decision maker reviews the operation
results and make resources allocation. The Group does not prepare separate financial
information for cornstarch and glucose production. Therefore, the management believes the
Group is operating in one reportable segment.
 Geographical segments
 All the revenue is attributed to the revenue from China.
 14.
    
    SUBSEQUENT EVENTS
 In the opinion of the management, the Group had no significant subsequent events.
  23




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##### Table of Contents



ITEM 2.
    
    MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  (1) Overview
    (2) Results of Operations
 Xiangrui Share Exchange Agreement
  24




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##### Table of Contents



Results of operations for the three months ended June 30, 2011 as compared with the three months
ended June 30, 2010.
 Three months EndedJune 30,(unaudited)2011
    
    
    2010
    
    
    $ Change
    
    
    % Change(In thousands, except percentages)Statement of operations dataRevenues
    
    $
    19,509
    
    
    
    10,742
    
    
    
    8,767
    
    
    
    82
    %Cost of sales
    
    
    16,947
    
    
    
    9,382
    
    
    
    7,565
    
    
    
    81
    %Gross profit
    
    
    2,562
    
    
    
    1,360
    
    
    
    1,202
    
    
    
    88
    %Operating expensesSelling and distribution expenses
    
    
    248
    
    
    
    264
    
    
    
    (16
    )
    
    
    (6
    %)General and administrative expenses
    
    
    371
    
    
    
    64
    
    
    
    307
    
    
    
    480
    %Total operating expenses
    
    
    619
    
    
    
    328
    
    
    
    219
    
    
    
    89
    %Income from operations
    
    
    1,943
    
    
    
    1,032
    
    
    
    911
    
    
    
    88
    %Interest income
    
    
    1
    
    
    
    
    
    
    
    1Interest expenses
    
    
    223
    
    
    
    45
    
    
    
    178
    
    
    
    396
    %Other expenses, net
    
    
    80
    
    
    
    19
    
    
    
    61
    
    
    
    321
    %Income before income tax expenses
    
    
    1,640
    
    
    
    967
    
    
    
    673
    
    
    
    70
    %Income taxes expenses
    
    
    405
    
    
    
    262
    
    
    
    143
    
    
    
    55
    %Net income attributable to ordinary shareholders
    
    
    1,235
    
    
    
    706
    
    
    
    529
    
    
    
    75
    %
 Revenues.
  Cost of Sales.
  25




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##### Table of Contents



Gross Profit.
 Selling and Distribution Expenses.
 General and Administrative Expenses.
 Interest Expenses.
 Income Before Income Tax Expenses.
 Income Tax Expenses.
 Net Income Attributable to Ordinary Shareholders.
  26




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##### Table of Contents



Results of operations for the six months ended June 30, 2011 as compared with the six months ended
June 30, 2010.
 Six months EndedJune 30,(unaudited)2011
    
    
    2010
    
    
    $ Change
    
    
    % Change(In thousands, except percentages)Statement of operations dataRevenues
    
    $
    35,631
    
    
    
    19,726
    
    
    
    15,905
    
    
    
    81
    %Cost of sales
    
    
    30,361
    
    
    
    17,120
    
    
    
    13,241
    
    
    
    77
    %Gross profit
    
    
    5,270
    
    
    
    2,607
    
    
    
    2,663
    
    
    
    102
    %Operating expensesSelling and distribution expenses
    
    
    541
    
    
    
    507
    
    
    
    34
    
    
    
    7
    %General and administrative expenses
    
    
    488
    
    
    
    119
    
    
    
    369
    
    
    
    310
    %Total operating expenses
    
    
    1,029
    
    
    
    626
    
    
    
    403
    
    
    
    64
    %Income from operations
    
    
    4,241
    
    
    
    1,981
    
    
    
    2,260
    
    
    
    114
    %Interest income
    
    
    2
    
    
    
    
    
    
    
    2Interest expenses
    
    
    399
    
    
    
    132
    
    
    
    267
    
    
    
    202
    %Other expenses, net
    
    
    122
    
    
    
    14
    
    
    
    108
    
    
    
    771
    %Income before income tax expenses
    
    
    3,723
    
    
    
    1,835
    
    
    
    1,888
    
    
    
    103
    %Income taxes
    
    
    951
    
    
    
    482
    
    
    
    469
    
    
    
    97
    %Net income attributable to ordinary shareholders
    
    
    2,771
    
    
    
    1,354
    
    
    
    1,417
    
    
    
    105
    %
 Revenues.
  Cost of Sales.
 Gross Profit.
 Selling and Distribution Expenses.
  27




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##### Table of Contents



General and Administrative Expenses.
 Interest
Expenses.
 Income Before Income Tax Expenses.
 Income Tax Expenses.
 Net Income Attributable to Ordinary Shareholders.
 (3) Liquidity and Capital Resources
 Operating Activities
  Investing Activities
  Financing Activities
  Loans
   28




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##### Table of Contents



Guarantees
  Future Cash Commitments and Needs
  (4) Critical Accounting Policies and Estimates
  (5) Recently Issued Accounting Pronouncements
  (6) Special Note Regarding Forward-Looking Statements
   29




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ITEM 3
    
    QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
 Inflation
  Foreign Currency Exchange Risk
   Interest Rate Risk
     30




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##### Table of Contents



ITEM 4
    
    CONTROLS AND PROCEDURES
 Evaluation of Disclosure Controls and Procedures
 Certifying Officer Exchange Act
 Changes in Internal Controls
  
 PART II  OTHER INFORMATION
 
 ITEM 1.
    
    LEGAL PROCEEDINGS
  
 ITEM 2.
    
    UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  
 ITEM 3.
    
    DEFAULTS UPON SENIOR SECURITIES
  
 ITEM 4.
    
    (REMOVED AND RESERVED)
  31




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ITEM 5.
    
    OTHER INFORMATION
  
 ITEM 6.
    
    EXHIBITS
 Exhibit No.
    
    Description2.1
    
    
    Share Exchange Agreement, dated May 13, 2011, among the Company,
Xiangrui and Mr. Chonxing Xu. [Incorporated by reference to
Exhibit 2.1 to the Companys Current Report on Form 8-K/A filed
on July 20 , 2011]10.1
    
    
    Loan Agreement, dated March 15, 2011, between Shandong Xiangrui
and Rural Cooperative Bank of Dongping, Shandong, for RMB 5
million. [English Translation of Summary] [Incorporated by
reference to Exhibit 10.12 to the Companys Current Report on
Form 8-K/A filed on July 20 , 2011]10.2
    
    
    Loan Agreement, dated March 16, 2011, between Shandong Xiangrui
and Rural Cooperative Bank of Dongping, Shandong, for RMB 5
million. [English Translation of Summary] [Incorporated by
reference to Exhibit 10.13 to the Companys Current Report on
Form 8-K/A filed on July 20 , 2011]10.3
    
    
    Guarantee Agreement, dated March 15, 2011, between Shandong
Guangda Sun & Moon Grease Co., Ltd. and Rural Cooperative Bank
of Dong Ping, Shandong for RMB 10 million loans. [English
Translation of Summary] [Incorporated by reference to Exhibit
10.14 to the Companys Current Report on Form 8-K/A filed on
July 20 , 2011]10.4
    
    
    Loan Agreement, dated April 15, 2011, between Shandong Xiangrui
and China Merchant Bank, Jinan Branch, for RMB 10 million.
[English Translation of Summary] [Incorporated by reference to
Exhibit 10.15 to the Companys Current Report on Form 8-K/A
filed on July 20 , 2011]10.5
    
    
    Irrevocable Maximum Guarantee Letter , dated April 15, 2011,
issued to China Merchant Bank, Jinan Branch, by Shandong Runyin
Bio-chemical, for a RMB 10 million loan. [English Translation of
Summary] [Incorporated by reference to Exhibit 10.16 to the
Companys Current Report on Form 8-K/A filed on July 20 , 2011]10.6
    
    
    Irrevocable Maximum Guarantee Letter , dated April 15, 2011,
issued to China Merchant Bank, Jinan Branch, by Mr. Xuchun Wang,
for a RMB 10 million loan. [English Translation] [Incorporated
by reference to Exhibit 10.17 to the Companys Current Report on
Form 8-K/A filed on July 20 , 2011]10.7
    
    
    Contract of Offering Technology Design, Key Equipments,
Materials and Technique Service for Effluent Disposal Project,
dated February 1, 2011, between Shandong Xiangrui and Park
Environment Protection Technology (Shanghai) Co., Ltd. [English
Translation of Summary] [Incorporated by reference to Exhibit
10.22 to the Companys Current Report on Form 8-K/A filed on
July 20 , 2011]10.8
    
    
    Corn Kernels Purchase Agreement, dated April 1, 2011, between
Shandong Xiangrui and Jinan Jingliang Grains Storage Co., Ltd.
[English Translation] [Incorporated by reference to Exhibit
10.23 to the Companys Current Report on Form 8-K/A filed on
July 20 , 2011]10.9
    
    
    Corn Kernels Purchase Agreement, dated May 6, 2011, between
Shandong Xiangrui and Zhongjiao Grain and Oil Storage Center,
Qingdao Tariff-free Area. [English Translation] [Incorporated by
reference to Exhibit 10.24 to the Companys Current Report on
Form 8-K/A filed on July 20 , 2011]10.10
    
    
    Corn Kernels Purchase Agreement, dated May 9, 2011, between
Shandong Xiangrui and Taian Branch of China Grain Reserves
Corporation. [English Translation] [Incorporated by reference to
Exhibit 10.25 to the Companys Current Report on Form 8-K/A
filed on July 20 , 2011]
  32




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##### Table of Contents



Exhibit No.
    
    Description10.11
    
    
    Corn Kernels Purchase Agreement, dated May 11, 2011, between
Shandong Xiangrui and Shanghai Yihai Commerce & Trade Co., Ltd.
[English Translation] [Incorporated by reference to Exhibit
10.26 to the Companys Current Report on Form 8-K/A filed on
July 20 , 2011]10.12
    
    
    Exclusive Technical and Consulting Service Agreement, dated May
9, 2011, between the WFOE and Shandong Xiangrui. [previously
filed as Exhibit 10.33] [Incorporated by reference to Exhibit
10.27 to the Companys Current Report on Form 8-K/A filed on
July 20 , 2011]10.13
    
    
    Management Fee Payment Agreement, dated May 9, 2011, among the
WFOE, Shandong Xiangrui and the Shandong Xiangrui Shareholders.
[previously filed as Exhibit 10.34] [Incorporated by reference
to Exhibit 10.28 to the Companys Current Report on Form 8-K/A
filed on July 20 , 2011]10.14
    
    
    Equity Interest Pledge Agreement, dated May 9, 2011, between the
WFOE and the Shandong Xiangrui Shareholders. [Incorporated by
reference to Exhibit 10.29 to the Companys Current Report on
Form 8-K/A filed on July 20 , 2011]10.15
    
    
    Exclusive Equity Interest Purchase Agreement, dated May 9, 2011,
among the WFOE, Shandong Xiangrui and the Shandong Xiangrui
Shareholders. [Incorporated by reference to Exhibit 10.30 to the
Companys Current Report on Form 8-K/A filed on July 20 , 2011]10.16
    
    
    Operating Agreement, dated May 9, 2011, among the WFOE, Shandong
Xiangrui and the Shandong Xiangrui Shareholders. [Incorporated
by reference to Exhibit 10.31 to the Companys Current Report on
Form 8-K/A filed on July 20 , 2011]10.17
    
    
    Proxy Agreement, dated May 9, 2011, among the WFOE, Shandong
Xiangrui and the Shandong Xiangrui Shareholders. [Incorporated
by reference to Exhibit 10.32 to the Companys Current Report on
Form 8-K/A filed on July 20 , 2011]10.18
    
    
    Option Agreement, dated May 13, 2011, between Mr. Chongxin Xu
and Mr. Binglong Qiao. [Incorporated by reference to Exhibit
10.33 to the Companys Current Report on Form 8-K/A filed on
July 20 , 2011]10.19
    
    
    Option Agreement, dated May 13, 2011, between Mr. Chongxin Xu
and Mr. Guo Wang. [Incorporated by reference to Exhibit 10.34 to
the Companys Current Report on Form 8-K/A filed on July 20 ,
2011]10.20
    
    
    Option Agreement, dated May 13, 2011, between Mr. Chongxin Xu
and Mr. Lingfa Huang. [Incorporated by reference to Exhibit
10.35 to the Companys Current Report on Form 8-K/A filed on
July 20 , 2011]10.21
    
    
    Option Agreement, dated May 13, 2011, between Mr. Chongxin Xu
and Mr. Xuchun Wang. [Incorporated by reference to Exhibit 10.36
to the Companys Current Report on Form 8-K/A filed on July 20 ,
2011]31.1
    *
    
    Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer31.2
    *
    
    Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer32.1
    *
    
    Section 1350 Certification of Chief Executive Officer32.2
    *
    
    Section 1350 Certification of Chief Financial Officer
 *
    
    Filed herein  33




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##### Table of Contents



SIGNATURES
  SMSA Treemont Acquisition Corp.Dated: August 15, 2011
    By:
    /s/ Guo WangGuo WangChief Executive OfficerDated: August 15, 2011
    By:
    /s/ Wencai PanWencai PanChief Financial Officer  34