UNITED
STATES
 SECURITIES
AND EXCHANGE COMMISSION
 WASHINGTON,
D.C. 20549
  FORM
10-K
   |X|             ANNUAL
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIESEXCHANGE ACT OF
1934
  For
the fiscal year ended: December 31, 2008
  or
  |   |             TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THESECURITIES EXCHANGE ACT OF
1934
  For the transition period from ______________ to _____________
 
 Commission
file number: 0-49819
 
 CHINA
HUAREN ORGANIC PRODUCTS, INC.
 (Exact
name of registrant as specified in its charter)
  Delaware____                                                                                                                          
43-1401158
  (State
or other jurisdiction of incorporation or
organization)                                                                           
(IRS Employer Identification No.)
 
  100 Wall Street, 15th Floor,
New York, NY 10005
 (Address
of principal executive offices)
 
 Issuer's
Telephone Number, including Area Code: 212-232-0120
 
 Securities
Registered Pursuant to Section 12(b) of the Act: None
 Securities
Registered Pursuant to Section 12(g) of the Act:
  Common
Stock, $.01 par value per share
 
 Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act. Yes oNo ý
 
 Indicate
by check mark if the registrant is not required to file reports pursuant to
Section 13 or Section 15(d) of the Act. Yes oNo ý
 
 Indicate
by check mark whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes ýNo o
 
 Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the
best of registrant’s knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. o
 
 Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting
company.  See the definitions of “large accelerated filer,”
“accelerated filer” and “smaller reporting company” in Rule 12b-2 of the
Exchange Act.  (Check one):
 
 Large
accelerated filer o                                                                                                Accelerated
filer  o
 Non-accelerated
filer  ý                                                                                     Smaller
reporting company  o
 (Do
not check if a smaller reporting company)
 
 Indicate
by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Act). Yes oNo ý
 
 The aggregate market value of the
voting and non-voting common equity held by non-affiliates computed by reference
to the price at which the common equity was sold, or the average bid and asked
price of such common equity, as of May 15, 2009 was $532,242.As of May
15, 2009 the number of shares outstanding of the Registrant’s common stock was
15,000,712 shares, $.01 par value.
 
 DOCUMENTS
INCORPORATED BY REFERENCE:  The information required by Part III of
Form 10-K is incorporated by reference from the Registrant's definitive proxy
statement on Schedule 14A that will be filed no later than the end of the
120-day period following the Registrant's fiscal year end, or, if the
Registrant's definitive proxy statement is not filed within that time, the
information will be filed as part of an amendment to this Annual Report on Form
10-K, not later than the end of the 120-day period.
 
 
 CHINA
HUAREN ORGANIC PRODUCTS, INC.
  TABLE
OF CONTENTS TO ANNUAL REPORT ON FORM 10-K
  For
the Fiscal Year Ended December 31, 2008
 ITEM
                                          
                                          
                                          
                                          PagePART
      IItem
      1.
                                          
                                          Business
                                          
                                          3Item
      2.
                                          
                                          Description
      of Properties
                                          
                                          6Item
      3.
                                          
                                          Legal
      Proceedings
                                          
                                          7Item
      4.
                                          
                                          Submission
      of Matters to a Vote of Security Holders
                                          
                                          7PART
      IIItem
      5.
                                          
                                          Market
      for Registrant’s Common Equity, Related Stockholder Matters and Issuer
      Purchases of Equity Securities
                                          
                                          7Item
      6.
                                          
                                          Managements'
      Discussion and Analysis of Results of Operations
                                          
                                          9Item
      7.
                                          
                                          Financial
      Statements and Supplementary Data
                                          
                                          13Item
      8.
                                          
                                          Changes
      in and Disagreements with Accountants on Accounting and Financial
      Disclosure
                                          
                                          13Item
      8A.
                                          
                                          Controls
      and Procedures
                                          
                                          13Item
      8B.
                                          
                                          Other
      Information
                                          
                                          15PART
      IIIItem
      9.
                                          
                                          Directors,
      Executive Officers and Corporate Governance
                                          
                                          15Item
      10.
                                          
                                          Executive
      Compensation
                                          
                                          16Item
      11.
                                          
                                          Security
      Ownership of Certain Beneficial Owners and Management and Related
      Stockholder Matters
                                          
                                          18Item
      12.
                                          
                                          Certain
      Relationships and Related Transactions
                                          
                                          19Item
      13.
                                          
                                          Exhibit
      list
                                          
                                          19Item
      14.
                                          
                                          Principal
      Accountant Fees and Services
                                          
                                          21PART
      IVItem
      15.
                                          
                                          Financial
      Statement Schedules
                                          
                                          F-1--F-17Signatures
                                          
                                          40
 2
 FORWARD-LOOKING
STATEMENTS: NO ASSURANCES INTENDED
 
 In
addition to historical information, this Annual Report contains forward-looking
statements, which are generally identifiable by use of the words “believes,”
“expects,” “intends,” “anticipates,” “plans to,” “estimates,” “projects,” or
similar expressions. These forward-looking statements represent Management’s
belief as to the future of China Huaren Organic Products.  Whether
those beliefs become reality will depend on many factors that are not under
Management’s control.  Many risks and uncertainties exist that could
cause actual results to differ materially from those reflected in these
forward-looking statements. Factors that might cause such a difference include,
but are not limited to, those discussed in the section entitled “Management’s
Discussion and Analysis of Financial Condition and Results of Operations—Risk
Factors That May Affect Future Results.” Readers are cautioned not to place
undue reliance on these forward-looking statements. We undertake no obligation
to revise or publicly release the results of any revision to these
forward-looking statements.
  PART 1
 
 Item
1.  Business
 
 China
Huaren Organic Products, Inc. is a holding company with one
subsidiary:  China Organic Health Products, Inc. (“China
Organic”).  China Organic was incorporated in 2006 as a Delaware
corporation.  China Organic is a holding company that owns 100% of the
registered capital of Jilin Huaren Organic Health Products Co., Ltd. (“Jilin
Huaren”), a corporation organized under the laws of The People’s Republic of
China.
  Jilin
Huaren was founded in 2002 by Fang Jinzhong and Zhang Changcai. In the
following years, Mr. Fang and Mr. Zhang have contributed to Jilin Huaren its
initial capital, as well as their expertise in organic farming and agricultural
manufacturing.  The result is that Jilin Huaren today is an enterprise
engaged in organic food and cosmetics production that controls the entire
industry chain, from production through manufacturing to marketing.
  The label
“organic” identifies food and other agricultural products that are produced and
processed through organic agricultural production systems.  In
general, organic foods are produced without use of any synthetic materials,
including pesticides, chemical fertilizers, or any form of
genetically-engineered animals or seeds.  The standards that determine
what can be called “organic” are generally set at the national level, with
reference to international standards adopted by agreement among
countries.
  In China,
the Organic Food Development Center and Organic Food Certification Center
(“OFDC”), a division of the State Environmental Protection Administration sets
the standards for organic certification.  The OFDC is the only organic
certification association in China that has been recognized by the International
Federation of Organic Agriculture Movements
(IFOAM).  OFDC-certification is honored not only in China, but also in
Korea, Hong Kong and Macao. In addition, OFDC has established close cooperative
relations with organic certification agencies in the EU, Japan and USA, and
maintains mutual recognition terms with more than 20 other IFOAM accredited
certification agencies in the EU, Japan and the US.
  Organic
certification by the OFDC provides organic food with an authentication tag,
usually in the form of symbols or graphs. In 2004 Jilin Huaren obtained both the
organic land certificate and the organic foodstuff certification from OFDC,
which signifies that Huaren is an independent manufacturer with its own organic
farms and processing factories.
  During
2008 Jilin Huaren produced and marketed the following categories of organic
agricultural products:
  
 A.
                  Organic rice and grains: These products are
      marketed under the Huaren brand
name.
 B.
                  Organic foods.  31 Series,
      including:1.
                  organic
      corn-based cakes, which come in a variety of flavors (corn flavored,
      buttermilk flavored, egg white
flavored)
 2.
                low-sugar
      organic wheat biscuits3.
                organic
      grain fiber powders
 4.
                organic
      grain sugar wafers5.
                organic
      bean rice crackers
 
 C.   Organic nutritional
supplements:
 1.
                Spirulina
      supplements (tablet form), classified as blue-green algae or as blue green
      bacteria. Spirulina is a rich source of protein and contains chlorophyll,
      carotenoids, minerals, and gamma-linolenic acid (GLA). Spirulina is taken
      as a protein supplement, in addition to protecting against various types
      of allergic reactions, antibiotic-related illnesses, and liver
      disorders.
 2.
                Gingko
      leaf extract supplements (tablet form).  These extracts from the
      gingko tree are used to treat a variety of ailments, including asthma,
      bronchitis, fatigue, and tinnitus.
 
 D.  Cosmetics
 These
      products are skin creams that reduce damage associated with the sun. These
      products are moisturizers, which were formulated to help balance the
      skin's moisture level and restore its moisture balance. The antioxidant
      rich, non-greasy formula helps improve the overall smoothness of the skin,
      soothes the skin and protects the skin from free radical attack. The
      cosmetics are sold in five series: Organic Shiyimei series, Ajiaoshu
      series, the Peach-blossom series, the Kasidina series and the
      Kaidimisha series.
  Production
  Jilin
Huaren acquires its organic crops from independent farmers, who have contracted
to sell the produce to Jilin Huaren. This produce forms the raw materials
for all of Jilin Huaren’s products.
  After
harvest, Jilin Huaren consigns its produce to organic manufacturing facilities
that have entered into consigned production agreements with Jilin
Huaren.  The facilities hold the produce, and manufacture it to Jilin
Huaren’s order, which is determined by contemporaneous market
demands.  To date, Jilin Huaren has utilized the following
manufacturing facilities:
  
 1.   Organic
rice: Jilin Wanchang Rice Co., Ltd.
  2.   Organic food: Jilin Jigu Fiber Food Technology Development
Company
 
 3.   Cosmetics:
 Shiyimei
series:  Beijing DYYH Science & Technology, Inc.
 Ajiaoshu
series:  Jingrentang Biological Technologies Co., Ltd.
 Peach-blossom
series:  Cosmetics Research Center of Changchun Film
Studio
 Kasidina
and Kaidimisha series:  Guangzhou Ke YinXin Chemistry Co.,
Ltd.
  4.   Healthcare
products:  Qingdao Sanjiujiuzhou Biotechnology Co., Ltd.
 
 Marketing
  Jilin
Huaren markets its products through a multi-level distribution network,
consisting of 90 “branch companies” and 140 “specialty stores” that take product
direct from Jilin Huaren.  The branch companies and specialty stores
are independently-owned and each has been assigned a specific geographic area in
which to develop the market for Jilin Huaren’s products.  Within that
area, the branch companies and specialty stores either market direct to beauty
salons and supermarkets, or appoint distributors that employ salesmen to
approach the salons and markets.  Jilin Huaren personnel maintain
surveillance over all points in this network, providing training and guidance
where needed, as well as being responsible for on-time delivery and
service.  Jilin Huaren is also responsible for the nation-wide
advertising and promotion program, whose goal is to make Jilin Huaren the
leading organic food brand in China.
  Jilin
Huaren’s principal target market is the rapidly developing urban class in
China.  The concept of organic food and cosmetics is new to China and
the size of the industry remains small, relative to other large
countries.  However, as China’s urban population expands and the
pressures of urban existence increase, there is a growing awareness in China of
the need for a healthier lifestyle.  For example, a recent survey by
the Sub-health Studies Center of the Shanghai Academy of Social Studies found
that only 16% of the population of Shanghai met the criteria set by the study
for “healthy.”  70% were classified as “sub-healthy,” and 14% as
“non-healthy.”  At the same time, the economic well-being of the
Chinese urban population has increased substantially in recent years, which
enables them to focus resources on improving their lifestyles.  As a
result, the demand for organic agricultural products is growing.
  Currently,
the organic food and cosmetics industry in China is highly
fragmented.  There is no market participant that controls more than a
small fraction of the market, and most focus their marketing efforts in a
limited geographic range.  Currently there is no large scale organic
food supplier in Jilin Province other than Jilin Huaren.
 
 
 Growth
  Jilin
Huaren’s strategy for growth is premised on the success of its program of brand
promotion.  Assuming that its promotion program is successful in
stirring nationwide demand for Jilin Huaren products, management has planned the
following development strategy to meet the demand:
  ·
                Strengthening
      research and development of organic products, and developing organic
      health products, organic cosmetics, organic costumes,
  etc.
  ·
                Continual
      expansion of the marketing network by bringing in more branch stores,
      specialty stores and distributors.
  ·
                Purchasing
      and acquiring organic food processing factories and organic product
      processing factories, to obtain greater control over the production
      segment.
  Personnel
  Jilin
Huaren currently employs 10 individuals, all on a full-time
basis.  Among those employees are 10 individuals with college or
university degrees.  None of Jilin Huaren’s employees belongs to a
collective bargaining unit.  Besides our 6 officers, 3 of our
employees are engaged in management activities and 1 is engaged in managing our
sales force.
  The sales
personnel who market Jilin Huaren’s products throughout China are employed by
independent distributors, and are not employees of Jilin
Huaren.  Management estimates that approximately 20,000 individuals
have ever been involved in the distribution of Jilin Huaren
products.
 
 Item
2.  Properties
 
 Jilin
Huaren’s executive offices and product exhibit space are located in a 5,000
square foot facility that it leases. During year 2008, field farm lease had
expired, and plant land lease had been cancelled.   Jilin Huaren’s
lease commitment for 2009 totals $5,772.
 
 During
2005 we contracted to purchase an office building for our
operations.  We have deposited $1,099,304 (equivalent to RMB
7,500,000) and $386,749 (equivalent to RMB2,638,593) with the seller and
constructors to cover the cost of the building and certain improvements that we
require.  Title to the building has not passed to us yet,
however.  So we have occupied the building as a lessee since 2005, but
have paid no rent.  We expect to get the title, and then sell the
building in the near future, since it exceeds our needs.
 
 
 
 Item
3. Legal Proceedings
  None.
 
 Item
4. Submission of Matters to a Vote of Security Holders
  Not
applicable.
   PART
II
 
 Item
      5.
                Market
      for Registrant's Common Equity, Related Stockholder Matters and Small
      Business Issuer Purchases of Equity
Securities
 
 (a)
Market Information
 
 The
Company’s common stock is quoted on the OTC Bulletin Board under the symbol
“CHRN.OB.”  Set forth below are the high and low bid prices for each
of the eight quarters in the past two fiscal years.  All prices have been
adjusted to reflect the 1-for-39 reverse stock split implements in January
2007.  The reported bid quotations reflect inter-dealer prices without
retail markup, markdown or commissions, and may not necessarily represent actual
transactions.
  BidQuarter
      Ending
                    
                    High
                    
                    
                    LowMarch
      31, 2007
                    
                    $
                    1.00
                    
                    
                    $
                    .58June
      30, 2007
                    
                    $
                    2.00
                    
                    
                    $
                    .55September
      30, 2007
                    
                    $
                    1.05
                    
                    
                    $
                    .27December
      31, 2007
                    
                    $
                    4.55
                    
                    
                    $
                    .65March
      31, 2008
                    
                    $
                    1.01
                    
                    
                    $
                    .70June
      30, 2008
                    
                    $
                    1.01
                    
                    
                    $
                    .77September
      30, 2008
                    
                    $
                    .85
                    
                    
                    $
                    .47December
      31, 2008
                    
                    $
                    .55
                    
                    
                    $
                    .08
 
 
 (b)
Shareholders
 
 Our
shareholders list contains the names of 199 registered stockholders of record of
the Company’s Common Stock.
  (c)  Dividends
 
 The
Company has never paid or declared any cash dividends on its Common Stock and
does not foresee doing so in the foreseeable future.  The Company
intends to retain any future earnings for the operation and expansion of the
business.  Any decision as to future payment of dividends will depend
on the available earnings, the capital requirements of the Company, its general
financial condition and other factors deemed pertinent by the Board of
Directors
  (d)  Sale
of Unregistered Securities
  None.
  (e)
Repurchase of Equity Securities
  The
Company did not repurchase any of its equity securities that were registered
under Section 12 of the Securities Act during the 4th quarter
of 2008.
   
 
 Item
      6
                Management’s
      Discussion and Analysis
 
 Results
of Operations
 
 Jilin
Huaren commenced its marketing operations in March of 2005.  The
growth of our business continued to the end of 2005, then came to a
halt.  During the winter of 2005, the government of China required
that enterprises engaged in multi-level product distribution substantially
revise the arrangements they had with their distribution
network.  Therefore, during the first quarter of fiscal 2006, we had
revenues of only $103,309 – as we spent the quarter rebuilding our distribution
network to achieve compliance with China’s regulations.  We completed
that rebuilding process in time to return to an almost-full marketing effort by
mid-year, and reported revenues of $2,188,146 for the entirety of
2006.
  Our
supply-to-distribution system continued to experience inefficiencies entering
2007, however.  In the Spring of both 2006 and 2007 we found ourselves
with large inventories of perishable goods that we were unable to sell before
their expiration dates.  So at both times we transferred the goods to
another distributor at cost.  The transaction in 2007 involved a sale
to Yushu Wanli Co., Ltd. of foodstuffs for $5,295,971 (equivalent at that time
to RMB 40,312,786) (including tax) under a contract that called for payments to
begin in cash in May 2007. This transaction relieved us of the problem of
perishable inventory.  But the result was that we realized only
$251,319 in gross profit on the transaction.  This gross margin is
inadequate to provide the funds we need for more than a minimal level of
operations.
  During
2007, we introduced many new organic corps such as rice soybean, corns, and
maize, which represented approximately 96% of our total revenue for the second
quarter and 89% of our total revenue for the third quarter.  On those
sales we realized gross profit in the range of 40% to 45%.  Our plan
was to achieve gross margin in the range of 40% to 50%, except when affected by
distress sales to distributors, as in the first quarter of both 2007 and
2006.
 
 Due to
the slow growth of sales and low margins achieved, in the fall of 2007, we
transferred operational control over Jilin Huaren to a group of experienced food
supplies managers. Our contract with the management group provided that
they would receive all net earnings from Jilin Huaren in excess of specified
amounts:  3 million RMB in the period from August to December 2007, 14
million RMB in 2008, etc.  Unfortunately, the transfer of control to
this new group brought sales to a halt.  In the fourth quarter of 2007
we realized only $134,778 in revenue; in the first quarter of 2008, our revenue
was nominal.  As a result of the poor operation, we intend to
terminate some management agreements. On May 19, 2008 Fang Jinzhong and Zhang
Chengcai submitted their resignations from the Board of Directors of China
Huaren Organic Products, Inc., and from their positions as officers of the
Company. On May 20, 2008 the Board of Directors elected Mrs. Yushu Cao to
fill the vacancy on the Board left by Mr. Fang. The Board also elected
Ms. Cao to serve as the Chief Executive Officer and Chief Financial Officer
of China Huaren Organic Products, Inc. However,
we still had produced no revenue as a result of our operations
during the year ended December 31, 2008, whereas we realized $215,777 operating
expenses and approximately $7.2 million loss on disposal of bad debts,
inventories, and fixed assets, and cancelled the operating lease in year
2008.
 
 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 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.  During 2008 the unrealized gain on foreign currency
translations added $482,527 to our accumulated other comprehensive
income.
  Our
prospects for the future will depend on the success of our new managers, we
believe that our business plan, if properly implemented by competent management,
can be successful, and that we have put in place most of the resources necessary
to permit the plan to be implemented.  But the new management will
have to revive the Company’s operations almost completely.  Whether
they will be able to overcome the inertia of recent stagnancy in our operations
will be known only with the passage of time.
 
 
 
 
 Liquidity and Capital
Resources
 
 On
December 31, 2008 we had working capital of $454,981. We had no long-term
liabilities. However, our working capital consisted primarily of the loan
to officers/stockholders of 2,255,312.
  The
Company leases certain spaces under operating lease agreements; office space,
products exhibit space, employee living space, field farm, and plant lands.
During year 2008, field farm lease had expired, and the plant lands lease in the
City of Baicheng had been cancelled.. The minimum rental payments required in
year 2009 is $5,772. Rent expenses amounted to $143,006 and $411,492 for the
years ended December 31, 2008 and 2007, respectively.
  Application
of Critical Accounting Policies
  In
preparing our financial statements we are required to formulate working policies
regarding valuation of our assets and liabilities and to develop estimates of
those values.  In our preparation of the financial statements for
2008, there were two estimates made which were (a) subject to a high degree of
uncertainty and (b) material to our results.  The first was our
determination, explained in Note 4c to the Financial Statements that we should
increase our allowance for doubtful accounts to 5% of accounts receivable. 
We made that determination based on the bad payment record of our distributor
and our expectation that we will recover our current receivables in
full.  The second estimate was our determination, detailed in Note
4(h) to the Financial Statements, that we had no need of a reserve for warranty
costs.  The primary reason for the determination was the fact that we
have received minimal warranty claims to date.
 
 We made
no material changes to our critical accounting policies in connection with the
preparation of financial statements for 2007.
 
 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.
 
 Our
new management may be unable to revive our marketing network.
  In the
past twelve months our marketing program has all-but-terminated. We
realized none revenue in the year 2008 and the first quarter of
2009. The management teams who had taken control of our company since May
2008 are still challenging to revive our marketing network. If they are
incapable of doing so, our business will fail.
 
 
 There
is no assurance that the market for organic foods and cosmetics will grow in
China.
  The
concept of organic foods and organic cosmetics is relatively new in
China.  In order for the market for organic agricultural products to
develop, it will be necessary for a portion of the Chinese population to become
willing to pay the extra cost or organic products in order to obtain the
benefits of organic products.  Although the economy of China is
growing, the average income of the Chinese population remains far below that of
the European and American countries where organic products have developed a
clientele.  If a sufficient portion of the Chinese population is not
willing to pay the extra cost of organic products, our business is likely to
fail.
 
 We
may not be able to increase production to the level necessary to meet
demand.
  Until
recently we obtained all of our raw materials from independent
farmers.  Recently we acquired 200 hectares of land on which we have
initiated organic farming operations.  If our program for promoting
our brand is successful, those resources may be inadequate to provide the raw
materials that we will need.  We will then have to obtain additional
hectares of organic soil.  There are few large areas of organic soil
available, and there is considerable competition to acquire them.  On
the other hand, it takes over three years to convert soil that has been used for
non-organic farming into soil useable in organic agriculture.  If,
therefore, we are unable to produce sufficient raw materials to meet the demand
for our products, the negative effect may offset the benefits of our marketing
program, and our business will fail.
 
 We are subject to the risk of
natural disasters.
  We
produce all of our raw materials, and have not developed alternative sources for
raw materials.  If our crops are destroyed by drought, flood, storm,
blight, or the other woes of farming, we will not be able to meet the demands of
our distribution network, and the network is likely to atrophy.  This
could have a long-term negative effect on our ability to grow our business, in
addition to the near-term loss of income.
 
 If
we lost control of our distribution network, our business would
fail.
  We depend
on our distribution network for the success of our
business.  Competitors may seek to pull our distribution network away
from us.  In addition, if dominant members of our distribution network
become dissatisfied with their relationship with Jilin Huaren, a concerted
effort by the distribution network could force us to accept less favourable
financial terms from the distribution network.  Either of these
possibilities, if realized, would have an adverse effect on our
business.
 
 A recession in China could
significantly hinder our growth.
  The
success of our efforts to introduce organic foods into the urban diet in China
will depend on continuation of recent improvements in the Chinese economy and
the amount of disposable income available to the Chinese
population.  If money becomes tight, individuals will be less willing
to pay extra for the benefits of organic food.  Many financial
commentators expect a recession to occur in China in the near
future.  The occurrence of a recession could significantly hinder our
efforts to implement our business plan.
 
 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 and agricultural technicians.  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.
  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.  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 organic farming and
production may increase the cost of our operations, which would adversely affect
our profitability.
 
 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.
 
 Currency
fluctuations may adversely affect our operating results.
  Jilin
Huaren generates revenues and incurs expenses and liabilities in Renminbi, the
currency of the People’s Republic of China.  However, as a subsidiary
of China Huaren Organic Products, Inc., 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.
 
 China
Huaren 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 China Huaren have no effective means of exercising
control over the operations of China Huaren.
  Item
7.   Financial Statements
 
 The
Company’s financial statements, together with notes and the Independent
Auditors’ Report, are set forth immediately following Item 15 of this Form
10-K.
 
 Item
      8.
                Changes
      in and Disagreements with Accountants on Accounting and Financial
      Disclosure
 
 Not
Applicable
 
 Item
8A.  Controls and Procedures
 
 (a)           Evaluation of disclosure controls and
procedures.
 
 The term
“disclosure controls and procedures” (defined in SEC Rule 13a-15(e)) refers to
the controls and other procedures of a company that are designed to ensure that
information required to be disclosed by a company in the reports that it files
under the Securities Exchange Act of 1934 (the “Exchange Act”) is recorded,
processed, summarized and reported within required time periods. The Company’s
management, with the participation of the Chief Executive Officer and the Chief
Financial Officer, has evaluated the effectiveness of the Company’s disclosure
controls and procedures as of the end of the period covered by this annual
report (the “Evaluation Date”). Based on that evaluation, the Company’s Chief
Executive Officer and Chief Financial Officer have concluded that, as of the
Evaluation Date, such controls and procedures were effective.
 
 
 (b)           Changes in internal
controls.
 
 The term
“internal control over financial reporting” (defined in SEC Rule 13a-15(f))
refers to the process of a company that is designed to provide reasonable
assurance regarding the reliability of financial reporting and the preparation
of financial statements for external purposes in accordance with generally
accepted accounting principles. The Company’s management, with the participation
of the Chief Executive Officer and Chief Financial Officer, has evaluated any
changes in the Company’s internal control over financial reporting that occurred
during the fourth quarter of the year covered by this annual report, and they
have concluded that there was no change to the Company’s internal control over
financial reporting that has materially affected, or is reasonably likely to
materially affect, the Company’s internal control over financial
reporting.
 
 (c)           Management’s
Report on Internal Control over Financial Reporting
 
 Management
of the Company is responsible for establishing and maintaining adequate internal
control over financial reporting as defined in Rule 13a-15(f) under the
Securities Exchange Act of 1934.  We have assessed the effectiveness
of those internal controls as of December 31, 2008, using the Committee of
Sponsoring Organizations of the Treadway Commission (“COSO”) Internal Control –
Integrated Framework as a basis for our assessment.
 
 Because
of inherent limitations, internal control over financial reporting may not
prevent or detect misstatements.  Projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies and procedures may deteriorate.  All internal
control systems, no matter how well designed, have inherent
limitations.  Therefore, even those systems determined to be effective
can provide only reasonable assurance with respect to financial statement
preparation and presentation.
 
 A
material weakness in internal controls is a deficiency in internal control, or
combination of control deficiencies, that adversely affects the Company’s
ability to initiate, authorize, record, process, or report external financial
data reliably in accordance with accounting principles generally accepted in the
United States of America such that there is more than a remote likelihood that a
material misstatement of the Company’s annual or interim financial statements
that is more than inconsequential will not be prevented or detected. In the
course of making our assessment of the effectiveness of internal controls over
financial reporting, we identified three material weaknesses in our internal
control over financial reporting.  These material weaknesses consisted
of:
  a. Inadequate staffing and supervision
within the accounting operations of our company.  The
relatively small number of employees who are responsible for accounting
functions prevents us from segregating duties within our internal control
system.  The inadequate segregation of duties is a weakness because it
could lead to the untimely identification and resolution of accounting and
disclosure matters or could lead to a failure to perform timely and effective
reviews.
  b. Lack of expertise in U.S accounting
principles among the personnel in our Chinese
headquarters.  Our books are maintained and our financial
statements are prepared by the personnel employed at our executive offices in
China.  None of our employees has substantial experience or
familiarity with U.S accounting principles.  The lack of personnel in
our China office who are trained in U.S. accounting principles is a weakness
because it could lead to improper classification of items and other failures to
make the entries and adjustments necessary to comply with U.S.
GAAP.
  Management
is currently reviewing its staffing and their training in order to remedy the
weaknesses identified in this assessment.  To date, we are not aware
of significant accounting problems resulting from these weaknesses; so we have
to weigh the cost of improvement against the benefit of strengthened
controls.  However, because of the above conditions, management’s
assessment is that the Company’s internal controls over financial reporting were
not effective as of December 31, 2008.
 
 This
annual report does not include an attestation report of the Company’s registered
public accounting firm regarding internal control over financial
reporting.  Management’s report was not subject to attestation by the
Company’s registered public accounting firm pursuant to temporary rules of the
Securities and Exchange Commission that permit the Company to provide only
management’s report in this annual report.
 
 
 Item
8B.  Other Information
 
 None.
  PART
III
 
 Item
      9.
                Directors,
      Executive Officers, Promoters, Control Persons and Corporate Governance;
      Compliance with Section 16(a) of the Exchange
  Act.
 
 The Board
of Directors has arranged to replace current management as soon as this Annual
Report is filed.  Currently, the officers and directors of the Company
are:
 
 Name
                  Age
                  Position
      with the Company
                  Director SinceCaoYushu
                  49
                  Chairman,
      Chief Executive Officer, Chief Financial Officer
                  2008Zhou
      Huakang
                  57
                  Director
                  2006
 
 Directors
hold office until the annual meeting of the Company’s stockholders and the
election and qualification of their successors.  Officers hold office,
subject to removal at any time by the Board, until the meeting of directors
immediately following the annual meeting of stockholders and until their
successors are appointed and qualified.
 
 Cao
Yushu.   Since 2000 Mrs. Cao has been employed as
President of Heilongjiang Futian Clean Fuel Co., Ltd.  Prior to that
appointment, Mrs. Cao was employed in the fuel industry as a manager, and
in a government position as an accountant.
 
 Zhou
Huakang.  Since 1993 Zhou Huakang has been employed as chairman
of the board of Warner Technology and Investment Corp. a New Jersey corporation
that he organized in 1993. Warner Technology provides international training and
market consulting services. Warner is licensed by the People’s Republic of China
to serve as an official host for Chinese government officials and business
executives in the US. As part of the hosting process Warner also provides
training programs to assist visiting Chinese officials and business executives
with the transition to doing business in the US.  Mr. Zhou holds a
Ph.D. degree in Operations Research that was awarded in 1989 by the Polytechnic
University of New York.
 
 
 
 
 Audit Committee;
Compensation Committee
 
 The Board
of Directors has not yet appointed an Audit Committee or a Compensation
Committee, due to the small size of the Board.  The Board of Directors
does not contain an audit committee financial expert, again due to the small
size of the Board.
 
 Code of
Ethics
 
 The
Company does not have a written code of ethics applicable to its executive
officers.  The Board of Directors has not adopted a written code of
ethics because there are so few executive officers of the Company.
 
 Section 16(a) Beneficial
Ownership Reporting Compliance
 
 None of
the officers, directors or beneficial owners of more than 10% of the Company’s
common stock failed to file on a timely basis the reports required by Section
16(a) of the Exchange Act during the year ended December 31, 2008.
  Item
10.  Executive Compensation
 
 The
following table sets forth all compensation awarded to, earned by, or paid by
China Huaren and its subsidiaries to Mrs. Yushu Cao , its Chief Executive
Officer, for services rendered in all capacities to the Company during the years
ended December 31, 2008, 2007 and 2006.  There were no executive
officers whose total salary and bonus for the fiscal year ended December 31,
2008 exceeded $100,000.
 
 Year
                      Salary
                      Bonus
                      Stock
                        Awards
                      Option
                        Awards
                      Other
                        CompensationFang,
      Jinzhong(former officer and director)
                      2008
                      02007
                      $10,0002006
                      $10,000Cao,
      Yushu
                      2008
                      $8,636
 
 
 
 Employment
Agreements
 
 All of
our employment arrangements with our executives are on an at will
basis.
 
 Equity
Grants
 
 The
following tables set forth certain information regarding the stock options
acquired by the Company’s Chief Executive Officer during the year ended December
31, 2008 and those options held by him on December 31, 2008.
  Option Grants in the Last
Fiscal Year
 Potential
      realizable value at assumed annual rates of appreciation
                    for
      option termNumber
      of
                    securities
                    underlying
                    option
                    granted
                  Percent
                    of
      total
                    options
                    granted
      to
                    employees
                    in
      fiscal
                    year
                  Exercise
                    Price
                    ($/share)
                  Expiration
                    Date5%
                  10%Mrs.
      Yushu Cao
                  --
                  --
                  --
                  --
                  --
                  --
 
 The
following tables set forth certain information regarding the stock grants
received by the executive officers named in the table above during the year
ended December 31, 2008 and held by them unvested at December 31,
2008
 
 Unvested Stock Awards in the
Last Fiscal Year
 Number
      of
                    Shares
      That
                    Have
      Not
                    Vested
                  Market
      Value
                    of
      Shares That
                    Have
      Not
                    VestedMrs.
      Yushu Cao
                  0
                  --
 
 
 Remuneration
of Directors
 
 None of
the members of the Board of Directors received remuneration for service on the
Board during 2008
 
 Item
      11.   Security Ownership of Certain Beneficial Owners and
      Management and Related Stockholder
Matters
 
 The
following table sets forth information known to us with respect to the
beneficial ownership of our common stock as of the date of this prospectus by
the following:
 
 ·
                each
      shareholder known by us to own beneficially more than 5% of our common
      stock;
  ·
                Mrs.
      Yushu Cao, our Chief Executive
Officer
  ·
                each
      of our directors; and
  ·
                all
      directors and executive officers as a
group.
  There are
15,000,712 shares of our common stock outstanding on the date of this
report.  Except as otherwise indicated, we believe that the beneficial
owners of the common stock listed below have sole voting power and investment
power with respect to their shares,  subject to community property
laws where applicable.  Beneficial ownership is determined in
accordance with the rules of the Securities and Exchange
Commission.
 
 In
computing the number of shares beneficially owned by a person and the percent
ownership of that person, we include shares of common stock subject to options
or warrants held by that person that are currently exercisable or will become
exercisable within 60 days. We do not, however, include these “issuable” shares
in the outstanding shares when we compute the percent ownership of any other
person.
 
 Name  of
                    Beneficial
      Owner(1)
                  Amount
      and Nature of
                    Beneficial
      Ownership(2)
                  Percentage
      of ClassFang
      Jinzhong (former officer and director)
                  2,376,000
                  15.8%Zhang
      Chengcai (former officer and director)
                  1,419,272
                  9.5%Zhou
      Huakang
                    18
      Kimberly Court
                    East
      Hanover, NJ 07936
                  2,857,765(3)
                  19.1%All
      officers and directors
                    (3
      persons)
                  6,653,037
                  44.4%
  (1)    Except
      as otherwise noted, the address of each shareholder is 648 Weihai Road,
      Changchun, Jilin Province, P.R.
China.
 (2)    Except as otherwise noted, all shares are owned of
record and beneficially.
 (3)    Represents
      shares held of record by Warner Technology & Investment Corp., of
      which Mr. Zhou is the President and controlling
    shareholder.
 
 
 Equity
Compensation Plan Information
 
 The
information set forth in the table below regarding equity compensation plans
(which include individual compensation arrangements) was determined as of
December 31, 2008.
  Number
      of securities to be issued upon exercise of outstanding options, warrants
      and rights
                  Weighted
      average exercise price of outstanding options, warrants and
      rights
                  Number
      of securities remaining available for future issuance under equity
      compensation plansEquity
      compensation plans approved by security holders.......
                  0
                  
                  0Equity
      compensation plans not approved by security holders......
                  0
                  
                  0Total..............
                  0
                  
                  0
 
 Item
12.  Certain Relationships and Related Transactions
 
 Amounts
loaned to (from) officers/stockholders are unsecured, non-interest bearing, and
have no set repayment date. As of December 31, 2008 and 2007, the total net
amounts of loan to (from) the shareholders/officers were $2,255,312 and
($90,132), respectively, which represented the net amounts lent by the Company
to (from) officers/stockholders. Mrs. Wen Ying Li is Mr. Jinzhong Fang's
spouse.
  December
      31,2008
                            
                            
                            2007Mr.
      JinZhong Fang
                            
                            $
                            60,682
                            
                            
                            $
                            -Mrs.
      WenYing Li
                            
                            
                            2,368,486
                            
                            
                            
                            (87,873
                            )Mr.
      HuaKang Zhou
                            
                            
                            (197,496
                            )
                            
                            
                            (2,259
                            )Mrs.
      Yushu Cao
                            
                            
                            23,640
                            
                            
                            
                            -Total
                            
                            $
                            2,255,312
                            
                            
                            $
                            (90,132
                            )
  Item
13.  Exhibit List
 
 (a)
Financial Statements
  Report of
Independent Registered Public Accounting Firm
  Consolidated
Balance Sheets - December 31, 2008 and 2007
  Consolidated
Statements of Operations – Years ended December 31, 2008 and 2007
  Consolidated
Statements of Stockholders’ Equity and Comprehensive Income - Years ended
December 31, 2008 and 2007
  Consolidated
Statements of Cash Flows - Years ended December 31, 2008 and 2007
  Notes to
Consolidated Financial Statements
 
 
 (b)
Exhibit List
 
 3-a.
                Articles
      of Incorporation, and 1989 amendment. - filed as an exhibit to the
      Company’s Registration Statement on Form SB-2 (33-85218 C) and
      incorporated herein by reference.
 
 3-a(1)
                Amendment
      to Articles of Incorporation dated March 4, 1991, March 22, 1994, and
      November 18, 1994. - filed as an exhibit to the Company’s Registration
      Statement on Form SB-2 (33-85218 C) and incorporated herein by
      reference.
 
 3-a(2)
                Certification
      of Correction of Articles of Incorporation. - filed as an exhibit to the
      Company’s Registration Statement on Form SB-2 (33-85218 C) and
      incorporated herein by reference.
 
 3-a(3)
                Amendment
      to Articles of Incorporation dated July 26, 1996 - filed as an Exhibit to
      Form 10-KSB for the year ended December 31, 1997, and incorporated herein
      by reference.
 
 3-a(4)
                Amendment
      to Articles of Incorporation dated June 15, 2005 - – filed as an exhibit
      to the Current Report on Form 8-K dated February 17, 2005 and incorporated
      herein by reference.
 
 3-a(5)
                Amendment
      to Articles of Incorporation dated January 16, 2007 - – filed as an
      exhibit to the Current Report on Form 8-K dated January 5, 2007 and
      incorporated herein by reference.
 
 3-b.
                By-laws.
      - filed as an exhibit to the Company’s Registration Statement on Form SB-2
      (33-85218 C) and incorporated herein by
  reference.
 
 31
                Rule
      13a-14(a) Certification
 
 32
                Rule
      13a-14(b) Certification
  
  
  Item
14.  Principal Accountant Fees and Services
 
 Audit
Fees
 
 MS Group
CPA LLC billed $65,000in connection with the audit of the
Company’s financial statements for the year ended December 31, 2008 and review
of the financial statements included in our 2008 10-Q filings.  MS
Group CPA LLC billed $65,000 in connection with the audit of the Company’s
financial statements for the year ended December 31, 2007.
 
 All
Other Fees
 
 MS Group
CPA LLC has not billed the Company for any other services.
 
 It
is the policy of the Company that all services other than audit, review or
attest 21
  REPORT
OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
 
 
 The Board
of Directors and Stockholders of
 China
Huaren Organic Products Inc. and Subsidiary
   We have
audited the accompanying consolidated balance sheets of China Huaren Organic
Products Inc. and Subsidiary (the “Company”)  as of years ended
December 31, 2008 and 2007, and the related consolidated statements of
operations, stockholders’ equity and comprehensive income, and cash flows for
each of the years in the two-year period ended December 31, 2008. The management
of China Huaren Organic Products Inc. and Subsidiary is responsible for these
financial statements. Our responsibility is to express an opinion on these
financial statements based on our audits.
  We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. The company is not required to
have, nor were we engaged to perform, an audit of its internal control over
financial reporting. Our audit included consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the company’s internal control over financial
reporting. Accordingly, we express no such opinion. An audit also includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statements presentation. We believe that our audits provide a
reasonable basis for our opinion.
  In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the financial position of China Huaren Organic
Products Inc. and Subsidiary as of December 31, 2008 and 2007, and the results
of its operations and its cash flows for each of the years in the two-years
period ended December 31, 2008 in conformity with accounting principles
generally accepted in the United States of America.
 
 The
accompanying consolidated financial statements have been prepared assuming that
the Company will continue as a going concern. As discussed in Note 2 to the
consolidated financial statements, the Company has negative cash flow in
operating activities, and lacks of cash and equivalents to satisfy its current
obligations. These events raise substantial doubt about the Company’s ability to
continue as a going concern. Management's plans concerning these matters are
also described in Note 2. The consolidated financial statements did not include
any adjustments that might result from the outcome of this
uncertainty.
  /s/MS Group CPA
LLC
   Edison, New Jersey
 May
10, 2009


F-1
  CHINA
      HUAREN ORGANIC PRODUCTS INC. AND SUBSIDIARYCONSOLIDATED
      BALANCE SHEETSFor
      Years Ended December 31,2008
                                                      
                                                      2007AssetsCurrent
      Assets:Cash
      and equivalents
                                                      
                                                      $            26,817
                                                      
                                                      $            76,658Accounts
      receivable, net of allowance for doubtful amounts of $0 and
      $45,668
                                                      -
                                                      
                                                      4,521,106Loan
      to officers/stockholders
                                                      
                                                      2,255,312
                                                      
                                                      -Inventories
                                                      
                                                      
                                                      
                                                      -
                                                      
                                                      762,972Prepaid
      expenses
                                                      
                                                      6,924
                                                      
                                                      1,591,952Other
      current assets
                                                      
                                                      1,433
                                                      
                                                      110Total
      Current Assets
                                                      
                                                      2,290,486
                                                      
                                                      6,952,798Property
      and Equipment, Net
                                                      
                                                      4,305
                                                      
                                                      10,670Deposit
      for Purchase of Fixed Assets
                                                      
                                                      1,486,053
                                                      
                                                      3,692,950Deferred
      Income Tax Assets
                                                      
                                                      73,305
                                                      
                                                      -Total
      Assets
                                                      
                                                      3,854,149
                                                      
                                                      10,656,418Liabilities
      and Stockholders' EquityCurrent
      Liabilities:Accounts
      payable and accrued expenses
                                                      
                                                      134,334
                                                      
                                                      87,732Loan
      from officers/stockholders
                                                      
                                                      -
                                                      
                                                      90,132Tax
      payable
                                                      
                                                      
                                                      1,687,389
                                                      
                                                      1,570,078Other
      current liabilities
                                                      
                                                      13,782
                                                      
                                                      5,127Total
      Current Liabilities
                                                      
                                                      1,835,505
                                                      
                                                      1,753,069Stockholders'
      EquitySeries
      C preferred stock, $0.01 par value, 150,000 shares
    authorized,zero
      and 100,000  shares issued and outstanding
                                                      
                                                      -
                                                      
                                                      1,000Common
      stock, $0.01 par value,100,000,000 shares authorized15,000,712
      and 14,699,853 shares issued and outstanding
                                                      
                                                      150,007
                                                      
                                                      146,999Additional
      paid-in capital
                                                      
                                                      6,041,868
                                                      
                                                      6,043,876Reserve
      fund
                                                      
                                                      
                                                      259,244
                                                      
                                                      259,244(Accumulated
      deficit) retained earnings
                                                      
                                                      (5,919,394)
                                                      
                                                      1,447,838Accumulated
      other comprehensive income
                                                      
                                                      1,486,919
                                                      
                                                      1,004,392Total
      Shareholders’ Equity
                                                      
                                                      2,018,644
                                                      
                                                      8,903,349Total
      Liabilities and Stockholders’ Equity
                                                      
                                                      $        3,854,149
                                                      
                                                      $      10,656,418See
      notes to consolidated financial
statements.
  F-2
  CHINA
      HUAREN ORGANIC PRODUCTS INC. AND SUBSIDIARYCONSOLIDATED
      STATEMENTS OF OPERATIONSFor
      Years Ended December 31,2008
                                        
                                        
                                        2007Revenues
                                        
                                        $
                                        -
                                        
                                        
                                        $
                                        7,449,370Cost
      of Goods Sold
                                        
                                        
                                        -
                                        
                                        
                                        
                                        6,183,543Gross
      Profit
                                        
                                        
                                        -
                                        
                                        
                                        
                                        1,265,827Operating
      ExpensesSelling
      expenses
                                        
                                        
                                        11,454
                                        
                                        
                                        
                                        70,203General
      and administrative expenses
                                        
                                        
                                        204,323
                                        
                                        
                                        
                                        281,637Research
      and development
                                        
                                        
                                        -
                                        
                                        
                                        
                                        52,603Total
      Operating Expenses
                                        
                                        
                                        215,777
                                        
                                        
                                        
                                        404,443(Loss)
      Income  From Operations
                                        
                                        
                                        (215,777
                                        )
                                        
                                        
                                        861,384Other
      Income (Expenses)Interest
      income
                                        
                                        
                                        18,655
                                        
                                        
                                        
                                        17,076Other
      expense, net
                                        
                                        
                                        (10,088
                                        )
                                        
                                        
                                        (165,665
                                        )Bad
      debts
                                        
                                        
                                        (4,754,119
                                        )
                                        
                                        
                                        (78,059
                                        )Loss on disposal of inventories
                                        
                                        
                                        (848,200
                                        )
                                        
                                        
                                        (282,922
                                        )Loss on disposal of fixed assets
                                        
                                        
                                        (5,623
                                        )
                                        
                                        
                                        (25,050
                                        )Loss on lease cancellation
                                        
                                        
                                        (1,624,065
                                        )
                                        
                                        
                                        -Total
      Other Expenses
                                        
                                        
                                        (7,223,440
                                        )
                                        
                                        
                                        (534,620
                                        )(Loss)
      Income  Before Income Taxes
                                        
                                        
                                        (7,439,217
                                        )
                                        
                                        
                                        326,764Provision
      for Income Taxes
                                        
                                        
                                        (71,985
                                        )
                                        
                                        
                                        114,824Net
      (Loss) Income
                                        
                                        $
                                        (7,367,232
                                        )
                                        
                                        $
                                        211,940Foreign
      Currency Translation Adjustment
                                        
                                        
                                        482,527
                                        
                                        
                                        
                                        576,680Comprehensive
      (Loss) Income
                                        
                                        $
                                        (6,884,705
                                        )
                                        
                                        $
                                        788,620Net
      (Loss) Income  Per Common Share-Basic
                                        
                                        $
                                        (0.49
                                        )
                                        
                                        $
                                        0.01-Diluted
                                        
                                        $
                                        (0.49
                                        )
                                        
                                        $
                                        0.01Weighted
      Common Shares Outstanding-Basic
                                        
                                        
                                        14,953,076
                                        
                                        
                                        
                                        14,699,853-Diluted
                                        
                                        
                                        15,000,712
                                        
                                        
                                        
                                        14,999,850See
      notes to consolidated financial
statements.
  F-3
   CHINA
      HUAREN ORGANIC PRODUCTS INC. AND SUBSIDIARYSTATEMENTS
      OF STOCKHOLDERS’ EQUITY AND COMPREHENSIVE INCOMEFOR
      THE YEARS ENDED OF DECEMBER 31, 2008 AND 2007Retained
                                  
                                  
                                  AccumulatedSeries
      C Preferred
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  Additional
                                  
                                  
                                  
                                  
                                  
                                  Earnings
      /
                                  
                                  
                                  Other
                                  
                                  
                                  TotalStock
                                  
                                  
                                  
                                  
                                  
                                  Common
      Stock
                                  
                                  
                                  Paid-In
                                  
                                  
                                  Reserve
                                  
                                  
                                  Accumulated
                                  
                                  
                                  Comprehensive
                                  
                                  
                                  StockholdersNo
      of Shares
                                  
                                  Amount
                                  
                                  
                                  No
      of Shares
                                  
                                  
                                  Amount
                                  
                                  
                                  Capital
                                  
                                  
                                  Fund
                                  
                                  
                                  (Deficit)
                                  
                                  
                                  Income
                                  
                                  
                                  EquityBalance
      as ofDecember
      31, 2006
                                  
                                  
                                  1
                                  
                                  
                                  $
                                  1,000
                                  
                                  
                                  
                                  14,699,853
                                  
                                  
                                  $
                                  146,999
                                  
                                  
                                  $
                                  6,043,876
                                  
                                  
                                  $
                                  224,275
                                  
                                  
                                  $
                                  1,270,867
                                  
                                  
                                  $
                                  427,712
                                  
                                  
                                  $
                                  8,114,729Net
      income
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  211,940
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  211,940Appropriation
      ofreserve
      funds
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  34,969
                                  
                                  
                                  
                                  (34,969
                                  )
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -Foreign
      currency translation gain
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  576,680
                                  
                                  
                                  
                                  576,680Balance
      as ofDecember
      31, 2007
                                  
                                  
                                  1
                                  
                                  
                                  
                                  1,000
                                  
                                  
                                  
                                  14,699,853
                                  
                                  
                                  
                                  146,999
                                  
                                  
                                  
                                  6,043,876
                                  
                                  
                                  
                                  259,244
                                  
                                  
                                  
                                  1,447,838
                                  
                                  
                                  
                                  1,004,392
                                  
                                  
                                  
                                  8,903,349Series
      C preferred stock converted intocommon
      stock on February 28, 2008
                                  
                                  
                                  (1
                                  )
                                  
                                  
                                  (1,000
                                  )
                                  
                                  
                                  300,859
                                  
                                  
                                  
                                  3,008
                                  
                                  
                                  
                                  (2,008
                                  )
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -Net
      loss
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  (7,367,232
                                  )
                                  
                                  
                                  -
                                  
                                  
                                  
                                  (7,367,232
                                  )Foreign
      currency translation gain
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  482,527
                                  
                                  
                                  
                                  482,527Balance
      as ofDecember
      31, 2008
                                  
                                  
                                  -
                                  
                                  
                                  $
                                  -
                                  
                                  
                                  
                                  15,000,712
                                  
                                  
                                  $
                                  150,007
                                  
                                  
                                  $
                                  6,041,868
                                  
                                  
                                  $
                                  259,244
                                  
                                  
                                  $
                                  (5,919,394
                                  )
                                  
                                  $
                                  1,486,919
                                  
                                  
                                  $
                                  2,018,644See
      notes to consolidated financial
statements.
  F-4
  CHINA
      HUAREN ORGANIC PRODUCTS INC. AND SUBSIDIARYCONSOLIDATED
      STATEMENTS OF CASH FLOWSFor
      Years Ended December 31,2008
                                    
                                    
                                    2007Cash
      flows From Operating Activities:Net  (Loss)
      Income
                                    
                                    
                                    
                                    
                                    $
                                    (7,367,232
                                    )
                                    
                                    $
                                    211,940Adjustments
      to Reconcile Net (Loss) Income to Net Cash(Used
      in) Provided by Operating ActivitiesBad
      debts
                                    
                                    
                                    
                                    
                                    
                                    4,754,119
                                    
                                    
                                    
                                    78,059Depreciation
                                    
                                    
                                    
                                    
                                    
                                    4,638
                                    
                                    
                                    
                                    11,888Loss
      on disposal of fixed assets
                                    
                                    
                                    
                                    
                                    
                                    5,623
                                    
                                    
                                    
                                    25,050Loss
      on disposal of inventories
                                    
                                    
                                    
                                    
                                    
                                    848,200
                                    
                                    
                                    
                                    282,922Loss
      on lease cancellation
                                    
                                    
                                    
                                    
                                    
                                    1,624,065
                                    
                                    
                                    
                                    -Deferred
      income tax benefit
                                    
                                    
                                    
                                    
                                    
                                    
                                    (71,985
                                    )
                                    
                                    
                                    -Changes
      in operating assets and liabilitiesAccounts
      receivable
                                    
                                    
                                    
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (3,758,892
                                    )Inventories
                                    
                                    
                                    
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    4,272,204Other
      receivable
                                    
                                    
                                    
                                    
                                    
                                    
                                    110
                                    
                                    
                                    
                                    (110
                                    )Employee
      travel and operation advance
                                    
                                    
                                    
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -Advances
      to suppliers
                                    
                                    
                                    
                                    
                                    
                                    
                                    (440
                                    )
                                    
                                    
                                    124,762Prepaid
      expenses
                                    
                                    
                                    
                                    
                                    
                                    
                                    (38,589
                                    )
                                    
                                    
                                    435,254Other
      current assets
                                    
                                    
                                    
                                    
                                    
                                    
                                    (929
                                    )
                                    
                                    
                                    43,451Accounts
      payable and accrued expenses
                                    
                                    
                                    
                                    
                                    
                                    
                                    37,908
                                    
                                    
                                    
                                    (4,268
                                    )Customer
      deposit
                                    
                                    
                                    
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (78,684
                                    )Welfare
      payable
                                    
                                    
                                    
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -Tax
      payable
                                    
                                    
                                    
                                    
                                    
                                    
                                    8,105
                                    
                                    
                                    
                                    421,251Other
      current liabilities
                                    
                                    
                                    
                                    
                                    
                                    
                                    7,763
                                    
                                    
                                    
                                    (3,373
                                    )Net
      Cash (Used in) Provided by Operating Activities
                                    
                                    
                                    
                                    
                                    
                                    
                                    (188,644
                                    )
                                    
                                    
                                    2,061,454Cash
      Flows From Investing ActivitiesPurchases
      of property and equipment
                                    
                                    
                                    
                                    
                                    
                                    
                                    (3,345
                                    )
                                    
                                    
                                    (1,675
                                    )Proceeds
      from repayment of related party advance
                                    
                                    
                                    
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    37,441Payment
      for deposit of purchase of fixed assets
                                    
                                    
                                    
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (2,154,639
                                    )Net
      Cash Used in Investing Activities
                                    
                                    
                                    
                                    
                                    
                                    
                                    (3,345
                                    )
                                    
                                    
                                    (2,118,873
                                    )Cash
      Flows From Financing ActivitiesProceeds
      from officers/shareholders loans
                                    
                                    
                                    
                                    
                                    
                                    
                                    195,238
                                    
                                    
                                    
                                    168,938Payment
      for loan to officers/shareholders
                                    
                                    
                                    
                                    
                                    
                                    
                                    (84,322
                                    )
                                    
                                    
                                    (76,632
                                    )Net
      Cash Provided by Financing Activities
                                    
                                    
                                    
                                    
                                    
                                    
                                    110,916
                                    
                                    
                                    
                                    92,306Net
      (Decrease) Increase in Cash and Equivalents
                                    
                                    
                                    
                                    
                                    
                                    
                                    (81,073
                                    )
                                    
                                    
                                    34,887Effect
      of Exchange Rate Changes on Cash
                                    
                                    
                                    
                                    
                                    
                                    
                                    31,232
                                    
                                    
                                    
                                    (44,495
                                    )Cash
      and Equivalents, at Beginning of Period
                                    
                                    
                                    
                                    
                                    
                                    
                                    76,658
                                    
                                    
                                    
                                    86,266Cash
      and Equivalents, at End of Period
                                    
                                    
                                    
                                    
                                    
                                    $
                                    26,817
                                    
                                    
                                    $
                                    76,658SUPPLEMENT
      DISCLOSURES OF CASH FLOW INFORMATIONThere
      were no cash payment for interest expenses or income taxesduring
      the years ended December 31, 2008 and 2007SUPPLEMENTAL
      SCHEDULE OF NON-CASH INVESTING ANDFINANCING
      ACTIVITIESDeposit
      for purchase of fixed assets returned to stockholder.
                                    
                                    
                                    
                                    
                                    
                                    $
                                    2,462,440
                                    
                                    
                                    $
                                    -See
      notes to consolidated financial
statements.
  F-5
 China
Huaren Organic Products Inc. and Subsidiary
 Notes
to Financial Statements
 
 1.
                Organization
      and Nature of Business
 
 China
Huaren Organic Products Inc. (“the Company”) through its indirect wholly-owned
subsidiary, Jilin Huaren Organic Product Co., Ltd. ("Jilin Huaren ") develops,
produces, and sells a wide array of organic foods and healthcare and cosmetic
products.
 
 In
November 2006, the Company acquired all the ownership interest in China Organic
Health Products Inc. (“China Organic”), a Delaware corporation organized in
January 2006. The Company acquired China Organic in exchange for shares of
common stock and shares of Series C Preferred Stock of the Company. The
capitalizations are described in further detail in Note 15 to the
accompanying consolidated financial statements.
 
 China
Organic did not initiate any business activity. Most of the Company's
activities are conducted through its 100% equity ownership in Jilin Huaren.
Jilin Huaren was incorporated in the Jilin district of People’s Republic of
China (PRC) in February 2000 under the name “Jilin KangJian Technology Trade
Center”, but adopted its current name on December 23, 2004. It remained inactive
and incurred minor administrative expenses prior to December 31, 2003. Started
from March 2004, Jilin Huaren began its business such as research, development,
production, and sale of organic foods and healthcare products, and
cosmetics related merchandises in PRC. The company is selling the cosmetics
products under the “Huaren” brand name. All of Jilin Huaren’s business is
currently in China.
 2.
Net loss during Transaction Period and Management Plans
 
 During
the fourth quarter of 2007, the sales revenue of Jilin Huaren had dropped down
significantly and the Company incurred a net loss. In addition, for the year
ended December 31, 2008, the sales revenue was none. As of December 31, 2008,
the Company had $26,817 cash and equivalents to fund the short-term working
capital requirements. The Company’s ability to continue as a going concern and
its future success is dependent upon its new management team’s ability to better
handle the Company’s business in China, to merge with a better business, and to
raise capital in the near term to (1) satisfy its current obligations, and (2)
fund the successful wide scale development and marketing of its
products.
 
 The
Company presently has ongoing discussions and negotiations with a number of
additional financing alternatives and merger targets. However, the Company has
no definitive agreements to provide funding at this time. In addition, the
Company has no firm commitment with any merger target.
 
 The
accompanying financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
 
 
 3.
Basis of Preparing Accounting Statement
  The
accompanying consolidated financial statements present the financial position,
results of operations and cash flows of the Company and all entities in which
the Company has a controlling voting interest. The consolidated financial
statements also include the accounts of any variable interest entities in which
the Company is considered to be the primary beneficiary and such entities are
required to be consolidated in accordance with accounting principles generally
accepted in the United States (“US GAAP”). These consolidated financial
statements include the financial statements of China Huaren Organic Products
Inc. and its subsidiary. All significant inter-company transactions and balances
are eliminated in consolidation.
 
 The
accompanying consolidated financial statements are prepared in accordance with
US GAAP. This basis of accounting differs from that used in the statutory
accounts of some of the Company’s subsidiary, which were prepared in accordance
with the accounting principles and relevant financial regulations applicable to
enterprises with foreign investment in the PRC (“PRC GAAP”). Necessary
adjustments were made to the Subsidiary’s statutory accounts to conform to US
GAAP to be included in these consolidated financial statements.
 
 4.
Summary of Significant Accounting Policies
 
 a.
Use of Estimates
 
 The
preparation of financial statements requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, and the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reported
period. Actual results could differ from these estimates.
 
 b.
Cash and cash equivalents
 
 Cash and
cash equivalents include cash on hand, demand deposits and highly liquid
instruments with a maturity of three months or less at the time of
purchase.
 
 c.
Accounts Receivable
 
 Accounts
receivables are recognized and carried at original invoice amount less allowance
for any uncollectible amounts. The Company provides an allowance for doubtful
accounts equal to the estimated losses that will be incurred in the collection
of all receivables. The estimated losses are based on a review of the current
status of the existing receivables. The allowance for doubtful accounts as of
December 31, 2008 and 2007 were $0 and $45,668, respectively.
 
 d.
Inventories
 
 Inventories
are stated at the lower of cost or market value. Estimated obsolescence and any
excess of carrying costs over market are provided for through valuation
reserves.
 
 
 e.
Property and Equipment
 
 Property
and equipment is stated at cost less accumulated depreciation. Depreciation on
property and equipment is determined using the straight-line method over the
estimated useful life of the assets, the office equipments and vehicles have
estimated useful lives of 5 years. Repairs and maintenance expenditures which do
not extend the useful lives of the related assets are expended as incurred,
whereas significant renewals and betterments are capitalized.
 
 The cost
and related accumulated depreciation of assets sold or otherwise retired are
eliminated from the accounts and any gain or loss is included in the statements
of operations.
 
 f.
Research and Development Costs
 
 Research
and development cost are charged to expenses as incurred. The Company incurred
$0 and $52,603 research and development expenses for the years ended December
31, 2008 and 2007, respectively.
 
 g.
Long-Lived Assets
 
 The
Company accounts for long-lived assets in accordance with SFAS 144, Accounting for the Impairment or
Disposal of Long-Lived Assets. Impairments are written off when events or
circumstances indicate the carrying amount exceeds the recoverability or the
estimated future cash flows expected from these assets. For long lived assets to
be disposed, impairment is written off when the carrying amount exceeds the fair
market value of the asset less the cost of disposal.
 
 h.
Warranties
 
 The
Company offers a commercial warranty on its products. Based on historical
returns, an estimated return reserve is accrued for in the period revenue is
recognized. The experience for costs and expenses in connection with such
warranties had been minimal and through December 31, 2008 and 2007, no amount
had been reserved.
 
 i.
Fair Value of Financial Instruments
 
 The
carrying amounts of cash and equivalents, accounts receivable, inventories,
prepaid expenses, other current assets, accounts payable, accrued liabilities,
customer deposits, taxes payable, and other current liabilities approximate
their fair value because of the immediate or short-term maturity of these
financial instruments.
 
 
 j.
Revenue Recognition
 
 Revenue
is recognized at the date of shipment to customers, and when the price is fixed
or determinable, the delivery is completed, no other significant obligations by
us exist and collectability is reasonably assured. All revenues for the years
ended December 31, 2008 and 2007 were products sales revenue recorded net of
value added taxes.
 
 Sales
transactions not meeting all the conditions of the full accrual method are
accounted for using the deposit method of accounting. Under the deposit method,
all costs are capitalized as incurred, and payments received from the buyer are
recorded as a customer deposits.
 
 k.
Advertising and Marketing Costs
 
 Advertising
and marketing costs, except for costs associated with direct-response
advertising and marketing, are charged to operations when incurred. The costs of
direct-response advertising are capitalized and amortized over the period during
which future benefits are expected to be received. Advertising and marketing
expense were
 $0 and
$18,822 for the fiscal year ended December 31, 2008 and 2007,
respectively.
 
 l.
Employee Welfare Benefit
 
 The
Company established an employee welfare plan in accordance with Chinese law and
regulations. The Company makes annual pre-tax contributions of 14% of all
employees’ salaries. Starting from when the Chinese subsidiary became foreign
fully owned company in June 2006, the Company’s Chinese subsidiary has expensed
all employee welfare benefit as incurred. The total expense for the above plan
amounted to $465 and $7,966 for the years ended December 31, 2008 and 2007,
respectively.
 
 m.
Foreign Currency Translation
 
 The
Company’s reporting currency is the U.S. dollar. The functional currencies of
the Company's subsidiary are local currencies, primarily the Chinese Renminbi.
The financial statements are translated into U.S. dollars using period-end rates
of exchange for assets and liabilities and average rates of exchange for the
period for revenues and expenses. Translation adjustments resulting from the
process of translating the local currency financial statements into U.S. dollars
are included in other comprehensive income or loss.
 
 
 n.
Income Taxes
 
 The
Company and its U.S. subsidiary will file consolidated federal income tax return
and file the Delaware state franchise tax returns individually. The Company’s
PRC subsidiary files income tax returns under the Income Tax Law of the People's
Republic of China concerning Foreign Investment Enterprises and Foreign
Enterprises and local income tax laws.
 
 The
Company follows Statement of Financial Accounting Standards No. 109 - Accounting
for Income Taxes, which requires recognition of deferred tax assets and
liabilities for the expected future tax consequences of events that have been
included in the financial statements or tax returns. Under this method, deferred
tax assets and liabilities are based on the differences between the financial
statement and tax bases of assets and liabilities using enacted tax rates in
effect for the year in which the differences are expected to reverse. Deferred
taxes also are recognized for operating losses that are available to offset
future income taxes.
 
 o.
Comprehensive Income
 
 SFAS 130,
Reporting Comprehensive
Income, defines comprehensive income to include all changes in equity
except those resulting from investments by owners and distributions to owners
and requires that the period’s comprehensive income, its components and
accumulated balances be disclosed. Among other disclosures, SFAS
 130
requires 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 presented with the same prominence as other
financial statements. The Company’s only current component of comprehensive
income is the foreign currency translation adjustment.
 
 p.
Segment Reporting
 
 SFAS 131,
Disclosure about Segments of
an Enterprise and Related Information, requires disclosure of reportable
segments used by management for making operating decisions and assessing
performance. Reportable segments are categorized by products and services,
geography, legal structure, management structure, or any other manner in which
management disaggregates a company. SFAS 131 has no effect on the Company’s
financial statements as substantially all of the Company’s operations and
management is under a single operating segment.
 
 q.
Recent Pronouncements
 
 In June
2008, the FASB issued FASB Staff Position on Emerging Issues Task Force Issue
03-6, “Determining Whether Instruments Granted in Share-Based Payment
Transactions Are Participating Securities” (“FSP EITF 03-6-1”). FSP EITF 03-6-1
states that unvested share-based payment awards that contain nonforfeitable
rights to dividends or dividend equivalents (whether paid or unpaid) are
participating securities and shall be included in the computation of earnings
per share (“EPS”) pursuant to the two-class method. FSP EITF 03-6-1 is effective
for financial statements issued for fiscal years beginning after
December 15, 2008, and interim periods within those years. All prior-period
EPS data presented shall be adjusted retrospectively (including interim
financial statements, summaries of earnings, and selected financial data)
to conform with the provisions of FSP EITF 03-6-1. The adoption of this FSP
EITF 03-6-1 did not have a material effect on the Company’s financial
position.
 
 In May 2008, theFinancial Accounting Standards Board
("FASB") issued Statement of Financial Accounting Standards ("SFAS") No.162,
“The Hierarchy of
Generally Accepted Accounting Principles”. SFAS 162 indicates theentity (not its auditor) that is
responsible for selecting accounting principles for financial statements that
are presented in conformity withGAAP. Accordingly, the GAAP hierarchy
should reside in the accounting literature established by the FASB and is
issuing SFAS 162 to achieve that result. SFAS 162 also identifies the sources of
accounting principles and the framework for selecting the principles to be used in the preparation of
financial statements of nongovernmental entities that are presented in
conformity with generally accepted accounting principles (GAAP) in the United
States (the GAAP hierarchy).SFAS 162 is effective 60 days followingthe SEC’s approval of the Public Company
Accounting Oversight Board amendments to AU Section 411,The Meaning
ofPresent Fairly in
Conformity With Generally Accepted Accounting Principles.The Company is in the process of
evaluating the new disclosure requirements under SFAS 162. The Company is
currently assessing the potential impact that adoption of SFAS No. 162 may
have on its financial statements.
 
 
 
 In March 2008, the Financial Accounting
Standards Board ("FASB") issued Statement of Financial Accounting Standards
("SFAS") No.161,"Disclosures about Derivative Instruments and Hedging Activities
- An Amendment of SFAS No. 133" ("SFAS 161"). SFAS 161 seeks to improve
financial reporting for derivative instruments and hedging activities by
requiring enhanced disclosures regarding the impact on financial position,
financial performance, and cash flows. To achieve this increased transparency,
SFAS 161 requires (1) the disclosure of the fair value of derivative instruments
and gains and losses in a tabular format;(2) the disclosure of derivative
features that are credit risk-related; and (3)cross-referencing within the
footnotes. SFAS 161 is effective for financial statements issued for fiscal
years and interim periods beginning after November 15, 2008 (that is, January 1,
2009, for entities with calendar year-ends), with early application
encouraged. The Company is currently assessing the potential
impact that adoption of SFAS No. 161 may have on its financial
statements.
  In
December 2007, the Financial Accounting Standard Board (“FASB”) issued SFAS No.
160, “Non-controlling Interests in Consolidated Financial Statements-an
amendment of ARB No. 51” which clarifies that a non-controlling interest in a
subsidiary is an ownership interest in the consolidated entity that should be
reported as equity in the consolidated financial statements. This statement also
changes the way the consolidated income statement is presented. It requires
consolidated net income to be reported at amounts that include the amounts
attributable to both the parent and the non-controlling interest. In addition,
it requires disclosure, on the face of the consolidated statement of income, of
the amounts of consolidated net income attributable to the parent and to the
non-controlling interest. SFAS No. 160 is effective for fiscal years, and
interim periods within those fiscal years beginning on or after December 15,
2008 (that is, January 1, 2009, for entities with calendar year-ends). Earlier
adoption is prohibited. The
adoption of this SFAS 160 did not have a material effect on the Company’s
financial position now.
 
 In December 2007, Statement of
Financial Accounting Standards No. 141(R), Business Combinations, was issued.
SFAS No. 141R replaces SFAS No. 141, Business Combinations. SFAS 141R retains
the fundamental requirements in SFAS 141 that the acquisition method of
accounting (which SFAS 141 called the purchase method) be used for all business
combinations and for an acquirer to be identified for each business combination.
SFAS 141R requires an acquirer to recognize the assets acquired, the liabilities
assumed, and any non-controlling interest in the acquiree at the acquisition
date, measured at their fair values as of that date, with limited exceptions.
This replaces SFAS 141's cost-allocation process, which required the cost of an
acquisition to be allocated to the individual assets acquired and liabilities
assumed based on their estimated fair values. SFAS 141R also requires the
acquirer in a business combination achieved in stages (sometimes referred to as
a step acquisition) to recognize the identifiable assets and liabilities, as
well as the non-controlling interest in the acquiree, at the full amounts of
their fair values (or other amounts determined in accordance with SFAS 141R).
SFAS 141R applies prospectively to 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, 2008 (that is, January 1, 2009, for
entities with calendar year-ends). An entity may not apply it before that date.
The Company is currently evaluating the impact that adopting SFAS 141R will have
on its financial statements. The Company is currently assessing the
potential impact that adoption of SFAS No. 141R may have on its financial
statements.
 
 
 
 5.
Accounts Receivable
 
 During
the first quarter of 2007, the Company, facing an imminent expiration date on
organic crops that it had received from Wancheng, sold those crops at cost to
Yushu Wanli Co., Ltd (“Yushu”) pursuant to a sales contract. This sale on March
15, 2007 increased the Company’s accounts receivable by approximately $5.9
million (equivalent to RMB 40,312,786), which included the merchandise price
plus VAT and other sales taxes. Yushu Wanli Co., Ltd. is a non-related third
party. Based upon the sales contract, Yushu began to pay the amount due to the
Company in May 2007. As of December 31, 2008, there was outstanding balance
due from Yushu in amount of $4,754,119 (equivalent to
RMB 33,312,786).For more than one year
tracing this outstanding payment, the new management team of the Company decided
to write the bad debt. As a result, the Company recognized approximately $4.7
million bad debts loss as of December 31, 2008.
 
 6.
Inventories
 
 Inventories
consisted of the following:
 December
      31,2008
                          
                          
                          2007Finished
      goods
                          
                          $
                          -
                          
                          
                          $
                          242,633Work
      in process
                          
                          
                          -
                          
                          
                          
                          480,532Packaging
      materials and other
                          
                          
                          -
                          
                          
                          
                          39,807Total
                          
                          $
                          -
                          
                          
                          $
                          762,972
 
 The
Company had loss on disposal of inventories in amounts of $848,200 and $282,922
for the years ended December 31, 2008 and 2007.
  7.
Loan to (from) officers/stockholders
 
 Amounts
loaned to (from) officers/stockholders are unsecured, non-interest bearing, and
have no set repayment date. As of December 31, 2008 and 2007, the total net
amounts of loan to (from) the shareholders/officers were $2,255,312 and
($90,132), respectively, which represented the net amounts lent by the Company
to (from) officers/stockholders.
  December
      31,2008
                            
                            
                            2007Mr.
      JinZhong Fang
                            
                            $
                            60,682
                            
                            
                            $
                            -Mrs.
      WenYing Li
                            
                            
                            2,368,486
                            
                            
                            
                            (87,873
                            )Mr.
      HuaKang Zhou
                            
                            
                            (197,496
                            )
                            
                            
                            (2,259
                            )Mrs.
      Yushu Cao
                            
                            
                            23,640
                            
                            
                            
                            -Total
                            
                            $
                            2,255,312
                            
                            
                            $
                            (90,132
                            )
  F-12
 8.Prepaid
Expenses
 
 Prepaid
expenses consisted of the following:
  December
      31,2008
                          
                          
                          2007Prepaid
      office rent
                          
                          $
                          1,070
                          
                          
                          $
                          267Prepaid
      consultation fees and other
                          
                          
                          5,854
                          
                          
                          
                          -Prepaid
      lease fees for the right to use lands
                          
                          
                          -
                          
                          
                          
                          1,591,685Total
                          
                          $
                          6,924
                          
                          
                          $
                          1,591,952
  9.
Property and Equipment, Net
 
 Property
and equipment at cost, less accumulated depreciation, consisted of the
following:
 December
      31,Estimated
      Life
                          
                          2008
                          
                          
                          2007Office
      equipments
                          5
      years
                          
                          $
                          7,989
                          
                          
                          $
                          21,930Less:
      Accumulated depreciation
                          
                          
                          
                          3,684
                          
                          
                          
                          11,260Total
                          
                          
                          $
                          4,305
                          
                          
                          $
                          10,670
 
 Depreciation
expenses charged to operations were $4,638 and $11,888 for the years ended
December 31, 2008 and 2007, respectively. Loss on disposal of fixed assets for
the years ended December 31, 2008 and 2007 was $5,623 and $25,050,
respectively.
 
 
 10.
Deposit for Purchase of Fixed Assets
 
 Starting
from late 2005, the subsidiary in China, Jilin Huaren, has intended to purchase
an office building from an unrelated company in P. R. China. The purchases price
was $1,099,304 (equivalent to RMB7, 500,000) and fix up construction cost was
$386,749 (equivalent to RMB 2,638,593). During 2006 and 2007, all these cost had
been paid to the seller and constructors by Jilin Huaren, but the title to the
property has not transferred. Jilin Huaren had occupied the property since year
2005 without paying any rent. Accordingly, Jilin Huaren recognized $18,655
(equivalent to RMB 129,600) of rent expenses per year since October 1, 2005, and
also recognized an offsetting amount of interest income imputed to the deposit
that Jilin Huaren paid to the seller in 2005. Management estimated the value of
the contribution items and expected to get full refund $1,486,053 (equivalent to
RMB 10,138,593) if the purchase does not go through.
 
 On March
1, 2007, the Company signed a letter of intent with a village in Jilin P.R.China
to purchase a land use right from the village. This letter of intent did not
list the total purchase price. However, the Company has deposited $2,462,440
(equivalent to RMB 16,800,000) to the village as of December 31, 2007.This
deposit had been paid back to the company’s shareholder as of December 31,
2008.
  Accordingly,
the total deposits for purchase of fixed assets consisted of the
following:
  December
      31,2008
                  
                  
                  2007Deposit
      for purchase office building
                  
                  $
                  1,486,053
                  
                  
                  $
                  1,389,876Deposit
      for purchase land use right from village
                  
                  
                  
                  
                  
                  
                  2,303,074Total
                  
                  $
                  1,486,053
                  
                  
                  $
                  3,692,950
  11.
Operating Lease Commitments
 
 The
Company leases certain spaces under operating lease agreements; office space,
products exhibit space, employee living space, field farm, and plant lands.
During year 2008, field farm lease had expired, and the plant lands lease had
been cancelled. The following was a schedule of future minimum rental payments
required under operating leases that had initial or remaining non-cancelable
lease terms as of December 31, 2008.
 Operating
      Lease CommitmentsFor
      Year Ended December 31,
                              
                              
                              
                              
                              Rounding
      Test2009
                              
                              
                              $              5,772
                              
                              5,772Total
      minimum payments required
                              
                              $              5,772
                              
                              5,772
 Rent
expenses amounted to $143,006 and $411,492 for the years ended December 31, 2008
and 2007, respectively.
 
 
 12.
Taxation
 
 a.
Corporation Income Tax (“CIT”)
 
 The
Company and its US subsidiary will file consolidated federal income
taxes and individually file state franchise taxes with the State of
Delaware. The Company’s PRC subsidiary files income tax returns under the
Income Tax Law of the People's Republic of China concerning Foreign Investment
Enterprises and Foreign Enterprises and local income tax laws.
 
 In
accordance with the relevant PRC tax laws and regulations, the Company’s PRC
subsidiary was subject to CIT at 33% and 25% tax rate before and after January
1, 2008, respectively. The Company did not record U.S. and PRC current income
taxes for year ended December 31, 2008, since there was no taxable income during
this year, whereas the Company had recorded the deferred benefit for income tax
in PRC in amount of $71,985 for year ended December 31, 2008, due to the
operations loss occurred during this year.
  b.
Value Added Tax (“VAT”)
 
 The
Company is subject to VAT on merchandises sales in PRC. For the years ended
December 31, 2008 and 2007, a small scale tax rate of 4% was
applicable.
 
 c.
Business Tax (“BT”)
 
 The
Company is also subject to Business Tax, which is charged on service income at a
rate of 5% in accordance with the tax law in Jilin District of PRC.
 
 d.
Taxes Payable
 
 As of
December 31, 2008 and 2007, tax payable consisted of the following:
 December
      31,2008
                            
                            
                            2007Value-added
      tax
                            
                            $
                            596,412
                            
                            
                            $
                            557,813Income
      tax
                            
                            
                            1,031,309
                            
                            
                            
                            964,564Delaware
      franchise taxes
                            
                            
                            31,317
                            
                            
                            
                            21,186Individual
      income tax withholdings
                            
                            
                            6,550
                            
                            
                            
                            6,126City
      construction, education, and other taxes
                            
                            
                            21,801
                            
                            
                            
                            20,389Total
                            
                            $
                            1,687,389
                            
                            
                            $
                            1,570,078
  F-15
  13.
Foreign Subsidiary
 
 a
..Operations
 
 Substantially
all of the Companies' operations are carried out through its subsidiary located
in the PRC. Accordingly, the Companies' business, financial condition and
results of operations may be influenced by the political, economic and legal
environments in the PRC. The Companies' business may be influenced by changes in
governmental policies with respect to laws and regulations, anti-inflationary
measures, currency fluctuation and remittances and methods of taxation, among
other things.
 
 b.
Dividends and Reserves
 
 Under
laws of the PRC, net income after taxation can only be distributed as dividends
after appropriation has been made for the following: (i) cumulative prior years'
losses, if any; (ii) allocations to the "Statutory Surplus Reserve" of at least
10% of net income after tax, as determined under PRC accounting rules and
regulations, until the fund amounts to 50% of the Company's registered capital;
(iii) allocations of 5-10% of income after tax, as determined under PRC
accounting rules and regulations, to the Company's "Statutory Common Welfare
Fund", which is established for the purpose of providing employee facilities and
other collective benefits to employees in China; and (iv) allocations to any
discretionary surplus reserve, if approved by shareholders.
 
 Since
Jilin Huaren incurred net loss in year 2008, there was no reservation for
Statutory Surplus Reserve Fund and Statutory Common Welfare Fund for Jilin
Huaren in year 2008. As of result, Jilin Huaren had segregated in retained
earnings an aggregate amount of $259,244 and $259,244 as of December 31, 2008
and 2007, respectively, for the Statutory Surplus Reserve and the Statutory
Common Welfare Fund.
 
 14.
Concentration of Business
 
 a.
Financial Risks
 
 The
Company provides credit in the normal course of business. The Company performs
ongoing credit evaluations of its customers and maintains allowances for
doubtful accounts based on factors surrounding the credit risk of specific
customers, historical trends, and other information.
 
 
 b.
Major Customers
 
 The
following summarizes sales to major customers (each 10% or more of
sale):
 Sales
      to
                      
                      
                      Number
      of
                      
                      
                      PercentageYear
      Ended
                      
                      Major
      Customers
                      
                      
                      Customers
                      
                      
                      of Total2008
                      
                      $
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -2007
                      
                      $
                      5,097,508
                      
                      
                      
                      1
                      
                      
                      
                      68.43
                      %
 
 c.
Major Suppliers
 
 The
following summarized purchases from major suppliers (each 10% or more of
purchases):
 Purchases
      from
                      
                      
                      Number
      of
                      
                      
                      PercentageYear
      Ended
                      
                      Major
      Suppliers
                      
                      
                      Suppliers
                      
                      
                      of Total2008
                      
                      $
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -2007
                      
                      $
                      798,509
                      
                      
                      
                      2
                      
                      
                      
                      92.09
                      %
 
 15.
Stockholders Equity
 
 Before
acquisition (the “Share Exchange”), the Company had 17,548,665 shares of common
stock outstanding. On November 13, 2006, the Company acquired all of the
outstanding capital stock of China Organic Health Products, Inc. (“China
Organic”).  In connection with the closing of the acquisition (the “Share
Exchange”), the Company issued to the shareholders of China Organic (a)
27,486,175 shares of common stock and (b) Series D Preferred Stock, which was
convertible into 469,760,000 shares of common stock. As a part of the merger, we
changed our corporate name to "China Huaren Organic Products, Inc. from
Ultradata Systems, Inc. " In addition, effective on January 16, 2007, the
Company (i) changed the its to “China Huaren Organic Products, Inc” from
“Ultradata Systems, Inc., (ii) brought into effect a 1:39 reverse split of
its outstanding common shares, and (iii)  increased  the
number of authorized shares of common stock from 50,000,000 shares, par value
$0.01 to 100,000,000 shares, $0.01 par value. After recapitalization, the Series
D Preferred Stock was converted into 12,045,128 common shares.
 
 On
January 5, 2007, the shareholder of Series B Preferred Stock exercised its right
to convert all of the outstanding Series B Preferred Stock into 58,499,413
shares of common stock. After giving effect to the reverse stock split on
January 16, 2007, the shares obtained by this shareholder on conversion of the
Series B Preferred Stock totaled 1,499,985. As a result, there were 14,699,853
common shares issued and outstanding, par value $0.01 as of December 31, 2007
and 2006.
 
 On
February 28, 2008, certain individuals converted all of the outstanding Series C
Preferred Stock into 300,859 shares of the Company’s common stock. Therefore the
Company had 15,000,712 common shares issued and outstanding, par value $0.01,
on December 31, 2008.
  F-17
   SIGNATURES
 
 In
accordance with Section 13 or 15(d) of the Exchange Act, the Registrant has
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
 
 China
Huaren Organic Products, Inc.
 
 By: /s/ Yushu
Cao
 Yushu
Cao, Chief Executive Officer
 
 In
accordance with the Exchange Act, this Report has been signed below on May 18,
2009 by the following persons, on behalf of the Registrant and in the capacities
and on the dates indicated.
  /s/ Yushu
Cao
 Yushu
Cao, Director,
 Chief
Executive Officer,
 Chief
Financial Officer
 
 /s/ Zhou
Huakang
 Zhou
Huakang, Director