UNITED
      STATES


SECURITIES
      AND EXCHANGE COMMISSION


WASHINGTON,
      D.C. 20549





**FORM
      10-Q**





(Mark
      One)


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





For
      the
      quarterly period ended September 30, 2008





or





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





For
      the
      transition period from ____________________ To
      ____________________





Commission
      File Number :  333-112111





Zhongpin
                Inc.(Exact
                name of registrant as specified in its
                charter)





Delaware
            
            54-2100419(State
                or other jurisdiction of incorporation or organization)
            
            (I.R.S.
                Employer Identification No.)





21
                Changshe Road, Changge City, Henan Province, People’s Republic of
                China(Address
                of principal executive offices)
            
            (Zip
                Code)





011
                86 374-6216633(Registrant’s
                telephone number, including area
                code)





Not
                Applicable(Former
                name, former address and former fiscal year, if changed since last
                report)





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 ninety (90) days. YES x NO  ̈





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





Large
      accelerated filer  ̈  Accelerated
      filer x  Non-accelerated
      filer  ̈





Indicate
      by check mark whether the registrant is a shell company (as defined in Rule
      12b-2 of the Exchange Act). YES  ̈ NO x





As
      of
      October 27, 2008, 27,471,585 shares of the registrant’s common stock, and
      2,129,200 shares of the registrant’s Series A convertible preferred stock, each
      such share convertible into one share of the registrant’s common stock, were
      outstanding.









**ZHONGPIN
      INC.**





**FORM
      10-Q**





**INDEX**





****
            ****
            
            **Page****Part
                I**
            **Financial
                Information**Item
                1.
            Unaudited
                Financial Statements:Consolidated
                Balance Sheets as of September 30, 2008 (unaudited) and December
                31,
                2007
            
            2Consolidated
                Statements of Operations and Comprehensive Income (unaudited) for
                the
                three- and nine-month periods ended September 30, 2008 and
                2007
            
            3Consolidated
                Statements of Cash Flows (unaudited) for the nine months ended September
                30, 2008 and 2007
            
            4Notes
                to Consolidated Financial Statements (unaudited)
            
            5Item
                2.
            Management’s
                Discussion and Analysis of Financial Condition and Results of
                Operations
            
            17Item
                3.
            Quantitative
                and Qualitative Disclosures About Market Risk
            
            32Item
                4.
            Controls
                and Procedures
            
            32**Part
                II**
            **Other
                Information**Item
                1.
            Legal
                Proceedings
            
            35Item
                1A.
            Risk
                Factors
            
            35Item
                2.
            Unregistered
                Sales of Equity Securities and Use of Proceeds
            
            35Item
                3.
            Defaults
                Upon Senior Securities
            
            35Item
                4.
            Submission
                of Matters to a Vote of Security Holders
            
            35Item
                5.
            Other
                Information
            
            35Item
                6.
            Exhibits
            
            35**Signatures**
            
            36




i




**ZHONGPIN
      INC.**





**Part
      I – Financial Information**




**Item
      1.**  **Financial
      Statements**





The
      accompanying unaudited consolidated balance sheets, statements of operations
      and
      comprehensive income, and of cash flows and related notes thereto, have been
      prepared in accordance with generally accepted accounting principles in the
      United States of America (“GAAP”) for interim financial information and in
      conjunction with the rules and regulations of the Securities and Exchange
      Commission (“SEC”). Accordingly, they do not include all of the disclosures
      required by GAAP for complete financial statements. The financial statements
      reflect all adjustments consisting only of normal, recurring adjustments, which
      are, in the opinion of management, necessary for a fair presentation for the
      interim periods.





The
      accompanying financial statements should be read in conjunction with the notes
      to the aforementioned financial statements and Management’s Discussion and
      Analysis of Financial Condition and Results of Operations and the financial
      statements and notes thereto included in our Annual Report on Form 10-K for
      the
      year ended December 31, 2007.





The
      results of operations for the three- and nine-month periods ended September
      30,
      2008 are not necessarily indicative of the results to be expected for the entire
      fiscal year or any other period.









**ZHONGPIN
      INC.**


**CONSOLIDATED
      BALANCE SHEETS**


*(Amounts
      in U.S. dollars)*





**September 30, 2008**
            
            **December 31, 2007******
            
            (Unaudited)**ASSETS**Current
                assetsCash
                and cash equivalents
            
            $
            54,177,858
            
            $
            45,142,135Restricted
                cash
            
            
            5,352,014
            
            
            3,559,401Bank
                notes receivable
            
            
            2,054,082
            
            
            —Accounts
                receivable, net of allowance for doubtful accounts of $2,345,021
                and
                $1,341,872
            
            
            17,435,950
            
            
            18,982,312Other
                receivables
            
            
            1,995,784
            
            
            4,826,279Purchase
                deposits
            
            
            9,425,477
            
            
            6,059,782Prepaid
                expenses and deferred charges
            
            
            240,042
            
            
            1,680,679Inventories
            
            
            22,846,850
            
            
            25,922,125VAT
                recoverable
            
            
            7,900,828
            
            
            4,350,795Total
                current assets
            
            
            121,428,885
            
            
            110,523,508Property,
                plant and equipment (net)
            
            
            113,851,995
            
            
            66,429,654Construction
                in progress
            
            
            42,814,682
            
            
            16,811,740Land
                use rights
            
            
            25,157,893
            
            
            23,339,142Total
                assets
            
            $
            303,253,455
            
            $
            217,104,044**LIABILITIES
                AND EQUITY**Current
                liabilitiesAccounts
                payable
            
            $
            6,026,935
            
            $
            4,145,842Other
                payables
            
            
            11,856,580
            
            
            8,746,845Bank
                notes payable
            
            
            2,209,164
            
            
            6,160,502Accrued
                liabilities
            
            
            6,983,464
            
            
            3,014,600Short-term
                bank loans payable
            
            
            69,544,470
            
            
            47,668,592Deposits
                from customers
            
            
            4,701,742
            
            
            1,876,665Research
                and development grants payable
            
            
            457,072
            
            
            490,288Long-term
                bank loans payable-current portion
            
            
            145,671
            
            
            145,671Tax
                payable
            
            
            633,043
            
            
            202,676Total
                current liabilities
            
            
            102,558,141
            
            
            72,451,681Long-term
                loans payable
            
            
            17,762,467
            
            
            1,634,769Total
                liabilities
            
            
            120,320,608
            
            
            74,086,450EquityPreferred
                stock: par value $0.001; 25,000,000 authorized; 2,229,200 and 3,125,000
                shares issued and outstanding
            
            
            2,229
            
            
            3,125Common
                stock: par value $0.001; 100,000,000 authorized; 27,371,585 and 25,891,567
                shares issued and outstanding
            
            
            27,372
            
            
            25,892Additional
                paid in capital
            
            
            102,479,375
            
            
            100,070,571Retained
                earnings
            
            
            60,592,012
            
            
            34,732,049Accumulated
                other comprehensive income
            
            
            19,831,859
            
            
            8,185,957Total
                equity
            
            
            182,932,847
            
            
            143,017,594Total
                liabilities and equity
            
            $
            303,253,455
            
            $
            217,104,044





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




2




**ZHONGPIN
      INC. AND SUBSIDIARIES**


**CONSOLIDATED
      STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME**


*(Amount
      in U.S. dollars) (Unaudited)*





**Three
                Months Ended**
              **September
                30,**
            
            **Nine
                Months Ended**
              **September
                30,****2008**
            
            **2007**
            
            **2008**
            
            **2007**RevenuesSales
                revenues
            
            $
            153,752,841
            
            $
            71,312,992
            
            $
            400,007,165
            
            $
            190,783,230Cost
                of sales
            
            
            (134,166,298
            )
            
            (61,641,917
            )
            
            (349,125,172
            )
            
            (165,192,668
            )Gross
                profit
            
            
            19,586,543
            
            
            9,671,075
            
            
            50,881,993
            
            
            25,590,562Operating
                expensesGeneral
                and administrative expenses
            
            
            (5,199,366
            )
            
            (2,419,576
            )
            
            (15,044,238
            )
            
            (6,488,794
            )Selling
                expenses
            
            
            (3,032,930
            )
            
            (1,067,048
            )
            
            (7,348,563
            )
            
            (3,311,409
            )Total
                operating expenses
            
            
            (8,232,296
            )
            
            (3,486,624
            )
            
            (22,392,801
            )
            
            (9,800,203
            )Income
                from operations
            
            
            11,354,247
            
            
            6,184,451
            
            
            28,489,192
            
            
            15,790,359Other
                income (expense)Interest
                income
            
            
            118,304
            
            
            42,932
            
            
            1,288,629
            
            
            169,856Other
                income (expenses)
            
            
            64,439
            
            
            101,339
            
            
            (36,883
            )
            
            238,315Government
                subsidies
            
            
            482,801
            
            
            36,540
            
            
            1,054,684
            
            
            39,989Interest
                expense
            
            
            (1,768,414
            )
            
            (701,616
            )
            
            (3,741,767
            )
            
            (1,772,957
            )Total
                other income (expense)
            
            
            (1,102,870
            )
            
            (520,805
            )
            
            (1,435,337
            )
            
            (1,324,797
            )Net
                income before taxes
            
            
            10,251,378
            
            
            5,663,646
            
            
            27,053,856
            
            
            14,465,562Provision
                for income taxes
            
            
            200,986
            
            
            370,509
            
            
            1,193,893
            
            
            982,902Net
                income
            
            $
            10,050,392
            
            $
            5,293,137
            
            $
            25,859,963
            
            $
            13,482,660Foreign
                currency translation adjustment
            
            
            1,875,399
            
            
            1,162,162
            
            
            11,645,902
            
            
            2,697,417Comprehensive
                income
            
            $
            11,925,791
            
            $
            6,455,299
            
            $
            37,505,865
            
            $
            16,180,077Basic
                earnings per common share
            
            $
            0.34
            
            $
            0.27
            
            $
            0.90
            
            $
            0.86Diluted
                earnings per common share
            
            $
            0.34
            
            $
            0.23
            
            $
            0.89
            
            $
            0.65Basic
                weighted average shares outstanding
            
            
            29,543,640
            
            
            19,259,575
            
            
            28,587,297
            
            
            15,604,355Diluted
                weighted average shares outstanding
            
            
            29,905,010
            
            
            23,421,587
            
            
            29,019,128
            
            
            20,878,935





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




3




**ZHONGPIN
      INC. AND SUBSIDIARIES**


**CONSOLIDATED
      STATEMENTS OF CASH FLOWS**


*(Amount
      in U.S. dollars) ( Unaudited)*





**Nine Months Ended September 30,****2008**
            
            **2007**Cash
                flows from operating activities:Net
                income
            
            $
            25,859,963
            
            $
            13,482,660Adjustments
                to reconcile net income to net cash provided by (used in)
                operations:Depreciation
            
            
            3,194,119
            
            
            1,318,451Amortization
            
            
            321,975
            
            
            247,493Provision
                for allowance for bad debt
            
            
            876,515
            
            
            —Warrant
                expense
            
            
            145,791
            
            
            15,950Non-cash
                compensation expense
            
            
            1,026,674
            
            
            1,715,999Changes
                in operating assets and liabilities:Accounts
                receivable
            
            
            2,026,268
            
            
            (7,553,889
            )Other
                receivables
            
            
            3,106,460
            
            
            (1,877,685
            )Purchase
                deposits
            
            
            (1,276,496
            )
            
            (366,173
            )Prepaid
                expense and deferred charges
            
            
            (26,296
            )
            
            (254,292
            )Inventories
            
            
            4,900,962
            
            
            (5,799,057
            )VAT
                recoverable
            
            
            (3,131,223
            )
            
            (443,004
            )Accounts
                payable
            
            
            1,523,517
            
            
            5,507,172Other
                payables
            
            
            2,416,588
            
            
            3,447,179Research
                and development grants payable
            
            
            15,729
            
            
            (21,035
            )Accrued
                liabilities
            
            
            2,756,036
            
            
            1,130,281Taxes
                payable
            
            
            1,300,681
            
            
            (325,604
            )Deposits
                from clients
            
            
            2,608,668
            
            
            4,956,464Net
                cash provided by operating activities
            
            
            47,645,931
            
            
            15,180,910Cash
                flows from investing activities:Construction
                in progress
            
            
            (57,838,392
            )
            
            (27,345,849
            )Additions
                to property and equipment
            
            
            (10,691,673
            )
            
            (5,627,248
            )Additional
                to intangible assets
            
            
            (370,161
            )
            
            (7,556,552
            )Proceeds
                on disposal of fixed assets
            
            
            75,669
            
            
            —Net
                cash used in investing activities
            
            
            (68,824,557
            )
            
            (40,529,649
            )Cash
                flows from financing activities:Proceeds
                (repayment) from (of) bank notes
            
            
            (6,293,518
            )
            
            (65,214
            )Proceeds
                from short-term bank loans
            
            
            68,452,935
            
            
            44,214,892Repayment
                of short-term loans
            
            
            (50,695,270
            )
            
            (20,737,958
            )Proceeds
                from long-term bank loans
            
            
            15,752,767
            
            
            —Repayment
                of long-term bank loans
            
            
            (195,111
            )
            
            (146,188
            )Proceeds
                from exercised warrants
            
            
            1,236,923
            
            
            16,010,511Net
                cash provided by financing activities
            
            
            28,258,726
            
            
            39,276,043Increase
                in restricted cash
            
            
            (1,480,708
            )
            
            (541,721
            )Effect
                of rate changes on cash
            
            
            3,436,331
            
            
            1,094,616Increase
                in cash and cash equivalents
            
            
            9,035,723
            
            
            14,480,199Cash
                and cash equivalents, beginning of period
            
            
            45,142,135
            
            
            13,351,045Cash
                and cash equivalents, end of period
            
            $
            54,177,858
            
            $
            27,831,244Supplemental
                disclosures of cash flow information:Cash
                paid for interest
            
            
            3,691,752
            
            
            1,791,177Cash
                paid for income taxes
            
            
            436,073
            
            
            673,165




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




4




**ZHONGPIN
      INC.**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**





The
      accompanying unaudited condensed consolidated financial statements have been
      prepared in accordance with accounting principles generally accepted in the
      United States of America for interim financial information and with the
      instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they
      do
      not include all of the information and footnotes required by GAAP for annual
      financial statements. In the opinion of management, all adjustments (consisting
      of normal recurring accruals) considered necessary for a fair presentation
      have
      been included. Operating results for the three- and nine-month periods ended
      September 30, 2008 are not necessarily indicative of the results that may be
      expected for the year ending December 31, 2008.





1.  ORGANIZATION
      AND NATURE OF OPERATIONS




Zhongpin
      Inc. (“Zhongpin”) was established under the laws of the State of Delaware on
      February 4, 2003.  Zhongpin is a public holding company holding an equity
      interest in its subsidiaries outside the U.S. Its operating subsidiaries are
      located in the People’s Republic of China (the “PRC”) and focus on two business
      segments: pork and pork products, and vegetables and fruits. **** The
      pork
      and pork products segment is involved primarily in the processing of live market
      hogs into fresh, frozen and processed pork products which are sold domestically
      to branded stores, food retailers, food service distributors, restaurants,
      hotel
      chains and non-commercial food service establishments, such as schools,
      governments, healthcare facilities, the military and other food processors,
      as
      well as to certain international markets in a limited scope. The vegetables
      and
      fruits segment is involved primarily in the processing of frozen vegetables
      and
      fruits that are sold to our branded stores and food retailers. Zhongpin and
      its
      subsidiaries is collectively referred to as “our company” “we,” “us” and
“our.”





We
      hold a
      100% interest in Falcon Link Investment Limited, a company organized under
      the
      laws of the British Virgin Islands (“Falcon”), through which we hold a 100%
      interest in our China-based subsidiaries, each of which was organized under
      the
      laws of the PRC. Our China-based subsidiaries include the following:


**Name**
                
                **Date Of**
                  **Incorporation**
                
                **Registered**
                  **Capital**
                
                **Percentage**
                  **of Ownership**Henan
                    Zhongpin Food Company, Ltd.
                
                Sep.
                    15, 2005
                
                84,300,000
                    USD
                
                100
                %Henan
                    Zhongpin Food Share Company, Ltd.
                
                Jan.
                    20, 2000
                
                626,900,000 RMB
                
                100
                %($82,011,411)Henan
                    Zhongpin Industry Co., Ltd.
                
                Jan.
                    17, 2004
                
                18,000,000
                    RMB
                
                100
                %($2,173,913)Henan
                    Zhongpin Import and Export Trading Company
                
                Aug.
                    11, 2004
                
                5,060,000
                    RMB
                  ($611,111)
                
                100
                %Zhumadian
                    Zhongpin Food Company Limited
                
                June
                    7, 2006
                
                60,000,000
                    RMB
                  ($8,585,399)
                
                100
                %Anyang
                    Zhongpin Food Company Limited
                
                Aug.
                    21, 2006
                
                4,800,000
                    RMB
                  ($606,927)
                
                100
                %Henan
                    Zhongpin Fresh Food Logistics Company Limited
                
                Sept.
                    14, 2006
                
                1,500,000
                    RMB
                  ($189,665)
                
                100
                %
 The
          accompanying notes are an integral part of these consolidated financial
          statements.
 5
  **ZHONGPIN
          INC.**
 **NOTES
          TO CONSOLIDATED FINANCIAL STATEMENTS**
 **Name**
                
                **Date Of**
                  **Incorporation**
                
                **Registered**
                  **Capital**
                
                **Percentage**
                  **of Ownership**Deyang
                    Zhongpin Food Company Limited
                
                Sept.
                    25, 2006
                
                15,000,000 RMB
                  ($1,967,799)
                
                100
                %Henan
                    Zhongpin Business Development Company Limited
                
                Sept.
                    27, 2006
                
                5,000,000
                    RMB
                  ($632,215)
                
                100
                %Heilongjiang
                    Zhongpin Food Company Limited
                
                Oct.
                    17, 2006
                
                1,000,000
                    RMB
                  ($126,406)
                
                100
                %Luoyang
                    Zhongpin Food Company Limited
                
                April
                    26, 2007
                
                5,000,000
                    RMB
                  ($647,677)
                
                100
                %Yongcheng
                    Zhongpin Food Company Limited
                
                June
                    1, 2007
                
                5,000,000
                    RMB
                  ($646,836)
                
                100
                %Tianjin
                    Zhongpin Food Company Limited
                
                Sept.
                    14, 2007
                
                5,000,000
                    RMB
                  (
                    $664,699 )
                
                100
                %




2.  SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES





**PRINCIPLES
      OF CONSOLIDATION**





The
      financial statements include the accounts of Zhongpin and its wholly-owned
      subsidiaries. All significant inter-company accounts and transactions have
      been
      eliminated. All of the consolidated financial statements have been prepared
      based on generally accepted accounting principles in the United
      States.





**FOREIGN
      CURRENCY TRANSLATIONS AND TRANSACTIONS**





The
      Renminbi (“RMB”), the national currency of the PRC, is the primary currency of
      the economic environment in which our China-based subsidiaries are operating.
      The United States dollar (“U.S. dollar”) is the functional currency used by
      Falcon and Zhongpin to record all of their activities. We use the U.S. dollar
      for financial reporting purposes.





We
      translate our subsidiaries’ assets and liabilities into U.S. dollars using the
      noon buying rate in the City of New York for cable transfers of RMB as certified
      for customs purposes by the Federal Reserve Bank of New York as of the balance
      sheet date. Our consolidated statements of operations and comprehensive income
      are translated at moving average exchange rates during the reporting period.
      Adjustments resulting from the translation of subsidiaries’ financial statements
      from the functional currency into U.S. dollars are recorded in shareholders’
equity as part of accumulated comprehensive income (loss) - translation
      adjustments. Gains or losses resulting from transactions in currencies other
      than the functional currency are reflected in our consolidated statements of
      operations and comprehensive income for the reporting periods.





**REVENUE
      RECOGNITION**





Revenues
      generated from the sales of various meat products and vegetables and fruits
      are
      recognized when these products are delivered to costumers in accordance with
      previously agreed upon pricing and delivery arrangement, and the collectibility
      of these sales is reasonably assured. Since the products sold by our company
      are
      primarily perishable and frozen food products, the right of return is only
      for a
      few days and has been determined to be insignificant by the management of our
      company. Accordingly, no provision has been made for returnable goods. Revenues
      presented on our consolidated statements of operations and comprehensive income
      are net of sales taxes.




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




6




**ZHONGPIN
        INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**




2.  SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES (continued)




**CASH
      AND CASH EQUIVALENTS**





We
      consider all highly-liquid investments with maturity of three months or less
      to
      be cash equivalents. We maintain our cash accounts at credit-worthy financial
      institutions and closely monitor the movements of our cash
      positions.





**RESTRICTED
      CASH**





Under
      the
      terms of the credit agreements with certain of our lenders, Henan Zhongpin
      Food
      Share Co., Ltd. (“Henan Zhongpin”) has agreed to maintain with such lenders in a
      deposit account an amount of cash that will serve as collateral for its delivery
      of bank promissory notes of such lenders as payment instruments for its
      procurement purposes. The amount of bank promissory notes of such lenders that
      can be delivered by Henan Zhongpin can be up to twice the amount of such
      deposits. As such deposits may not be withdrawn by Henan Zhongpin without
      restriction, such cash deposits are presented as “restricted cash” on our
      consolidated balance sheets.





**BANK
      NOTES RECEIVABLE**





We
      accept
      notes issued only by banks during the normal course of business as payment
      for
      our products. These notes receivable are issued by commercial banks in the
      PRC, have maturity dates of up to 180 days and bear no interest. We can hold
      the
      bank notes until the maturity date and collect the amount from the issuing
      banks, or we can use the bank notes as a means for payment for goods or
      services we receive. We accrue no provision for bank notes because we believe
      that such bank notes have little risk of default in the PRC.





**ACCOUNTS
      RECEIVABLE**





During
      the normal course of business, our policy is to ask larger customers to make
      deposits in reasonable and meaningful amounts on a case-by-case basis. For
      certain newly-developed customers, we may extend unsecured credit.





We
      regularly evaluate and monitor the creditworthiness of each of our customers
      in
      accordance with the prevailing practice in the meat industry and based on
      general economic conditions in the PRC. We maintain a general policy of
      providing allowance for doubtful accounts in an amount equal to the aggregate
      amount of those accounts that are not collected within one year plus an amount
      equal to 10% of the aggregate amount of accounts receivable less than one year
      old for Henan Zhongpin and an amount equal to 5% of the aggregate amount of
      accounts receivable less than one year old for our other subsidiaries. After
      all
      attempts to collect a receivable have failed, the receivable is written off
      against the allowance.





Based
      on
      the information available to management, we believe our allowance for doubtful
      accounts as of September 30, 2008 and December 31, 2007, respectively, were
      adequate. However, the actual write-off for any one period might exceed the
      recorded allowance.




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




7




**ZHONGPIN
        INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**




2.  SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES (continued)





The
      following table presents allowance activities for our accounts
      receivable.





September 30, 2008
            
            December 31, 2007Beginning
                balance
            
            $
            1,341,872
            
            $
            412,026Additions
                charged to expense
            
            
            1,003,149
            
            
            929,846Ending
                balance
            
            $
            2,345,021
            
            $
            1,341,872





**OTHER
      RECEIVABLES**





Other
      receivables consist primarily of advance to vendors other than hog farms to
      ensure preferential pricing and delivery. Other receivables also consist of
      cash
      advances to our employees for their potential expenses related to our business.
      These advances bear no interest and are expected to be repaid in cash. Repayment
      is typically required to be made in less than one year. Advances that are not
      expected to be repaid within one year are classified as
      non-current.





**INVENTORIES**





Inventories
      are stated at the lower of cost, determined on a weighted average basis, and
      net
      realizable value. Work-in-progress and finished goods are composed of direct
      material, direct labor and an attributable portion of manufacturing overhead.
      Net realizable value is the estimated selling price, in the ordinary course
      of
      business, less estimated costs to complete and dispose.





**LAND
      USE RIGHTS**





We
      do not
      own any of the parcels of land on which our plants are built as these parcels
      of
      land are owned by the PRC government. In the PRC, land use rights for commercial
      purposes are granted by the PRC government typically for a term of 50 years,
      and
      we are required to pay a lump sum of money to the State Land and Resource
      Department of the applicable locality to acquire such rights. In accordance
      with
      the provision of Statement of Financial Accounting No. 142, “ *Goodwill
      and Other Intangible Assets* ”
(SFAS
      No. 142), we capitalize the lump sum of money paid and amortize these land
      use
      rights by using the straight line method over the term of the land use license
      granted by the applicable governmental authority.





**IMPAIRMENT
      OF LONG-LIVED ASSETS**





We
      have
      adopted the provisions of the Statement of Financial Accounting Standard No.
      144, “ *Accounting
      for the Impairment or Disposal of Long-Lived Assets* ”
(“SFAS
      No. 144”). SFAS No.144 requires that long-lived assets be reviewed for
      impairment whenever events or changes in circumstances indicate that the
      carrying amount of an asset may not be recoverable through the estimated
      undiscounted cash flows expected to result from the use and eventual disposition
      of the assets. Whenever any such impairment exists, an impairment loss will
      be
      recognized for the amount by which the carrying value exceeds the fair value.
      There was no impairment loss for the three or nine months ended September 30,
      2008 and 2007.




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




8




**ZHONGPIN
        INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**




2.  SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES (continued)





**CONSTRUCTION
      IN PROGRESS AND INTEREST CAPITALIZATION**





Along
      with the expansion of our business model, we have continued to construct new
      production facilities during the nine months ended September 30, 2008. Once
      the
      construction projects have been put into service and all regulatory permits
      and
      approvals have been received, we expect to conclude the cost accumulation
      process. The interest costs related to these construction projects have been
      determined to be insignificant by management and we do not capitalize them
      during the construction process.





**VALUE
      ADDED TAX**





All
      China-based entities are subject to a value added tax (VAT) imposed by the
      PRC
      government on their sales of domestic products. Our VAT rates are 13% for
      chilled pork products, frozen pork products and vegetable and fruit products,
      and 17% for prepared meat products. The input VAT can be offset against the
      output VAT. The VAT payable or receivable balance presented on our consolidated
      balance sheets represents either the input VAT less than or larger than the
      output VAT. The debit balance represents a credit against future collection
      of
      output VAT instead of a receivable.





**RESEARCH
      AND DEVELOPMENT**





The
      PRC
      government regularly makes grants to certain China-based entities
      specifically to fund their research and development activities. We have received
      such grants and have recorded these grants as liabilities titled “Research &
development grants payable” on our consolidated balance sheets. Qualifying
      research and development costs reduce the liability while non-qualifying
      research and development costs are expensed as incurred. Research and
      development costs were approximately $0.7 million and $0.4 million for the
      three
      months ended September 30, 2008 and 2007, respectively, and $1.9 million
      and $1.2 million for the nine months ended September 30, 2008 and 2007,
      respectively.





**EARNINGS
      (LOSS) PER SHARE**





We
      present earnings per share in accordance with Statement of Financial Accounting
      Standards No.128, “ *Earnings
      per Share,* ”
“SFAS
      No.128.” SFAS No. 128 replaced the calculation of primary and fully-diluted
      earnings (loss) per share with basic and diluted earnings (loss) per share.
      Basic earnings (loss) per share includes no dilution and is computed by dividing
      income (loss) available to common shareholders by the weighted average number
      of
      common shares outstanding during the period. Diluted earnings (loss) per share
      reflect the potential dilution of securities that could share in the earnings
      of
      an entity, similar to fully-diluted earnings (loss) per share. **** Based
      on
      the fact that the voting rights and
      certain other characteristics of our Series A convertible preferred stock are
      the same as those of common stock, the outstanding shares of our Series A
      convertible preferred stock at each reporting period are deemed to be common
      shares outstanding. The number of outstanding shares subject to stock warrants
      and options at September 30, 2008 and 2007 was 3,347,936 shares and 5,274,580
      shares, respectively. All of such securities are included in the computation
      of
      diluted earnings per share.




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




9




**ZHONGPIN
        INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**




2. SUMMARY
      OF SIGNIFICANT ACCOUNTING POLICIES (continued)




**ADOPTION
      OF FIN 48**





Effective
      January 1, 2007, we adopted Financial Accounting Standards Board (“FASB”)
      Interpretation No. 48, “ *Accounting
      for Uncertainty in Income Taxes* ”
(FIN
      48). FIN 48 clarifies the accounting for uncertainty in income taxes recognized
      in an enterprise’s financial statements in accordance with SFAS No. 109,
“ *Accounting
      for Income Taxes* .”
FIN
      48
      prescribes a recognition threshold
      and measurement attribute for the financial statement recognition and
      measurement of a tax position taken or expected to be taken in a tax return.
      FIN
      48 also provides guidance on de-recognition of tax benefits, classification
      on
      the balance sheet, interest and penalties, accounting in interim periods,
      disclosure, and transition. In accordance with FIN 48, we performed a
      self-assessment and concluded that there were no significant uncertain tax
      positions requiring recognition in our financial statements.





**SHARE-BASED
      PAYMENT**





Effective
      January 1, 2006, we adopted Statement of Financial Accounting Standards No
      123(R), “ *Share-Based
      Payments* ”
(SFAS
      No. 123(R)). SFAS 123R amends existing accounting pronouncements for share-based
      payment transactions in which an enterprise receives employee and certain
      non-employee services
      in exchange for (a) equity instruments of the enterprise or (b) liabilities
      that
      are based on the fair value
      of
      the enterprise’s equity instruments or that may be settled by the issuance of
      such equity instruments. SFAS 123(R) generally requires such transactions be
      accounted for using a fair-value-based method. We accounted for stock options
      granted using a fair-value-based method in accordance with SFAS No.
      123(R).





**USE
      OF ESTIMATES**





The
      preparation of financial statements in conformity with GAAP requires management
      to make estimates and assumptions that affect the reported amounts of assets
      and
      liabilities and disclosure of contingent assets and liabilities at the date
      of
      the financial statements and the reported amounts of revenues and expenses
      during the reporting period. Actual results could differ materially from those
      estimates.





**RECLASSIFICATION**





The
      presentation of certain items contained in the notes to financial statements
      for
      the prior year have been changed in conformity with the current year
      presentation of the notes to the consolidated financial statements.




3.  INVENTORIES




Inventories
      at September 30, 2008 and December 31, 2007 consisted of the
      following:





September 30, 2008
            
            December 31, 2007(Unaudited)Raw
                materials
            
            $
            2,620,190
            
            $
            1,242,717Work
                in progress
            
            
            1,623,591
            
            
            4,899,169Finished
                goods
            
            
            17,900,475
            
            
            18,753,016Low
                value consumables and packing materials
            
            
            702,594
            
            
            1,027,223$
            22,846,850
            
            $
            25,922,125




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




10




**ZHONGPIN
        INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**




4.  PROPERTY,
      PLANT AND EQUIPMENT





A
      summary
      of property, plant and equipment at cost at September 30, 2008 and December
      31,
      2007 is as follows:





September 30, 2008
            
            December 31, 2007(Unaudited)Plants
                and buildings
            
            $
            73,771,365
            
            $
            42,711,397Machinery
                and equipment
            
            
            44,939,136
            
            
            26,964,304Office
                furniture and equipment
            
            
            2,013,315
            
            
            818,528Vehicles
            
            
            2,305,312
            
            
            1,491,544Acquisition
                gain (loss)
            
            
            (94,614
            )
            
            -Accumulated
                depreciation
            
            
            (9,082,519
            )
            
            (5,556,119
            )$
            113,851,995
            
            $
            66,429,654





The
      depreciation and amortization expenses for the three months ended September
      30,
      2008 and 2007 were $1,317,586 and $546,665, respectively, and for the nine
      months ended September 30, 2008 and 2007 were $3,194,119 and $1,329,342,
      respectively.





5.  LAND
      USE
      RIGHTS





Our
      land
      use rights at September 30, 2008 and December 31, 2007 are summarized as
      follows:





September 30, 2008
            
            December 31, 2007(Unaudited)Land
                use rights
            
            $
            26,188,327
            
            $
            23,989,174Accumulated
                amortization
            
            
            (1,030,434
            )
            
            (650,032
            )$
            25,157,893
            
            $
            23,339,142





The
      amortization of land use rights for the three months ended September 30, 2008
      and 2007 were $103,255 and $94,250, respectively, and for the nine months ended
      September 30, 2008 and 2007 was $321,975 and $247,493, respectively.




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




11




**ZHONGPIN
        INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**


6.  CONSTRUCTION
      IN PROGRESS





Construction
      in progress at September 30, 2008 and December 31, 2007 consisted
      of:





Date orEstimated DateConstruction Project
            
            Put in Service(1)
            
            September 30, 2008
            
            December 31, 2007(Unaudited)Cooling
                storage and logistic hub in Changge industrial park
            
            
            Completed
            
            $
            —
            
            $
            7,673,644Production
                facility for chilled and frozen pork in Anyang
            
            
            Completed
            
            
            —
            
            
            2,069,446Production
                facility for chilled and frozen pork in Zhumadian
            
            
            Completed
            
            
            25,052
            
            
            523,359Supplies
                storage in Changge industrial plant
            
            
            October
                2008
            
            
            1,796,050
            
            
            —Production
                facility for chilled and frozen pork in Luoyang
            
            
            December
                2008
            
            
            899,674
            
            
            6,481,730Production
                line for prepared pork in Changge industrial plant
            
            
            December
                2008
            
            
            11,258,423
            
            
            —The
                first phase of residential dormitory construction in Changge industrial
                park
            
            
            December 2008
            
            
            3,642,174
            
            
            —Waste
                water solution system in Changge industrial plant
            
            
            December
                2008
            
            
            1,012,828
            
            
            8,214Waste
                water solution system in Deyang
            
            
            December
                2008
            
            
            7,364
            
            
            —Replacement
                and maintenance in Changge industrial park
            
            
            January
                2009
            
            
            1,236,172
            
            
            —Production
                facility for chilled and frozen pork in Yongcheng
            
            
            January
                2009
            
            
            14,881,097
            
            
            55,347Production
                line for fruits and vegetables in Changge industrial park
            
            
            January
                  2009
            
            
            8,055,848
            
            
            —Total
            
            
            
            
            $
            42,814,682
            
            $
            16,811,740







(1)
            Represents
                date all regulatory permits and approvals are received and project
                is
                placed in service. In certain cases, construction of a project may
                be
                substantially completed and the project may be operational during
                a
                testing period prior to such date.





7.  SHORT-TERM
      BANK LOANS




Short-term
      bank loans are due within one year. Of the $69.5 million aggregate principal
      amount of short-term bank loans at September 30, 2008, loans in the principal
      amount of $36.2 million were secured by our plants located primarily in Henan
      Province and loans in the aggregate principal amount of $33.3 million were
      guaranteed by Henan Zhongpin Industry Co., Ltd. These loans bear interest at
      prevailing lending rates in the PRC ranging from 7.10 % to 7.84% per annum.





8.  LONG-TERM
      BANK LOANS





Amounts
      outstanding under our long-term debt arrangements at September 30, 2008 and
      December 31, 2007 were as follows:





**Bank**
            
            **September
                30, 2008**
            
            **December
                31, 2007**(Unaudited)Canadian
                Government Transfer Loan
            
            $
            1,707,605
            
            $
            1,780,440Rabobank
                Nederland Shanghai
            
            
            11,782,206
            
            
            —CITIC
                Industrial Bank
            
            
            4,418,327
            
            
            —17,908,138
            
            
            1,780,440Current
                portion
            
            
            (145,671
            )
            
            (145,671
            )Total
            
            $
            17,762,467
            
            $
            1,634,769


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


12




**ZHONGPIN
        INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**




8.  LONG-TERM
      BANK LOANS (continued)





In
      May
      2008, Henan Zhongpin entered into a credit agreement with Rabobank Nederland
      Shanghai Branch that provided for a one-year short-term loan of RMB 20 million
      ($2.9 million) and a three-year term loan of up to RMB 80 million ($11.8
      million). Upon execution of the credit agreement, the full amount of the
      short-term loan was funded by the bank. On June 10, 2008, the first 50% of
      the
      long-term loan was funded by the bank. The remaining 50% of the long-term loan
      was drawn down by Henan Zhongpin on July 10, 2008. Amounts currently outstanding
      under the term loan bear interest at the rate of 7.56% per annum, which is
      the
      interest rate published by the People’s Bank of China on July 10, 2008 for loans
      with the same or similar terms. The accrued interest on this loan is payable
      on
      a quarterly basis. Of the outstanding principal under the long-term loan, 25%
      is
      payable 24 months after the first drawdown date (June 10, 2008), 37.5% is
      payable 30 months after the first drawdown date and the balance is payable
      36
      months after the first drawdown date.





Borrowings
      under the term loan agreement are guaranteed by our subsidiaries, Anyang
      Zhongpin Food Co., Ltd. and Zhumadian Zhongpin Food Co., Ltd., are secured
      by
      our prepared pork production facilities located at Changge City, Henan Province
      and are subject to various financial and non-financial covenants, including
      a
      debt-to-net-worth ratio, a debt-to-EBIDTA ratio, an interest coverage ratio,
      a
      required minimum tangible net worth, restrictions on investments in fixed assets
      and financial assets, on inter-company indebtedness and on consolidated
      contingent liabilities and a requirement that a minimum percentage of Henan
      Zhongpin’s consolidated EBITDA be generated by Henan Zhongpin and the
      guarantors. Henan Zhongpin also is prohibited from paying dividends in an amount
      in excess of 50% of its retained earnings during the term of the credit
      facility.





In
      April
      2008, Henan Zhongpin entered into a loan agreement with CITIC Industrial Bank
      pursuant to which Henan Zhongpin borrowed RMB 30 million ($4.4 million). All
      amounts borrowed under
      the
      loan agreement bear interest at a floating rate that was based on the prime
      rate
      published by the People’s Bank of China for loans with the same or similar terms
      on the drawdown date (7.56% per annum on that drawdown date) and are payable
      on
      January 23, 2010. The accrued interest on this loan is payable quarterly on
      the
      20 th of last
      month of each quarter since the drawdown date. Borrowings under the loan
      agreement are guaranteed by a third-party located in Henan Province.





In
      May
      2002, Henan Zhongpin entered into a loan agreement with China Communication
      Bank, Zhengzhou Branch, which is the intermediary bank for a 40-year term loan
      in the amount of $2,504,969 from the Canadian government. Under the terms of
      the
      loan agreement, 58% of the principal amount ($1,452,882) of this loan bears
      interest at the fixed rate of 6.02% per annum and remaining principal amount
      of
      this loan is interest free. The loan is repayable in a fixed amount of $145,671,
      which includes principal and interest, that is payable on a semi-annual basis
      through May 15, 2042. Borrowings under the loan agreement are guaranteed by
      the
      Financing Department, Henan Province.





9.  EQUITY
      TRANSACTIONS





During
      the three months ended September 30, 2008, no warrants to purchase common stock
      with an
      exercise price per share of $5.00 or $5.50 were exercised. During
      the nine months ended September 30, 2008, warrants to purchase an aggregate
      of
      225,000 shares of common stock were exercised with an exercise price per share
      of $5.00 and warrants to purchase an aggregate of 45,338 shares of common stock
      were exercised with an exercise price per share of $5.50. We
      received net proceeds from these transactions
      in the aggregate amount of approximately $1.24 million, after payment of a
      10%
      commission to the placement agent in accordance with the relevant retainer
      agreements. Our total of net proceeds was calculated as follows:




$(5.00
      x
      225,000 + $5.50 x 45,338) x 90% = $1,236,923




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




13




**ZHONGPIN
        INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**




9. EQUITY
      TRANSACTIONS (continued)




During
      the three and nine months ended September 30, 2008, warrants to purchase an
      aggregate of 45,000 shares of common stock with an exercise price per share
      of
      $6.50 were exercised on a cashless basis. In connection with these transactions,
      we issued an aggregate of 20,523 shares of common stock and we received no
      cash
      from such issuances. For cash flow purposes, these transactions were non-cash
      transactions.





During
      the three months ended September 30, 2008, no warrants to purchase common stock
      with an
      exercise price per share of $8.00 were exercised.
      During the nine months ended September 30, 2008, warrants to purchase an
      aggregate of 72,187 shares of common stock with an exercise price per share
      of
      $8.00 were exercised on a cashless basis. In connection with these transactions,
      we issued an aggregate of 24,256 shares of common stock and we received no
      cash
      from such issuances. For cash flow purposes, these transactions were non-cash
      transactions.





During
      the three months ended September 30, 2008, warrants to purchase 46,387 units
      were exercised on a cashless basis. During the nine months ended September
      30,
      2008, warrants to purchase 135,012 units were exercised on a cashless basis.
      Each unit is comprised of two shares of Series A preferred stock and a five-year
      warrant to purchase one share of common stock with the exercise price of $5.00
      per share. At the time of exercise of the unit warrants, the holders also
      exercised the underlying warrants to purchase common stock. In connection with
      these transactions, we issued an aggregate of 92,659 and 269,102 shares of
      common stock for three and nine months ended September 20, 2008 respectively,
      and we received no cash proceeds from such issuances. For cash flow purposes,
      these transactions were non-cash transactions.





During
      the three months ended September 30, 2008, no shares of our Series A convertible
      preferred stock were converted into shares of common stock. During the nine
      months ended September 30, 2008, an aggregate of 895,800 shares of our Series
      A
      convertible preferred stock were converted into 895,800 shares of common stock.
      For cash flow purposes, these transactions were non-cash
      transactions.




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




14




**ZHONGPIN
        INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**




10.  EARNINGS
      PER SHARE





The
      following table sets forth the computation of basic and diluted net earnings
      per
      share for the periods indicated:





Three Months Ended
              September 30,
            
            Nine Months Ended
              September 30,2008
            
            2007
            
            2008
            
            2007(Unaudited)
            
            (Unaudited)
            
            (Unaudited)
            
            (Unaudited)Numerator:Net
                income (loss) attributable to common shareholders
            
            $
            10,050,392
            
            $
            5,293,137
            
            $
            25,859,963
            
            $
            13,482,660Net
                income (loss) used in computing diluted earnings per share
            
            
            10,050,392
            
            
            5,293,137
            
            
            25,859,963
            
            
            13,482,660Denominator:Weighted
                average common shares outstanding – basic
            
            
            29,543,640
            
            
            19,259,575
            
            
            28,587,297
            
            
            15,604,355Potential
                diluted shares from stock options, warrants and preferred
                shares
            
            
            361,370
            
            
            4,162,012
            
            
            431,831
            
            
            5,274,580Weighted
                average common share outstanding – diluted
            
            
            29,905,010
            
            
            23,421,587
            
            
            29,019,128
            
            
            20,878,935Basic
                earnings per share
            
            $
            0.34
            
            $
            0.27
            
            $
            0.90
            
            $
            0.86Diluted
                earnings per share
            
            $
            0.34
            
            $
            0.23
            
            $
            0.89
            
            $
            0.65




11.  CONTINGENT
      LIABILITIES





In
      April
      2008, our wholly-owned subsidiary, Henan Zhongpin, entered into a mutual
      guarantee agreement with Xuji Group Co., Ltd., a group corporation based in
      Henan Province, PRC that is not affiliated with our company or with any of
      our
      subsidiaries. Pursuant to the agreement, Henan Zhongpin has agreed to guarantee
      bank loans of Xuji Group in an amount up to $44.2 million and Xuji Group has
      agreed to guarantee Henan Zhongpin's bank loans in an amount up to $44.2
      million. The agreement will expire in March 2009. At September 30,
      2008, Henan Zhongpin has guaranteed $38.3 million of Xuji Group’s bank
      loans.





12.  SEGMENT
      REPORTING





We
      operate in two business segments: pork and pork products, and vegetables and
      fruits.





Our
      pork
      and pork products segment is involved primarily in the processing of live market
      hogs into fresh, frozen and processed pork products. This segment sells pork
      and
      pork products domestically to branded stores, food retailers, food service
      distributors, hotel chains, restaurants and non-commercial foodservice
      establishments, such as schools, governments, healthcare facilities, the
      military and other food processors, as well as in certain international markets
      on a limited basis.





Our
      vegetables and fruits segment is involved primarily in the processing of frozen
      vegetables and fruits. We contract with more than 100 farms in Henan Province
      and nearby areas to produce high-quality vegetables and fruits suitable for
      export purposes. The proximity of the contracted farms to our operations ensures
      freshness from harvest to processing. We contract with those farms to grow
      more
      than 20 categories of vegetables and fruits, including asparagus, sweet corn,
      broccoli, mushrooms, lima beans and strawberries.




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




15




**ZHONGPIN
        INC.**
 **NOTES
        TO CONSOLIDATED FINANCIAL STATEMENTS**




12.  SEGMENT
      REPORTING (continued)




**Sales
                  by Segment**
                **(U.S.
                  dollars in millions)**Three Months Ended
              September 30,
            
            Nine Months Ended
              September 30,2008
            
            2007
            
            2008
            
            2007(Unaudited)
            
            (Unaudited)
            
            (Unaudited)
            
            (Unaudited)Pork
                and Pork Products:Chilled
                pork
            
            $
            86.1
            
            $
            37.0
            
            $
            213.0
            
            $
            98.3Frozen
                pork
            
            
            51.9
            
            
            24.8
            
            
            141.0
            
            
            67.3Prepared
                pork products
            
            
            13.8
            
            
            6.7
            
            
            39.0
            
            
            18.6Vegetables
                and Fruits
            
            
            2.0
            
            
            2.8
            
            
            7.0
            
            
            6.6$
            153.8
            
            $
            71.3
            
            $
            400.0
            
            $
            190.8Cost
                of SalesPork
                products
            
            $
            132.4
            
            $
            59.3
            
            $
            343.1
            
            $
            159.7Vegetables
                and fruits
            
            
            1.8
            
            
            2.3
            
            
            6.0
            
            
            5.5Gross
                Margin:Pork
                products
            
            
            12.8
            %
            
            13.4
            %
            
            12.7
            %
            
            13.3
            %Vegetables
                and fruits
            
            
            10.0
            %
            
            17.9
            %
            
            14.3
            %
            
            16.7
            %




**As
                of September 30, 2008**
              **(U.S.
                dollars in millions)**Pork
                and Pork
            
            VegetablesProducts
            
            and
                Fruits
            
            TotalReceivables
            
            $
            17.1
            
            $
            0.3
            
            $
            17.4Inventory
            
            
            22.5
            
            
            0.3
            
            
            22.8Property
                and equipment
            
            
            112.2
            
            
            1.7
            
            
            113.9




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




16




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





**Disclosure
      Regarding Forward-Looking Statements**





*The
      statements contained in this Report with respect to our financial condition,
      results of operations and business that are not historical facts are
“forward-looking statements” within the meaning of the Private Securities
      Litigation Reform Act of 1995 and Section 21E of the Securities Exchange Act
      of
      1934, as amended (the “Exchange Act”). We intend such forward-looking statements
      to be covered by the safe harbor provisions for forward-looking statements
      contained in Section 21E of the Exchange Act. Forward-looking statements can
      be
      identified by the use of forward-looking terminology, such as “estimates,”
“projects,” “plans,” “believes,” “expects,” “anticipates,” “intends,” or the
      negative thereof or other variations thereon, or by discussions of strategy
      that
      involve risks and uncertainties. Management wishes to caution the reader of
      the
      forward-looking statements that any such statements that are contained in this
      Report reflect our current beliefs with respect to future events and involve
      known and unknown risks, uncertainties and other factors, including, but not
      limited to, economic, competitive, regulatory, technological, key employee,
      and
      general business factors affecting our operations, markets, growth, services,
      products, licenses and other factors discussed in our other filings with the
      Securities and Exchange Commission, and that these statements are only estimates
      or predictions. No assurances can be given regarding the achievement of future
      results, as actual results may differ materially as a result of risks facing
      our
      company, and actual events may differ from the assumptions underlying the
      statements that have been made regarding anticipated events.*





*These
      forward-looking statements are subject to numerous assumptions, risks and
      uncertainties that may cause our actual results to be materially different
      from
      any future results expressed or implied by us in those statements. Some of
      these
      risks are described in “Risk Factors” in Item 1A of our Annual Report on
      Form 10-K for the year ended December 31, 2007.*




*These
      risk factors should be considered in connection with any subsequent written
      or
      oral forward-looking statements that we or persons acting on our behalf may
      issue. All written and oral forward looking statements made in connection with
      this Report that are attributable to our company or persons acting on our behalf
      are expressly qualified in their entirety by these cautionary statements. Given
      these uncertainties, we caution investors not to unduly rely on our
      forward-looking statements. We do not undertake any obligation to review or
      confirm analysts’ expectations or estimates or to release publicly any revisions
      to any forward-looking statements to reflect events or circumstances after
      the
      date of this Report or to reflect the occurrence of unanticipated events.
      Further, the information about our intentions contained in this Report is a
      statement of our intention as of the date of this Report and is based upon,
      among other things, the existing regulatory environment, industry conditions,
      market conditions and prices, the economy in general and our assumptions as
      of
      such date. We may change our intentions, at any time and without notice, based
      upon any changes in such factors, in our assumptions or
      otherwise.*





**Overview**





We
      are
      principally engaged in the meat and food processing and distribution business
      in
      the PRC. Currently, we have 11 processing plants located in Henan, Heilongjiang
      and Sichuan Provinces and in Tianjin City in the PRC, with a total of 19
      production lines. Our current total production capacity for chilled pork and
      frozen pork is 1,088 metric tons per day, based on an eight-hour working day,
      or
      approximately 391,560 metric tons on an annual basis. We also have production
      capacity for prepared meats of 150 metric tons per eight-hour day, or
      approximately 54,000 metric tons on an annual basis, and for fruits and
      vegetables of 73 metric tons per eight-hour day, including the average
      production capacity of approximately 8 metric tons per day supplied by OEM
      partners, or approximately 26,280 metric tons on an annual basis. We utilize
      state-of-the-art equipment in all of our abattoirs and processing facilities.




17




On
      June
      1, 2007, Henan Zhongpin formed a wholly-owned subsidiary, Yongcheng Zhongpin
      Food Company Limited, through which we plan to invest approximately $17 million
      to construct a new production facility in eastern Henan Province that will
      be
      designed with a production capacity for chilled or frozen pork of 222 metric
      tons per eight-hour working day, or approximately 80,000 metric tons on an
      annual basis. Approximately 75% of the production capacity will be designed
      for
      the production of chilled pork and approximately 25% will be designed for the
      production of frozen pork. We plan to put this new plant into production in
      January 2009.





In
      addition, we plan to invest a total of $7 million to expand and upgrade our
      production line for fruits and vegetables in our production facilities located
      in Changge City, Henan Province. This new production line will be designed
      to
      expand our production capacity for fruits and vegetables by 83 metric tons
      per
      eight-hour day, or approximately 30,000 metric tons on an annual basis, and
      is
      expected to be put into operation in January 2009.





During
      the third quarter of 2008, we completed a number of smaller projects to support
      our expanding operations, including a waste water solution system for our
      production facilities in Changge City, a storage facility for our production
      facilities in Changge City, and the first phase of a residential dormitory
      complex for our production facilities in Changge City.





In
      November 2008, we placed into operation the production line for prepared meat
      products at our production facilities in Changge City. The new production line
      has a production capacity of 80 metric tons per eight-hour working day, or
      approximately 28,800 metric tons on an annual basis.





Our
      products are sold under the “Zhongpin” brand name. At September 30, 2008, our
      customers included 29 international or domestic fast food companies in the
      PRC,
      53 processing factories and 1,628 school cafeterias, factory canteens, army
      posts and national departments. At such date, we also sold directly to 2,995
      retail outlets, including supermarkets, within the PRC.





Since
      2001, we have been one of the “leading agricultural industrial enterprises” in
      the PRC. Over the past five fiscal years, we achieved a compound annual growth
      rate of 77% in terms of revenues and 86% in terms of net profits. We have
      established distribution networks in 24 provinces, including four cities with
      special legal status, in the North, East, South and South Midland of the PRC,
      and also have formed strategic partnerships with leading supermarket chains
      and
      the food industry in the PRC. In addition, we export products to the European
      Union and Southeast Asia





With
      the
      recent fluctuation in pork prices in the PRC and the appreciation of the RMB
      against the U.S. dollar and other foreign currencies, we believe the dynamics
      of
      the international pork trade have changed over the past year, with exports
      of
      pork and pork products declining and imports of such products starting to
      increase. We believe we are well positioned to benefit from this change, both
      in
      the domestic market in the PRC and in the international market. In response
      to
      these changes in the marketplace, we visited several companies in four European
      countries and discussed further cooperation in by-products processing
      techniques, equipment and product line and import and exports.





As
      of
      September 30, 2008, we had 4,463 employees, of whom 3,222 were operating
      personnel, 859 were sales personnel, 78 were research and development personnel
      and 304 were administrative personnel.




18




**Critical
      Accounting Policies**





Our
      discussion and analysis of our financial condition and results of operations
      are
      based on our consolidated financial statements, which have been prepared in
      accordance with U.S. GAAP. The preparation of these financial statements
      requires us to make estimates and judgments that affect the reported amounts
      of
      assets, liabilities, revenues and expenses. We evaluate, on an on-going basis,
      our estimates for reasonableness as changes occur in our business environment.
      We base our estimates on experience, the use of independent third-party
      specialists, and various other assumptions that we believe to be reasonable
      under the circumstances, the results of which form the basis for making
      judgments about the carrying values of assets and liabilities that are not
      readily apparent from other sources. Actual results may differ from these
      estimates under different assumptions or conditions.





Critical
      accounting policies are defined as those that are reflective of significant
      judgments, estimates and uncertainties, and potentially result in materially
      different results under different assumptions and conditions. We believe the
      following are our critical accounting policies:





***Revenue
      Recognition.*** We
      recognize revenues generated from sales of various meat and vegetable and fruit
      products when these products are delivered to customers in accordance with
      previously-agreed-upon pricing and delivery arrangements and the collectability
      of these sales is reasonably assured. Since the products sold by our company
      are
      primarily perishable and frozen food products, the right of return is only
      for a
      few days and has been determined to be insignificant by the management of our
      company. Accordingly, no provision has been made for returnable goods. Revenue
      presented on our consolidated statements of income and comprehensive income
      is
      net of sales taxes.





***Accounts
      Receivable*** **.** We
      state
      accounts receivable at cost, net of allowance for doubtful accounts. Based
      on
      our past experience and current practice in the PRC, management provides for
      an
      allowance for doubtful accounts in an amount equal to the aggregate amount
      of
      those accounts that have not been collected within one year plus an amount
      equal
      to the sum of 10% of the aggregate amount of the accounts receivable of our
      wholly-owned subsidiary, Henan Zhongpin Food Share Co., Ltd., plus 5% of the
      aggregate amount of the accounts receivable less than one year old for all
      of
      our other subsidiaries. It is management’s belief that the current bad debt
      allowance adequately reflects an appropriate estimate based on management’s
      judgment.





***Inventory
      Valuation.*** We
      value
      our pork inventories at the lower of cost, determined on a weighted average
      basis, and net realizable value (the estimated market price). When the carcasses
      are disassembled and transferred from primary processing to various
      manufacturing departments, we adjust the net realizable value for product
      specifications and further processing, which becomes the basis for calculating
      inventory values. In addition, substantially all inventory expenses, packaging
      and supplies are valued by the weighted average method.





***Impairment
      of Long-Lived Assets.*** **** We
      have
      assessed the impairment of long-lived assets whenever events or changes in
      circumstances indicate that the carrying amount of an asset may not be
      recoverable through the estimated undiscounted cash flows expected to result
      from the use and eventual disposition of the assets. Whenever any such
      impairment exists, an impairment loss will be recognized for the amount by
      which
      the carrying value exceeds the fair value.





***Income
      Taxes.*** We
      account for income taxes in accordance with Statement of Financial Accounting
      Standard No. 109, “ *Accounting
      for Income Taxes* .”
We
      compute our provision for income taxes based on the statutory tax rates and
      tax
      planning opportunities available to us in the PRC. Significant judgment is
      required **** in
      evaluating our tax positions and determining our annual tax
      position.




19




**Results
      of Operations**





In
      fiscal
      2008, we intend to continue to focus on the implementation of our strategic
      plan
      to continue the growth we have experienced in the last five years. The
      construction of our new plant in western Henan Province was completed on
      schedule and was placed into operation on June 29, 2008. The construction of
      our
      new prepared meat facility in Changge City, Henan Province with 28,800 tons
      of
      capacity was completed in November 2008 and that facility was placed into
      operation on November 7, 2008. The construction of our new plant in eastern
      Henan Province is expected to be completed in January 2009. The construction
      of
      our new fruit and vegetable facility with 30,000 tons of capacity also is
      expected to be completed January 2009. Over the next 12 months, we expect to
      continue to expand our distribution channel and develop new markets. Through
      our
      aggressive marketing campaign, we also expect to increase our brand awareness
      and customer loyalty. We also intend to further streamline our supply chain
      management to build a unified, safe and efficient cold-chain logistics system.
      In addition, working with China Agriculture University, we have established
      the
      Henan Province Prepared Meat Products Technology Research Center, which has
      been
      certified by the Technology Bureau of Henan Province. We expect the
      establishment of this research center to increase our research and development
      capability. We also have invested in training and human resources development
      so
      that we will be able to sustain a rapid and healthy growth while maintaining
      a
      satisfactory profit margin.





In
      the
      last quarter of fiscal 2008, we expect steady growth in sales of our pork and
      pork products. While the supply of live hogs in the PRC has increased somewhat
      and the price of live hogs has dropped in the past two quarters, we expect
      to
      experience further improvement in the hog supply in the last quarter of 2008.
      Based on our results for the first three quarters of full-year 2008, we raised
      our 2008 earnings guidance in October 2008 and remain confident in our ability
      to reach our forecasted results. We also expect to increase our market share
      in
      the meat and meat products segment of our target markets over the next
      year.





***Comparison
      of Three Months Ended September 30, 2008 and September 30,
      2007***





*Revenue.* Total
      revenue increased from $71.3 million for the three months ended
      September 30, 2007 to $153.8 million for the three months ended September
      30, 2008, which represented an increase of $82.5 million, or approximately
      116%.
      The increase in revenues was primarily due to increases in the prices of our
      pork and pork products and, to a lesser extent, to increases in the sales volume
      of our pork and pork products. The following table presents certain information
      regarding our sales per product segment for the three months ended September
      30,
      2008 and 2007.




20




**Sales by Segment**
              **(unaudited)****Three Months Ended**
              **September 30, 2008**
            
            **Three Months Ended**
              **September 30, 2007****Metric**
              **Tons**
            
            **Sales**
              **Revenues**
              **(in**
              **millions)**
            
            **Average**
              **Price/Ton**
            
            **Metric**
              **Tons**
            
            **Sales**
              **Revenues**
              **(in**
              **millions)**
            
            **Average**
              **Price/Ton**Pork
                and Pork ProductsChilled
                pork
            
            
            38,380
            
            $
            86.1
            
            $
            2,243
            
            
            21,348
            
            $
            37.0
            
            $
            1,733Frozen
                pork
            
            
            23,043
            
            
            51.9
            
            
            2,252
            
            
            15,039
            
            
            24.8
            
            
            1,648Prepared
                pork products
            
            
            6,258
            
            
            13.8
            
            
            2,205
            
            
            3,756
            
            
            6.7
            
            
            1,789Vegetables
                and Fruits
            
            
            3,449
            
            
            2.0
            
            
            580
            
            
            5,257
            
            
            2.8
            
            
            533Total
            
            
            71,130
            
            $
            153.8
            
            $
            2,162
            
            
            45,400
            
            $
            71.3
            
            $
            1,571





The
      pork
      market in China is highly fragmented and in the markets in which we
      sell our products no single supplier has a significant impact on
      the market price of pork or related pork products. We have been pricing our
      products based on the value of our brand, the quality of our products, hog
      prices in the applicable period and pricing trends for similar products in
      the
      regions in which we operate. In the third quarter of fiscal 2008 we increased
      our sales of chilled pork products by approximately $49.1 million over the
      amount of our sales of such products in the third quarter of 2007. As shown
      in
      the above table, our average price during the third quarter of 2008 was
      approximately $2,243 per ton for chilled pork whereas our average price during
      the third quarter of 2007 was only $1,733 per ton for chilled pork. Assuming
      the
      average price for chilled pork during the three months ended September 30,
      2008 was the same as the average price during the three months ended September
      30, 2007, the impact from the increase in metric tons of chilled pork sold
      was
      $29.5 million. Assuming the number of metric tons sold in the third quarter
      of
      2008 was the same as the number of metric tons sold in the third quarter of
      2007, the impact from the increase in prices of our chilled pork products was
      $10.9 million. The remaining $8.1 million of such increase
      resulted from the combination of changes in prices and volume of chilled
      pork products sold.





In
      the
      third quarter of fiscal 2008 we increased our sales of frozen pork products
      by
      approximately $27.1 million over the amount of our sales of such products in
      the
      third quarter of 2007. Our average price during the third quarter of 2008 was
      approximately $2,252 per ton for frozen pork whereas our average price during
      the third quarter of 2007 was only $1,648 per ton for frozen pork. Assuming
      the
      average price for frozen pork during the three months ended September 30, 2008
      was the same as the average price during the three months ended September 30,
      2007, the impact from the increase in metric tons of frozen pork sold was $13.2
      million. Assuming the number of metric tons sold in the third quarter of 2008
      was the same as the number of metric tons sold in the third quarter of 2007,
      the
      impact from the increase in prices of our frozen pork products was $9.1 million.
      The remaining $4.8 million of such increase resulted from the
      combination of changes in prices and volume of frozen pork products
      sold.





In
      the
      third quarter of fiscal 2008 we increased our sales of prepared pork products
      by
      approximately $7.1 million over the amount of our sales of such products in
      the
      third quarter of 2007. Our average price during the third quarter of 2008 was
      approximately $2,205 per ton for prepared pork products whereas our average
      price during the third quarter of 2007 was only $1,789 per ton for prepared
      pork
      products. Assuming the average price for prepared pork products during the
      three
      months ended September 30, 2008 was the same as the average price during the
      three months ended September 30, 2007, the impact from the increase in
      metric tons of prepared pork products sold was $4.5 million. Assuming the number
      of metric tons sold in the third quarter of 2008 was the same as the number
      of
      metric tons sold in the third quarter of 2007, the impact from the increase
      in
      prices of our prepared pork products was $1.6 million. The
      remaining $1.0 million of such increase resulted from the combination of
      changes in prices and volume of prepared pork products sold.





The
      sales
      of meat and vegetable products are closely related to the particular regional
      markets in which our distribution channels are located. Therefore, the increase
      in metric tons sold for the third quarter of 2008 was partly attributable to
      our
      effort to expand our distribution channels. The following table sets forth
      the
      changes in our distribution channels:




21




**Numbers of Stores and Cities Generating Sales Volume**
              **(unaudited)****September 30,**
            
            **Net**
            
            **Percentage****2008**
            
            **2007**
            
            **Change**
            
            **of Change**Showcase
                store
            
            
            123
            
            
            109
            
            
            14
            
            
            13
            %Branded
                stores
            
            
            944
            
            
            912
            
            
            32
            
            
            4
            %Super
                market counters
            
            
            1928
            
            
            1,881
            
            
            47
            
            
            2
            %Second-tier
                Cities
            
            
            100
            
            
            89
            
            
            11
            
            
            12
            %Third-tier
                Cities
            
            
            311
            
            
            267
            
            
            44
            
            
            16
            %





The
      expansion in our distribution channels and geographical coverage has been a
      significant factor in the increase in our sales volume. The following table
      sets
      forth our revenues by distribution channel for the third quarter of 2008 and
      2007, respectively.





**Sales by Distribution Channel**
              **(unaudited)****Three Months Ended**
              **September 30,**
            
            **Net**
            
            **Percentage****2008**
            
            **2007**
            
            **Change**
            
            **of Change****($ in millions)**
            
            **($ in millions)**
            
            **($ in millions)**Branded
                stores
            
            $
            65.6
            
            $
            32.5
            
            $
            33.1
            
            
            102
            %Food
                services distributors
            
            
            45.6
            
            
            13.1
            
            
            32.5
            
            
            248
            %Restaurants
                and noncommercial
            
            
            41.2
            
            
            20.9
            
            
            20.3
            
            
            97
            %Export
            
            
            1.4
            
            
            4.8
            
            
            (3.4
            )
            
            (71
            )%Total
            
            $
            153.8
            
            $
            71.3
            
            $
            82.5
            
            
            116
            %





The
      increase in sales to different distribution channels was mainly due to the
      following factors: (i) our production capacity has increased since our Luoyang
      production facilities commenced production in the second quarter of 2008; (ii)
      we have built up our brand image and recognition through advertisements on
      China
      Central TV and local television and promotion; (iii) we have increased the
      number of stores and other channels through which we sell our products; and
      (iv)
      we believe consumers are placing increased importance on food safety and are
      willing to pay higher prices for safe food products.





During
      the three months ended September 30, 2008, revenues from export sales decreased
      to $1.4 million, which represented a decline of $3.4 million, or approximately
      71%, as compared to the three months ended September 30, 2007. The decrease
      in
      export sales was primarily due to the reduction of our export sales efforts
      during the 2008 period due to the higher gross profit margins we could achieve
      during that period by selling our pork products domestically in the PRC.





*Costs
      of Sales.* Our cost
      of sales increased from $61.6 million for the three months ended September
      30,
      2007 to $134.2 million for the three months ended September 30, 2008, which
      represented an increase of $72.6 million, or approximately 118%. Our costs
      of
      sales primarily include our costs of raw materials, labor costs and overhead.
      Of
      our total cost of sales, our cost of raw materials typically accounts for
      approximately 96% to 97%, our overhead typically accounts for 2% to 2.5% and
      our
      labor costs typically accounts for 1% to 1.3%, with slight variations from
      period to period. All of our meat products are derived from the same raw
      materials, which are live hogs. Our vegetable and fruit products are purchased
      from farmers located close to our processing facility in Changge City, Henan
      Province. As a result, the purchasing costs of live hogs and vegetables and
      fruits represent substantially all of our costs of raw materials. The increase
      in our cost of sales was consistent with our increase in sales revenue.




22




**Costs of Sales by Segment**
              **(unaudited)****Three Months Ended**
              **September 30,  2008**
            
            **Three Months Ended**
              **September 30, 2007****Metric****Tons**
            
            **Amount**
              **(in millions)**
            
            **Average**
              **Cost/Ton**
            
            **Metric**
              **Tons**
            
            **Amount**
              **(in millions)**
            
            **Average**
              **Cost/Ton**Pork
                and Pork ProductsChilled
                pork
            
            
            38,380
            
            $
            75.3
            
            $
            1,962
            
            
            21,348
            
            
            31.8
            
            $
            1,490Frozen
                pork
            
            
            23,043
            
            
            46.6
            
            
            2,022
            
            
            15,039
            
            
            22.0
            
            
            1,463Prepared
                pork products
            
            
            6,258
            
            
            10.5
            
            
            1,678
            
            
            3,756
            
            
            5.5
            
            
            1,464Vegetables
                and Fruits
            
            
            3,449
            
            
            1.8
            
            
            522
            
            
            5,257
            
            
            2.3
            
            
            438Total
            
            
            71,130
            
            $
            134.2
            
            $
            1,887
            
            
            45,400
            
            
            61.6
            
            $
            1,357





Our
      gross
      profit margin (gross profit divided by sales revenue) decreased from 13.6%
      for
      the three months ended September 30, 2007 to 12.7% for the three months ended
      September 30, 2008. The slight decrease in our gross margin during the 2008
      period was primarily due to (i) the increase in labor costs as a result of
      the
      implementation of new labor laws in the PRC, (ii) the increase in our
      depreciation expense resulting from the newly-built production facilities that
      were put into service over the past year, and (iii) our strategic decision
      to
      take steps to increase market share and utilization rate. As a result, our
      gross
      profit margin was lower than the level we would expect to achieve when we fully
      integrate our new production facilities and open new regional markets for our
      products. We intend to adjust our production levels and product mix and the
      percentages of our sales through our different sales channels in the coming
      quarters to increase our gross profit margin.





*General
      and Administrative Expenses.* General
      and administrative expenses increased from $2.4 million for the three months
      ended September 30, 2007 to $5.2 million for the three months ended September
      30, 2008, which represented an increase of $2.8 million, or approximately 117%.
      As a percentage of revenues, general and administrative expenses remained the
      same, at 3.4% for the three months ended September 30, 2007 and
      2008.





The
      increase in general and administrative expenses during the three months ended
      September 30, 2008 was primarily the result of (i) a $0.7 million increase
      in
      research and development expenses due to our continuing efforts to develop
      new
      products; (ii) a $0.8 million increase in salary expense due to the expansion
      of
      our business, which required us to hire more employees, and certain salary
      increases that were implemented in 2008 to bring our compensation levels more
      in
      line with industry and regional standards; (iii) a $0.6 million increase in
      advertising expenses in 2008 to build up our brand image and recognition; and
      (iv) a $0.3 million increase in option amortization expense as there was no
      such
      expense during the same period in 2007.





*Selling
      Expenses.* Selling
      expenses increased from $1.1 million for the three months ended September 30,
      2007 to $3.0 million for the three months ended September 30, 2008, which
      represented an increase of $1.9 million, or approximately 190%. The increase
      in selling expenses was primarily the result of our increased sales of pork
      and pork products. As a percentage of revenue, selling expenses increased
      from 1.5% for the three months ended September 30, 2007 to 2.0% for the three
      months ended September 30, 2008. The increase was primarily due to a $1.2
      million increase in transportation costs due to our increased sales of products
      and a $0.4 million increase in salary expense due to the expansion of our
      business, which required us to hire additional employees, and certain increased
      compensation levels as discussed above.




23




*Interest
      Expense.* Interest
      expense increased from $0.7 million for the three months ended September 30,
      2007 to $1.8 million for the three months ended September 30, 2008, which
      represented an increase of $1.1 million, or approximately 153%. The increase
      in
      interest expense was primarily the result of an increase of $21.9 million in
      short-term bank loans and an increase of $16.1 million in long-term bank loans.
      During the third quarter of 2008, we received a $5.9 million long-term loan
      from
      Rabobank Nederland Shanghai.





*Interest
      Income, Government Subsidies, Other Income, and Exchange Gain* .
      Interest income, government subsidies, other income and exchange gain increased
      from $0.2 million for the three months ended September 30, 2007 to $0.7
      million for the three months ended September 30, 2008. This increase was
      primarily the result of an increase in interest income and government subsidies.





*Income
      Taxes.* The
      effective tax rate in the PRC on income generated from the sale of prepared
      products is 25% and there is no income tax on income generated from the sale
      of
      raw products, including raw meat products and raw fruits and vegetable products.
      The decrease of $0.2 million in the provision for income taxes for the three
      months ended September 30, 2008 over the three months ended September 30,
      2007 resulted from the decrease in the income tax rate from 33% in 2007 to
      25%
      in 2008 and our overpayment of income taxes in the first half of the year,
      which
      enabled us to reduce our provision for income taxes in the third quarter of
      2008.





***Comparison
      of Nine Months Ended September 30, 2008 and September 30,
      2007***





*Revenue.* Total
      revenue increased from $190.8 million for the nine months ended September 30,
      2007 to $400.0 million for the nine months ended September 30, 2008, which
      represented an increase of $209.2 million, or approximately 110%. The increase
      in revenues was primarily due to increased prices for pork and pork products,
      combined with our increased sales volume during the nine months ended September
      30, 2008. During the nine months ended September 30, 2008, we sold a total
      of
      182,070 metric tons of pork and pork products and fruits and vegetables, which
      represented an increase of approximately 50,584 metric tons, or approximately
      39%, from the 131,487 metric tons we sold during the nine months ended September
      30, 2007.


The
        following table presents certain information regarding our sales per product
        segment for the nine months ended September 30, 2008 and 2007.
 
 **Sales
                  by Segment**
                **(unaudited)****Nine
                  Months Ended**
                **September
                  30, 2008**
              
              **Nine
                  Months Ended**
                **September
                  30, 2007****Metric
                  Tons**
              
              **Sales
                  Revenues**
                **(in
                  millions)**
              
              **Average
                  Price/Ton**
              
              **Metric
                  Tons**
              
              **Sales
                  Revenues**
                **(in
                  millions)**
              
              **Average
                  Price/Ton**Pork
                  and Pork ProductsChilled
                  pork
              
              
              91,934
              
              $
              213.0
              
              $
              2,317
              
              
              65,091
              
              $
              98.4
              
              $
              1,512Frozen
                  pork
              
              
              62,411
              
              
              141.0
              
              
              2,259
              
              
              46,027
              
              
              67.3
              
              
              1,462Prepared
                  pork products
              
              
              17,646
              
              
              39.0
              
              
              2,210
              
              
              10,442
              
              
              18.5
              
              
              1,772Vegetables
                  and Fruits
              
              
              10,079
              
              
              7.0
              
              
              695
              
              
              9,927
              
              
              6.6
              
              
              665Total
              
              
              182,070
              
              $
              400.0
              
              $
              2,197
              
              
              131,487
              
              $
              190.8
              
              $
              1,451
 
 As
        discussed above, the pork market in China is highly fragmented and no single
        supplier has a significant impact on the market price of pork or related
        pork
        products in any regional market. We have been pricing our products based
        on the
        value of our brand, the quality of our products, hog prices in the applicable
        period and pricing trends for similar products in the various regional markets
        in which we offer our products. For the nine months ended September 30, 2008,
        we
        increased our sales of chilled pork products by approximately $114.6 million
        over the amount of our sales of such products for the nine months ended
        September 30, 2007. As shown in the above table, our average price for the
        nine
        months ended September 30, 2008 was approximately $2,317 per ton for chilled
        pork whereas our average price during for the nine months ended September
        30,
        2007 was only $1,512 per ton for chilled pork. Assuming the average price
        for
        chilled pork for the nine months ended September 30, 2008 was the same as
        the
        average price for the nine months ended September 30, 2007, the impact from
        the
        increase in metric tons of chilled pork sold was $40.6 million. Assuming
        the
        number of metric tons sold in the nine months ended September 30, 2008 was
        the
        same as the number of metric tons sold in the nine months ended September
        30,
        2007, the impact from the increase in prices of our chilled pork products
        was
        $52.4 million. The remaining $21.6 million of such increase resulted from
        the
        combination of changes in prices and volume of chilled pork products sold.
 
 For
        the
        nine months ended September 30, 2008, we increased our sales of frozen pork
        products by approximately $73.7 million over the amount of our sales of such
        products for the nine months ended September 30, 2007. As shown in the above
        table, our average price for the nine months ended September 30, 2008 was
        approximately $2,259 per ton for frozen pork whereas our average price for
        the
        nine months ended September 30, 2007 was only $1,462 per ton for frozen pork.
        Assuming the average price for frozen pork for the nine months ended September
        30, 2008 was the same as the average price for the three months ended September
        30, 2007, the impact from the increase in metric tons of frozen pork sold
        was
        $24.0 million. Assuming the number of metric tons sold in the nine months
        ended
        September 30, 2008 was the same as the number of metric tons sold in the
        nine
        months ended September 30, 2007, the impact from the increase in prices of
        our
        frozen pork products was $36.7 million. The remaining $13.0 million of such
        increase resulted from the combination of changes in prices and volume of
        frozen
        pork products sold.
 
 For
        the
        nine months ended September 30, 2008, we increased our sales of prepared
        pork
        products by approximately $20.5 million over the amount of our sales of such
        products for the nine months ended September 30, 2007. As shown in the above
        table, our average price for the nine months ended September 30, 2008 was
        approximately $2,210 per ton for prepared pork products whereas our average
        price for the nine months ended September 30, 2007 was only $1,772 per ton
        for
        prepared pork products. Assuming the average price for prepared pork products
        for the nine months ended September 30, 2008 was the same as the average
        price
        for the nine months ended September 30, 2007, the impact from the increase
        in
        metric tons of prepared pork products sold was $12.8 million. Assuming the
        number of metric tons sold in the nine months ended September 30, 2008 was
        the
        same as the number of metric tons sold in the nine months ended September
        30,
        2007, the impact from the increase in prices of our prepared pork products
        was
        $4.6 million. The remaining $3.1 million of such increase resulted from the
        combination of changes in prices and volume of prepared pork products
        sold.
 
 The
        expansion in our distribution channels and geographical coverage has been
        a
        significant factor in the increase in our sales volume. The
        following table sets forth our revenues by products and by sales channel
        for the
        nine-month periods ended September 30, 2008 and 2007.




24


**Sales by Products**
              **(U.S. dollars in millions)****Nine Months Ended**
              **September 30,**
            
            **Net Change**
            
            **Percentage**
              **Change****2008**
            
            **2007**
            
            **2008/2007**
            
            **2008/2007**Pork and pork productsChilled
                Pork
            
            $
            213.0
            
            $
            98.3
            
            $
            114.7
            
            
            117
            %Frozen
                Pork
            
            
            141.0
            
            
            67.3
            
            
            73.7
            
            
            110
            %Prepared
                food
            
            
            39.0
            
            
            18.6
            
            
            20.4
            
            
            110
            %Vegetables
                and Fruits
            
            
            7.0
            
            
            6.6
            
            
            0.4
            
            
            6
            %Total
            
            $
            400.0
            
            $
            190.8
            
            $
            209.2
            
            
            110
            %





**Sales by Distribution Channel**
              **(U.S. dollars in millions)****Nine Months Ended**
              **September 30,**
            
            **Net Change**
            
            **Percentage**
              **Change****2008**
            
            **2007**
            
            **2008/2007**
            
            **2008/2007**Branded stores
            
            $
            166.0
            
            $
            88.4
            
            $
            77.6
            
            
            88
            %Food
                services distributors
            
            
            113.0
            
            
            35.1
            
            
            77.9
            
            
            222
            %Restaurants
                and non-commercial
            
            
            116.0
            
            
            53.5
            
            
            62.5
            
            
            117
            %Export
            
            
            5.0
            
            
            13.8
            
            
            (8.8
            )
            
            (63
            )%Total
            
            $
            400.0
            
            $
            190.8
            
            $
            209.2
            
            
            110
            %





Within
      these four distribution channels, the percentage of growth was highest for
      food
      service distributors, which was primarily due to our decision to distribute
      products from our new production facilities initially through food distributors
      because they can generally help us increase our market share in new markets
      more
      quickly than we can by using our other distribution channels. The decrease
      in
      export sales was primarily due to the reduction of our export sales efforts
      during the 2008 period due to the higher gross profit margins we could achieve
      during that period by selling our pork products domestically in the
      PRC.




The
        increase in sales to different distribution channels was mainly due to the
        following factors: (i) our production capacity has increased; (ii) we have
        built
        up our brand image and recognition through advertisements on China Central
        TV
        and local television and promotion; (iii) we have increased the number of
        stores
        and other channels through which we sell our products; and (iv) we believe
        consumers are placing increased importance on food safety and are willing
        to pay
        higher prices for safe food products.
 
 *Cost
        of sales.* As
        discussed above, our costs of sales primarily include our costs of raw
        materials, labor costs and overhead. Our total cost of sales, our cost of
        raw
        material typically accounts for approximately 96% to 97%, our overhead typically
        accounts for 2% to 2.5%, and our labor cost typically accounts for approximately
        1% to 1.3%, with slightly variances between the reporting periods. Of the
        cost
        of sales, our overhead is semi-fixed in nature. Along with the increase in
        our
        overall production capacity over the past twelve months, the amount of our
        depreciation expense relating to our production facilities increased
        significantly during the nine months ended September 30, 2008 as compared
        to our
        depreciation expense for the nine months ended September 30, 2007.


Our
      cost of
      sales increased from $165.2 million for the nine months ended September 30,
      2007 to $349.1 million for the nine months ended September 30, 2008, which
      represented an increase of $183.9 million, or approximately 111%. The increase
      in our cost of sales was consistent with our increase in sales
      revenue.




The
      gross
      profit  margin (gross profit devided by sales revenue) decreased from
      13.4% for the nine months ended September 30, 2007 to 12.7% for the nine months
      ended September 30, 2008. The slight decrease in our gross margin during
      the 2008 period was primarily due to (i)
      the
      increase in labor costs as a result of the implementation of new labor laws
      in
      the PRC, (ii) the increase in our depreciation expense resulting from the
      newly-built production facilities that were put into service over the past
      year,
      and (iii) our strategic decision to take steps to increase market share and
      utilization rate. As a result, our gross profit margin was lower than the level
      we would expect to achieve when we fully integrate our new production facilities
      and open new regional markets for our products. We intend to adjust our
      production levels and product mix and the percentages of our sales through
      our
      different sales channels in the coming quarters to increase our gross profit
      margin.





*General
      and administrative expenses* .
      General
      and administrative expenses increased from $6.5 million for the nine months
      ended September 30, 2007 to $15.0 million for the nine months ended
      September 30, 2008, which represented an increase of $8.5 million, or
      approximately 131%. As a percentage of revenues, general and administrative
      expenses increased from 3.4% for the nine months ended September 30, 2007 to
      3.8% for the nine months ended September 30, 2008.


25


The
      increase of general and administrative expenses during the nine months ended
      September 30, 2008 was primarily the result of the following factors: (i) a
      $1.7
      million increase in advertising expenses in 2008 to build up our brand image
      and
      recognition; (ii) a $1.1 million option compensation expense, which had not
      occurred in 2007; (iii) a $0.7 million increase in consulting and professional
      fees as a result of the expenses we incurred to move the trading market for
      our
      common stock from the OTC Bulletin Board to The NASDAQ Stock Market and the
      related expenses we incurred to become compliant with the Sarbanes-Oxley Act
      of
      2002; (iv) a $1.1 million increase in research and development expenses incurred
      for new product development and technical cooperation; (v) a $1.4 million
      increase in salary expense resulting from an increased employee count to meet
      the requirements of our production expansion and our increased salary standards
      in 2008; (vi) a $0.9 million increase in our real estate taxes and land usage
      taxes due to the opening of our new production facilities; and (vii) a $0.9
      million increase in our provision for bad debt.





*Selling expenses.* Selling
      expenses increased from $3.3 million for the nine months ended September 30,
      2007 to $7.3 million for the nine months ended September 30, 2008, which
      represented an increase of $4.0 million, or approximately 122%. The increase
      in selling expenses was primarily the result of the increased sales of our
      pork and pork products. As a percentage of revenue, selling expenses
      increased from 1.7% for the nine months ended September 30, 2007 to 1.8% for
      the
      nine months ended September 30, 2008, which was primarily due to a $2.2 million
      increase in transportation costs resulting from our increased sales volume
      and a
      $1.0 million increase in salary expense for the reasons discussed above.





*Interest
      expense.* Interest
      expense increased from $1.8 million for the nine months ended September 30,
      2007
      to $3.7 million for the nine months ended September 30, 2008, which represented
      an increase of $1.9 million, or approximately 111%. The increase in interest
      expense was primarily a result of an increase of $21.9 million in short-term
      bank loans and an increased of $16.1 million in long-term bank loans.





*Interest
      income, government subsidies, other income and exchange gain.* Interest
      income, government subsidies, other income and exchange gain increased from
      $0.4
      million for the nine months ended September 30, 2007 to $2.3 million for the
      nine months ended September 30, 2008. This increase was primarily the result
      of
      an increase of $1.1 million in interest income due to the increased cash
      balances during the period, combined with higher interest rates, and an increase
      of $1.0 million in government subsidies.





*Income
      Taxes.* The
      effective tax rate in the PRC on income generated from the sale of prepared
      products is 25% and there is no income tax on income generated from the sale
      of
      raw products, including raw meat products and raw fruits and vegetable products.
      The increase of $0.2 million in the provision for income taxes for the nine
      months ended September 30, 2008 over the nine months ended September 30, 2007
      resulted from an increase of $1.6 million in our net income from the sale of
      prepared products during the nine months ended September 30, 2008 and a decrease
      in the tax rate from 33% in 2007 to 25% in 2008.





***Segment
      Information***





We
      operate in two business segments: pork and pork products, and vegetables and
      fruits.





Our
      pork
      and pork products segment is involved primarily in the processing of live market
      hogs into fresh, frozen and processed pork products. Our pork and pork products
      segment markets its products domestically to our branded stores, food retailers,
      foodservice distributors, restaurant operators and noncommercial foodservice
      establishments, such as schools, hotel chains, healthcare facilities, the
      military and other food processors, as well as to international
      markets.





Our
      vegetables and fruits segment is involved primarily in the processing of fresh
      vegetables and fruits. We contract with more than 100 farms in Henan Province
      and nearby areas to produce high-quality vegetable varieties and fruits suitable
      for export purposes. The proximity of the contracted farms to our operations
      ensures freshness from harvest to processing. We contract to grow more than
      20
      categories of vegetables and fruits, including asparagus, sweet corn, broccoli,
      mushrooms, lima beans, strawberries and capsicum.


26


The
      following tables set forth our sales volume and the production volume in metric
      tons by product segment for the three-month and nine-month periods ended
      September 30, 2008 and 2007.




**Sales
                by Segment**
              **(****in
                metric tons****)****Three
                Months Ended**
              **September
                30,**
            
            **Nine
                Months Ended**
              **September
                30,****2008**
            
            **2007**
            
            **2008**
            
            **2007**(Unaudited)
            
            (Unaudited)
            
            (Unaudited)
            
            (Unaudited)Pork
                and Pork ProductsChilled
                pork
            
            
            38,380
            
            
            21,348
            
            
            91,934
            
            
            65,091Frozen
                pork
            
            
            23,043
            
            
            15,039
            
            
            62,412
            
            
            46,027Prepared
                pork products
            
            
            6,258
            
            
            3,756
            
            
            17,647
            
            
            10,442Vegetables
                and Fruits
            
            
            3,449
            
            
            5,257
            
            
            10,078
            
            
            9,927Total
            
            
            71,130
            
            
            45,400
            
            
            182,071
            
            
            131,487





**Production
                by Segment**
              **(****in
                metric tons****)****Three
                Months Ended**
              **September
                30,**
            
            **Nine
                Months Ended**
              **September
                30,****2008**
            
            **2007**
            
            **2008**
            
            **2007**(Unaudited)
            
            (Unaudited)
            
            (Unaudited)
            
            (Unaudited)Pork
                and Pork ProductsChilled
                pork
            
            
            37,936
            
            
            21,700
            
            
            91,734
            
            
            65,443Frozen
                pork
            
            
            22,761
            
            
            16,721
            
            
            63,920
            
            
            47,846Prepared
                pork products
            
            
            6,187
            
            
            3,779
            
            
            17,668
            
            
            10,724Vegetables
                and Fruits
            
            
            3,362
            
            
            5,948
            
            
            10,239
            
            
            11,399Total
            
            
            70,246
            
            
            48,148
            
            
            183,561
            
            
            135,412





**Additional
      Operating Data**





In
      assessing our existing operations and planning our future growth and the
      development of our business, management considers, among other factors, our
      revenue growth and growth in sales volume by market segment, as well as our
      sales by distribution channel and geographic market coverage.





The
      following table sets forth information with respect to the number of products
      we
      offered, the number of stores in our retail network and the number of provinces
      and cities in the PRC in which we offered and sold our products at
      December 31, 2005, 2006, 2007 and September 30, 2008.


27




**December 31,****2005**
              
              **2006**
              
              **2007**
              
              **September 30, 2008**No.
                  of products
              
              
              168
              
              
              229
              
              
              270
              
              
              297No.
                  of retail stores
              
              
              2,100
              
              
              2,721
              
              
              2,939
              
              
              2,995Expansion
                  of Market CoverageNo.
                  of Provinces
              
              
              24
              
              
              24
              
              
              24
              
              
              24No.
                  of first-tier cities
              
              
              29
              
              
              29
              
              
              29
              
              
              29No.
                  of second-tier cities
              
              
              44
              
              
              75
              
              
              93
              
              
              100No.
                  of third-tier cities
              
              
              142
              
              
              226
              
              
              287
              
              
              311





**Liquidity
      and Capital Resources**





At
      December 31, 2007 and September 30, 2008, we had cash and cash equivalents
      of
      $45.1 million and $54.2 million, respectively. At September 30, 2008, our
      working capital was approximately $18.9 million. Our debt-to-asset ratio,
      current ratio, and quick ratio at September 30, 2008 were 0.4, 1.2 and 0.8,
      respectively.





For
      the
      nine months ended September 30, 2008, net cash provided by operating activities
      was $47.6 million, which represented an increase of $32.5 million as compared
      to
      the net cash provided by operating activities of $15.2 million for the same
      period of the prior year. Of the $32.5 million increase, net income accounted
      for $12.4 million, non-cash items accounted for $2.3 million and changes in
      operating assets and liabilities accounted for $17.8 million. Of the non-cash
      items, depreciation and amortization accounted for $1.9 million of change due
      to
      the fact that more plants, equipment and machinery were put into use during
      the
      nine months ended September 30, 2008.





Cash
      flow
      from changes in operating assets and liabilities accounted for approximately
      $17.8 million of the increase, as compared to the negative cash flow of $1.6
      million from changes in operating assets and liabilities for the same period
      of
      the prior year. Of the $17.8 million increase, $10.7 million was attributable
      to
      the change of cash flow from inventories due to the fact that our inventory
      balance at September 30, 2008 was reduced as our sales increased during the
      current period; $9.6 million was attributable to the change of cash flow from
      accounts receivable due to the fact that the collection of accounts receivable
      in the nine months ended September 30, 2008 was significantly improved; $5.0
      million was attributable to the change of cash flow from other receivables
      due
      to the fact that the collection of other receivables in the nine months ended
      September 30, 2008 improved; and $4.0 million was attributable to the increase
      in accounts payable resulting from our decision to postpone certain payments
      due
      to the tight economic environment. These increases were partly offset by a
      $2.7
      million decrease in VAT recoverable because VAT input increased in line with
      our
      production volume, but not all VAT input can be deducted, and a $2.3 million
      decrease in customer deposits from larger customers.





Net
      cash
      used in investing activities was $68.8 million for the nine months ended
      September 30, 2008, which represented an increase of $28.3 million as compared
      to the net cash of $40.5 million used by investing activities for the same
      period of the prior year. We spent $30.5 million more on the costs of
      construction for new production facilities during the current period, $5.1
      million more on equipment and machinery and $7.2 million less on acquiring
      land
      usage rights compared to the same period of the prior year.


28


Net
      cash
      provided by financing activities was $28.3 million during the nine months ended
      September 30, 2008, a decrease of $11.0 million compared to the net cash
      provided by financing activities of $39.3 million for the same period of the
      prior year. While we received $15.8 million in net proceeds from long-term
      bank
      loans in the current period and no such proceeds in the same period of the
      prior
      year, we received $14.8 million less in net proceeds from the exercise of stock
      purchase warrants during the current period compared to the same period of
      the
      prior year. In addition, we repaid $6.3 million more of bank notes
      during the current period and we reduced our net proceeds from short-term bank
      loans by $5.7 million during the current period compared to the same period
      of
      the prior year.





At
      September 30, 2008, Henan Zhongpin had short-term bank and governmental loans
      in
      the aggregate amount of $69.5 million with interest rates ranging from 7.10
      % to
      7.84% per annum, as follows.





**Bank**
            
            **Amount**
              **Borrowed**
            
            **Interest Rate**
            
            **Maturity Date**Agriculture Bank of
                China
            
            $
            2,798,274
            
            
            7.29
            %
            
            12/14/20082,945,551
            
            
            7.47
            
            
            12/28/20081,030,943
            
            
            7.47
            
            
            01/21/2009Rabobank
                Nederland Shanghai
            
            
            2,945,551
            
            
            7.47
            %
            
            05/28/2009Agriculture
                Development Bank of China
            
            
            5,154,715
            
            
            7.47
            %
            
            04/27/20097,363,879
            
            
            7.47
            
            
            05/11/200910,603,986
            
            
            7.47
            
            
            05/28/20094,123,772
            
            
            7.47
            
            
            05/28/2009Shanghai
                Pudong Development Bank of China
            
            
            3,092,829
            
            
            7.47
            %
            
            03/28/20091,325,498
            
            
            7.47
            
            
            03/26/20093,829,217
            
            
            7.47
            
            
            03/25/2009Bank
                of China
            
            
            8,100,267
            
            
            7.10
            %
            
            02/21/2009China
                Merchants Bank
            
            
            4,418,327
            
            
            7.47
            %
            
            05/20/20092,945,551
            
            
            7.47
            
            
            06/27/2009Guangdong
                Development Bank
            
            
            4,418,327
            
            
            7.29
            %
            
            12/11/2008China
                Communication Bank
            
            
            4,418,327
            
            
            7.84
            %
            
            01/03/2009City
                Finance – short-term
            
            
            29,456
            
            
            
            
            
            ExtendableTotal
            
            $
            69,544,470





In
      April
      2008, Henan Zhongpin entered into a mutual guarantee agreement with Xuji Group
      Co., Ltd., a group corporation based in Henan Province, PRC that is not
      affiliated with our company or with any of our subsidiaries. Pursuant to the
      agreement, Henan Zhongpin has agreed to guarantee bank loans of Xuji Group
      in an
      amount up to $44.2 million and Xuji Group has agreed to guarantee Henan
      Zhongpin's bank loans in an amount up to $44.2 million. The agreement will
      expire in March 2009. At September 30, 2008, Henan Zhongpin had
      guaranteed $38.3 million of Xuji Group’s bank loans.


29


In
      May
      2008, Henan Zhongpin entered into a credit agreement with Rabobank Nederland
      Shanghai Branch that provided for a one-year short-term loan of RMB 20 million
      ($2.9 million) and a three-year term loan of up to RMB 80 million ($11.8
      million). Upon execution of the credit agreement, the full amount of the
      short-term loan was funded by the bank. On June 10, 2008, the first 50% of
      the
      long-term loan was funded by the bank. The remaining 50% of the long-term loan
      was drawn down by Henan Zhongpin on July 10, 2008. Amounts currently outstanding
      under the long-term loan bear interest at the rate of 7.56% per annum, which
      was
      the interest rate published by the People’s Bank of China on July 10, 2008 for
      loans with the same or similar terms. The accrued interest on this loan is
      payable on a quarterly basis. Of the outstanding principal under the long-term
      loan, 25% is payable 24 months after the first drawdown date (June 10, 2008),
      37.5% is payable 30 months after the first drawdown date and the balance is
      payable 36 months after the first drawn down date.





Borrowings
      under the term loan agreement are guaranteed by our subsidiaries, Anyang
      Zhongpin Food Co., Ltd. and Zhumadian Zhongpin Food Ltd., are secured by
      mortgages on our prepared pork production facilities located in Changge City,
      Henan Province and are subject to various financial and non-financial covenants,
      including a debt to net worth ratio, a debt to EBIDTA ratio, an interest
      coverage ratio, a required minimum tangible net worth, restrictions on
      investments in fixed assets and financial assets, on inter-company indebtedness
      and on consolidated contingent liabilities and a requirement that a minimum
      percentage of Henan Zhongpin’s consolidated EBITDA be generated by Henan
      Zhongpin and the guarantors. Henan Zhongpin also is prohibited from paying
      dividends in an amount in excess of 50% of its retained earnings during the
      term
      of the credit facility.





In
      April
      2008, Henan Zhongpin entered into a loan agreement with CITIC Industrial Bank
      pursuant to which Henan Zhongpin borrowed RMB 30 million ($4.4 million). All
      amounts borrowed under
      the
      loan agreement bear interest at a floating rate that was based on the prime
      rate
      published by the People’s Bank of China for the loans with the same or similar
      terms on the drawdown date (7.56% per annum on that drawdown date) and are
      payable on January 23, 2010. The accrued interest on this loan is payable
      quarterly on the 20 th of the
      last month of the quarter since the drawdown date. Borrowings under the loan
      agreement are guaranteed by a third party located in Henan Province.





In
      May
      2002, Henan Zhongpin entered into a loan agreement with China Communication
      Bank, Zhengzhou Branch, which is the intermediary bank for a 40-year term loan
      in the amount of $2,504,969 from the Canadian government. Under the terms of
      the
      loan agreement, 58% of the principal amount ($1,452,882) of this loan bears
      interest at the fixed rate of 6.02% per annum and remaining principal amount
      of
      this loan is interest free. The loan is repayable in a fixed amount of $145,671,
      which includes both principal and interest, that is payable on a semi-annual
      basis through May 15, 2042. Borrowings under the loan agreement are guaranteed
      by the Financing Department, Henan Province.





On
      November 5, 2008, we entered into a sale-leaseback agreement with CMB Finance
      Lease Company (“CMB Finance”) pursuant to which we sold to CMB Finance equipment
      with a book net value of $6.6 million for $4.6 million and leased such equipment
      back. Our lease payments for this equipment are paid on a monthly basis over
      a
      three-year period and consist of a fixed payment based upon a 36-month
      amortization of the purchase price plus an interest component that is based
      upon
      the rate announced from time to time by the People’s Bank of China for
      three-year loans. At September 30, 2008, our monthly rental fee under the
      agreement was $142,936, which included an interest component calculated at
      the
      rate of 7.02% per annum. We have the right at the end of the lease term to
      repurchase all of the equipment for a $1.00 purchase price.




We
      believe our existing cash and cash equivalents, together with our available
      lines of credit ($129.2 million at September 30, 2008), will be sufficient
      to
      finance our investment in new facilities, operating requirements and anticipated
      capital expenditures of approximately $27.2 million over the next 12 months.
      We
      intend to use such funds over the next 12 months to fund our capacity expansion
      and the construction of supporting facilities and to supplement our working
      capital requirements to enable us to strengthen our market position and
      accelerate our growth.


30





**Contractual
      Commitments**





The
      following table summarizes our contractual obligations at September 30, 2008
      and
      the effect those obligations are expected to have on our liquidity and cash
      flow
      in future periods.


**Payments Due by Period**
                **(in thousands)****Contractual Obligations**
              
              **Total**
              
              **Less Than**
                **1 Year**
              
              **1-3 Years**
              
              **3-5 Years**
              
              **More Than**
                **5 Years**Long-term debt obligations
              
              $
              17,908
              
              $
              146
              
              $
              16,492
              
              $
              218
              
              $
              1,052Capital
                  lease obligations
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Operating
                  lease obligations
              
              
              486
              
              
              486
              
              
              -
              
              
              -
              
              
              -Total
              
              $
              18,394
              
              $
              632
              
              $
              16,492
              
              $
              218
              
              $
              1,052





**Inflation
      and Seasonality**





While
      demand for our products in general is relatively high before the Chinese New
      Year in January or February each year and lower thereafter, we do not believe
      our operations have been materially affected by inflation or
      seasonality.





**New
      Accounting Pronouncements**




In
      September 2006, the FASB issued SFAS No. 157, “ ***Fair
      Value Measurements*** ”
(“SFAS
      No. 157”). SFAS No. 157 clarifies the principle that fair value should
      be based on the assumptions market participants would use when pricing an asset
      or liability and establishes a fair value hierarchy that prioritizes the
      information used to develop those assumptions. Under SFAS No 157, fair value
      measurements would be separately disclosed by level within the fair value
      hierarchy. SFAS No. 157 is effective for fiscal years beginning after
      November 15, 2007 and is required to be adopted by the Company in the first
      quarter of 2008 but was amended on February 6, 2008 to defer the effective
      date one year for certain non-financial assets and liabilities. The Company
      has
      not yet determined the impact, if any, that the implementation of SFAS
      No. 157 will have on its results of operations or financial
      condition.


In
      March
      2008, the Financial Accounting Standards Board issued Statement of Financial
      Accounting No.161, *Disclosures
      about Derivative Instruments and Hedging Activities* (SFAS
      No. 161). The provisions of SFAS No. 161 are effective for us as of January
      1,
      2009. SFAS No. 161 requires enhanced disclosures about (i) how and why we use
      derivative instruments, (ii) how we account for derivative instruments and
      related hedged items under SFAS No. 133, *Accounting
      for Derivative Instruments and Hedging Activities* ,
      and
      (iii) how derivative instruments and related hedged items affect our financial
      results. We do not expect the adoption of this statement to have a material
      impact on our financial statements.




In
      May
      2008, the FASB issued Statement of Financial Accounting Standards No. 162, *The
      Hierarchy of Generally Accepted Accounting Principles* (“SFAS
      No. 162”).  SFAS No. 162 identifies the sources of accounting
      principles and the framework for selecting the principles used in the
      preparation of financial statements of nongovernmental entities that are
      presented in conformity with generally accepted accounting principles in the
      United States.  We do not expect any significant changes to our
      financial accounting and reporting as a result of the issuance of SFAS No.
      162.


31


**Item
      3.**  **Quantitative
      and Qualitative Disclosures About Market Risk**





*Disclosures
      About Market Risk.* We
      may be
      exposed to changes in financial market conditions in the normal course of
      business. Market risk generally represents the risk that losses may occur as
      a
      result of movements in interest rates and equity prices. We currently do not
      use
      financial instruments in the normal course of business that are subject to
      changes in financial market conditions.





*Currency
      Fluctuations and Foreign Currency Risk.* Substantially all of our operations are conducted in the PRC, with the exception
      of our export business and limited overseas purchases of raw materials. Most
      of
      our sales and purchases are conducted within the PRC in RMB, which is the
      official currency of the PRC. As a result, the effect of the fluctuations of
      exchange rates is considered minimal to our business operations.





Substantially
      all of our revenues and expenses are denominated in RMB. However, we use the
      U.S. dollar for financial reporting purposes. Conversion of Renminbi into
      foreign currencies is regulated by the People’s Bank of China through a unified
      floating exchange rate system. Although the PRC government has stated its
      intention to support the value of the RMB, there can be no assurance that such
      exchange rate will not again become volatile or that the RMB will not devalue
      significantly against the U.S. dollar. Exchange rate fluctuations may adversely
      affect the value, in U.S. dollar terms, of our net assets and income derived
      from our operations in the PRC.





*Interest
      Rate Risk.* We do
      not have significant interest rate risk as the interest we pay on substantially
      all of our debt obligations is calculated at a fixed rate in accordance with
      the
      terms of such indebtedness.




*Credit
      Risk.* We have
      not experienced significant credit risk, as most of our customers are long-term
      customers with superior payment records. Our receivables are monitored regularly
      by our credit managers.





**Item
      4.**  **Controls
      and Procedures**





Our
      management, with the participation our chief executive officer and chief
      financial officer, has evaluated the effectiveness of our disclosure controls
      and procedures (as such term is defined in Rules 13a-15(e) and 15d-15(e) under
      the Exchange Act) as of the end of the period covered by this report. Based
      on
      such evaluation, our chief executive officer and chief financial officer were
      unable to conclude that, as of the end of such period, our disclosure controls
      and procedures were effective. As reported in our annual report on Form 10-K
      for
      the year ended December 31, 2007, we have not completed all of the evaluations
      necessary to issue guidance on the status of our internal controls, have
      identified certain control deficiencies and have not yet been able to complete
      our assessment of which, if any, control deficiencies constitute “material
      weakness” as defined under Public Accounting Oversight Board Auditory Standard
      No. 5. See Item 9A. Controls and Procedures of our annual report on Form 10-K
      for the year ended December 31, 2007, which was filed on March 28, 2008 and
      is
      incorporated by reference into this Item 4 for a more detailed explanation
      of
      these control deficiencies and remedial actions taken and planned that we expect
      will materially affect our disclosure controls and procedures.





In
      late
      April 2008, Child, VanWagoner & Bradshaw, PLLC, our independent registered
      accounting firm at that time, advised our board of directors and the audit
      committee of our board that during its audit of our consolidated financial
      statements for the year ended December 31, 2007 the following matters were
      identified involving our internal control over financial reporting that it
      considered to be significant deficiencies under the standards established by
      the
      Public Company Accounting Oversight Board (“PCAOB”):


32





·
            the
                lack of a system of timely recording certain cash receipts and
                disbursements;





·
            the
                need to hire additional accounting personnel to prepare, supervise
                and
                review general ledger reconciliations at our subsidiaries;
                and





·
            our
                failure to have an effective method of accounting for certain non-routine
                transactions and estimates.





In
      response to the deficiencies identified, we have taken steps to strengthen
      our
      internal control over financial reporting. In particular,





·
            we
                are in the process of implementing a system to record all cash receipts
                and disbursements;





·
            we
                have evaluated, and continue to evaluate, the roles and functions
                of the
                accounting personnel within our corporate accounting department and
                have
                added three permanent employees to support our internal control over
                financing reporting; and





·
            we
                have implemented procedures to record non-routine transactions and
                estimates.





In
      addition, as reported in our annual report on Form 10-K for the year ended
      December 31, 2007, we have retained Horwath International, an independent third
      party consulting firm, to assist our management team in evaluating our internal
      controls and procedures. As of the date of this report, Horwath International
      has performed two rounds of testing of our internal controls and identified
      the
      following matters involving our internal control over financial reporting that
      it considered to be significant deficiencies under the standards established
      by
      the PCAOB:





·
            the
                lack of a system of tracking, updating and evaluating changes in
                U.S. GAAP
                and PRC GAAP.





We
      are in
      the process of resolving the above-listed deficiencies and, as relates to the
      tracking of changes in accounting standards, have begun creating a detailed
      system of analyzing, assessing and documenting the effect of any changes in
      the
      U.S. and PRC accounting standards on our financial reporting, profit and loss,
      and internal control procedures. Management will continue to monitor the
      effectiveness of our internal controls and procedures on an ongoing basis and
      will take further action, as appropriate, to address the control deficiencies
      described herein.





The
      certifications of our chief executive officer and chief financial officer
      attached as Exhibits 31.1 and 31.2 to this report include, in paragraph 4 of
      such certifications, information concerning our disclosure controls and
      procedures and internal control over financial reporting. Such certifications
      should be read in conjunction with the information contained in this Item 4,
      including the information incorporated by reference to our annual report on
      Form
      10-K for the year ended December 31, 2007, for a more complete understanding
      of
      the matters covered by such certifications.


33





Except
      as
      otherwise described herein, t here
      have
      not been any changes in our internal control over financial reporting (as such
      term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during
      the fiscal quarter to which this report relates that have materially affected,
      or are reasonably likely to materially affect, our internal control over
      financial reporting.


34


**Part
      II – Other Information**





**Item
      1.**  **Legal
      Proceedings**





None.





**Item
      1A.**  **Risk
      Factors**





During
      the nine months ended September 30, 2008, there were no material changes to
      the
      risk factors previously disclosed in our Annual Report on Form 10-K for the
      year
      ended December 31, 2007.





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





(a)  None.





(b)  Not
      Applicable.





(c)  None.





**Item
      3.**  **Defaults
      Upon Senior Securities**





Not
      Applicable.





**Item
      4.**  **Submission
      of Matters to a Vote of Security Holders**





Not
      Applicable.





**Item
      5.**  **Other
      Information**





(a)  None.





(b)  None.





**Item
      6.**  **Exhibits**





The
                exhibits required by this item are set forth on the Exhibit Index
                attached
                hereto.


35


**Signatures**





Pursuant
      to the requirements of the Securities Exchange Act of 1934, we have duly caused
      this report to be signed on our behalf by the undersigned thereunto duly
      authorized.





Zhongpin
                Inc.(Company)Date:
                November 10, 2008By:
            /s/
                Xianfu ZhuXianfu
                ZhuChief
                Executive OfficerBy:
            /s/
                Feng WangFeng
                WangChief Financial
                Officer




36


**Exhibit
      Index**





**Exhibit**
              **Number**
            
            **Exhibit Title**10.1*
            
            Financial
                Lease Contract, dated as of October 28, 2008, between Henan Zhongpin
                Food
                Share Co., Ltd. and CMB Financial Leasing Co., Ltd. (*Translated from
                Mandarin*).10.2*
            
            Cross-Guarantee
                Agreement between Xuji Group Co., Ltd. and Henan Zhongpin Food Share
                Co.,
                Ltd. (*Translated from Mandarin*).31.1*
            
            Certification
                of our Chief Executive Officer pursuant to Section 302 of the
                Sarbanes-Oxley Act of 2002.31.2*
            
            Certification
                of our Chief Financial Officer pursuant to Section 302 of the
                Sarbanes-Oxley Act of 2002.32.1*
            
            Certification
                of our Chief Executive Officer pursuant to Section 906 of the
                Sarbanes-Oxley Act of 2002.32.2*
            
            Certification
                of our Chief Financial Officer pursuant to Section 906 of the
                Sarbanes-Oxley Act of 2002.





*
            Filed
                herewith


37