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 June 30, 2012
|--------------------------------------------



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 : | 001-33593
|------------------------ | ---------



|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 |  | 461500    
|-------------------------------------------------------------------------- |  | ----------
|(Address of principal executive offices)                                   |  | (Zip Code)



|011 86 10-8455 4188                                 
|----------------------------------------------------
|(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 has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required
to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that
the registrant was required to submit and post such files). YES x NO  ̈



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



Large accelerated filer  ̈
Accelerated filer xNon-accelerated
filer  ̈ (Do not check if a smaller reporting company) Smaller reporting company
 ̈



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 August 6, 2012, 37,189,344 shares
of the registrant’s common stock were outstanding.











ZHONGPIN INC.



FORM 10-Q



INDEX



|           |                       | Page                                                                                                                                                         
|---------- | --------------------- | -------------------------------------------------------------------------------------------------------------------------------------------------------------
|Part I     | Financial Information |                                                                                                                                                              
|           |                       |                                                                                                                                                              
|           | Item 1.               | Financial Statements:                                                                                                                                        
|           |                       |                                                                                                                                                              
|           |                       | Condensed Consolidated Balance Sheets as of June 30, 2012 (unaudited) and December 31, 2011                                                                  
|           |                       |                                                                                                                                                              
|           |                       | Condensed Consolidated Statements of Operations and Comprehensive  Income (unaudited) for the three-month and six-month periods  ended June 30, 2012 and 2011
|           |                       |                                                                                                                                                              
|           |                       | Condensed Consolidated Statements of Cash Flows (unaudited) for the six-month periods ended June 30, 2012 and 2011                                           
|           |                       |                                                                                                                                                              
|           |                       | Notes to Condensed Consolidated Financial Statements (unaudited)                                                                                             
|           |                       |                                                                                                                                                              
|           | Item 2.               | Management’s Discussion and Analysis of Financial Condition and Results of Operations                                                                        
|           |                       |                                                                                                                                                              
|           | Item 3.               | Quantitative and Qualitative Disclosures About Market Risk                                                                                                   
|           |                       |                                                                                                                                                              
|           | Item 4.               | Controls and Procedures                                                                                                                                      
|           |                       |                                                                                                                                                              
|Part II    | Other Information     |                                                                                                                                                              
|           |                       |                                                                                                                                                              
|           | Item 1.               | Legal Proceedings                                                                                                                                            
|           |                       |                                                                                                                                                              
|           | Item 1A.              | Risk Factors                                                                                                                                                 
|           |                       |                                                                                                                                                              
|           | Item 2.               | Unregistered Sales of Equity Securities and Use of Proceeds                                                                                                  
|           |                       |                                                                                                                                                              
|           | Item 3.               | Defaults Upon Senior Securities                                                                                                                              
|           |                       |                                                                                                                                                              
|           | Item 4.               | Mine Safety Disclosures                                                                                                                                      
|           |                       |                                                                                                                                                              
|           | Item 5.               | Other Information                                                                                                                                            
|           |                       |                                                                                                                                                              
|           | Item 6.               | Exhibits                                                                                                                                                     
|           |                       |                                                                                                                                                              
|Signatures |                       |                                                                                                                                                              











ZHONGPIN INC.



Part I - Financial Information



Item 1. Financial Statements



The accompanying unaudited condensed consolidated
balance sheets, statements of operations and comprehensive income, and statements of cash flows and the 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 condensed consolidated
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 unaudited condensed consolidated
financial statements should be read in conjunction with the notes to the aforementioned condensed consolidated 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, 2011.



The results of operations for the three-month
and six-month periods ended June 30, 2012 are not necessarily indicative of the results to be expected for the entire fiscal year
or any other period.











ZHONGPIN INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Amounts in U.S. dollars)



|                                                                                                                                                                                                                           |  | June 30, 2012 |               |   | December 31, 2011 |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | ------------- | - | ----------------- | -
|                                                                                                                                                                                                                           |  | (Unaudited)   |               |   |                   |  
|ASSETS                                                                                                                                                                                                                     |  |               |               |   |                   |  
|                                                                                                                                                                                                                           |  |               |               |   |                   |  
|Current assets                                                                                                                                                                                                             |  |               |               |   |                   |  
|Cash and cash equivalents                                                                                                                                                                                                  |  | $             | 143,264,744   |   |                   | $
|Restricted cash                                                                                                                                                                                                            |  |               | 98,051,840    |   |                   |  
|Bank notes receivable                                                                                                                                                                                                      |  |               | 56,372,795    |   |                   |  
|Accounts receivable, net of allowance for doubtful accounts of $4,327,163 and $2,323,920                                                                                                                                   |  |               | 77,620,512    |   |                   |  
|Other receivables, net of allowance for doubtful accounts of $284,979 and $449,048                                                                                                                                         |  |               | 1,467,451     |   |                   |  
|Purchase deposits                                                                                                                                                                                                          |  |               | 7,204,856     |   |                   |  
|Inventories                                                                                                                                                                                                                |  |               | 64,169,530    |   |                   |  
|Prepaid expenses                                                                                                                                                                                                           |  |               | 548,394       |   |                   |  
|VAT recoverable                                                                                                                                                                                                            |  |               | 36,159,510    |   |                   |  
|Allowance receivables                                                                                                                                                                                                      |  |               | 950,210       |   |                   |  
|Deferred tax assets                                                                                                                                                                                                        |  |               | 570,618       |   |                   |  
|Other current assets                                                                                                                                                                                                       |  |               | 1,522,497     |   |                   |  
|Total current assets                                                                                                                                                                                                       |  |               | 487,902,957   |   |                   |  
|                                                                                                                                                                                                                           |  |               |               |   |                   |  
|Long-term investment                                                                                                                                                                                                       |  |               | 474,316       |   |                   |  
|Property, plant and equipment, net                                                                                                                                                                                         |  |               | 460,470,336   |   |                   |  
|Deposits for purchase of land use rights                                                                                                                                                                                   |  |               | 29,018,401    |   |                   |  
|Construction in progress                                                                                                                                                                                                   |  |               | 46,784,402    |   |                   |  
|Land use rights                                                                                                                                                                                                            |  |               | 106,676,476   |   |                   |  
|Deferred charges                                                                                                                                                                                                           |  |               | 37,414        |   |                   |  
|Other non-current assets                                                                                                                                                                                                   |  |               | 1,845,742     |   |                   |  
|Total assets                                                                                                                                                                                                               |  | $             | 1,133,210,044 |   |                   | $
|                                                                                                                                                                                                                           |  |               |               |   |                   |  
|LIABILITIES AND SHAREHOLDERS’ EQUITY                                                                                                                                                                                       |  |               |               |   |                   |  
|Current liabilities                                                                                                                                                                                                        |  |               |               |   |                   |  
|Short-term loans                                                                                                                                                                                                           |  | $             | 186,891,773   |   |                   | $
|Bank notes payable                                                                                                                                                                                                         |  |               | 205,396,133   |   |                   |  
|Long-term loans - current portion                                                                                                                                                                                          |  |               | 44,658,520    |   |                   |  
|Capital lease obligation                                                                                                                                                                                                   |  |               | 2,732,592     |   |                   |  
|Accounts payable                                                                                                                                                                                                           |  |               | 17,107,743    |   |                   |  
|Other payables                                                                                                                                                                                                             |  |               | 28,402,879    |   |                   |  
|Accrued liabilities                                                                                                                                                                                                        |  |               | 14,871,326    |   |                   |  
|Deposits from customers                                                                                                                                                                                                    |  |               | 7,316,394     |   |                   |  
|Tax payable                                                                                                                                                                                                                |  |               | 1,724,988     |   |                   |  
|Deferred subsidy - current portion                                                                                                                                                                                         |  |               | 68,512        |   |                   |  
|Total current liabilities                                                                                                                                                                                                  |  |               | 509,170,860   |   |                   |  
|                                                                                                                                                                                                                           |  |               |               |   |                   |  
|Deferred tax liabilities                                                                                                                                                                                                   |  |               | 522,409       |   |                   |  
|Deposits from customers - long-term portion                                                                                                                                                                                |  |               | 2,266,661     |   |                   |  
|Long-term loans                                                                                                                                                                                                            |  |               | 96,580,051    |   |                   |  
|Deferred subsidy - long-term portion                                                                                                                                                                                       |  |               | 1,946,891     |   |                   |  
|Total liabilities                                                                                                                                                                                                          |  |               | 610,486,872   |   |                   |  
|                                                                                                                                                                                                                           |  |               |               |   |                   |  
|Equity                                                                                                                                                                                                                     |  |               |               |   |                   |  
|Common stock: par value $0.001; 100,000,000 authorized; 40,356,182 and40,355,502shares issued as of June 30, 2012 and December 31, 2011; and37,189,344 and 37,556,964outstanding as of June 30, 2012 and December 31, 2011 |  |               | 40,356        |   |                   |  
|Additional paid in capital                                                                                                                                                                                                 |  |               | 239,880,014   |   |                   |  
|Retained earnings                                                                                                                                                                                                          |  |               | 257,378,217   |   |                   |  
|Treasury stock, at cost: 3,166,838 and 2,798,538 shares as of June 30, 2012 and December 31, 2011                                                                                                                          |  |               | (26,225,647   | ) |                   |  
|Accumulated other comprehensive income                                                                                                                                                                                     |  |               | 50,828,164    |   |                   |  
|Total Zhongpin Inc. shareholders’ equity                                                                                                                                                                                   |  |               | 521,901,104   |   |                   |  
|Noncontrolling interest                                                                                                                                                                                                    |  |               | 822,068       |   |                   |  
|Total shareholders’ equity                                                                                                                                                                                                 |  |               | 522,723,172   |   |                   |  
|Total liabilities and shareholders’ equity                                                                                                                                                                                 |  | $             | 1,133,210,044 |   |                   | $



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



2







ZHONGPIN INC.

CONDENSED CONSOLIDATED STATEMENTS OF
OPERATIONS AND COMPREHENSIVE INCOME

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



|                                                                                   |  | Three Months Ended June 30, |              |   | Six Months Ended June 30, |  
|---------------------------------------------------------------------------------- |  | --------------------------- | ------------ | - | ------------------------- | -
|                                                                                   |  | 2012                        |              |   | 2011                      |  
|                                                                                   |  |                             |              |   |                           |  
|Revenues                                                                           |  |                             |              |   |                           |  
|Sales revenues                                                                     |  | $                           | 408,211,851  |   |                           | $
|Cost of sales                                                                      |  |                             | (372,591,095 | ) |                           |  
|Gross profit                                                                       |  |                             | 35,620,756   |   |                           |  
|                                                                                   |  |                             |              |   |                           |  
|Operating expenses                                                                 |  |                             |              |   |                           |  
|General and administrative expenses                                                |  |                             | (8,912,125   | ) |                           |  
|Selling expenses                                                                   |  |                             | (8,819,522   | ) |                           |  
|Research & development expenses                                                    |  |                             | (157,016     | ) |                           |  
|Total operating expenses                                                           |  |                             | (17,888,663  | ) |                           |  
|                                                                                   |  |                             |              |   |                           |  
|Income from operations                                                             |  |                             | 17,732,093   |   |                           |  
|                                                                                   |  |                             |              |   |                           |  
|Other income (expense)                                                             |  |                             |              |   |                           |  
|Interest expenses, net                                                             |  |                             | (6,285,030   | ) |                           |  
|Other income (expenses), net                                                       |  |                             | 591,768      |   |                           |  
|Government subsidies                                                               |  |                             | 650,488      |   |                           |  
|Total other expenses                                                               |  |                             | (5,042,774   | ) |                           |  
|                                                                                   |  |                             |              |   |                           |  
|Net income before taxes                                                            |  |                             | 12,689,319   |   |                           |  
|Provision for income taxes                                                         |  |                             | (1,708,505   | ) |                           |  
|                                                                                   |  |                             |              |   |                           |  
|Net income after taxes                                                             |  | $                           | 10,980,814   |   |                           | $
|Net income (loss) attributable to noncontrolling interest                          |  |                             | 15           |   |                           |  
|                                                                                   |  |                             |              |   |                           |  
|Net income attributable to Zhongpin Inc. shareholders                              |  |                             | 10,980,829   |   |                           |  
|                                                                                   |  |                             |              |   |                           |  
|Foreign currency translation adjustment                                            |  | $                           | (2,662,676   | ) |                           | $
|Foreign currency translation adjustment attributable to noncontrolling interest    |  |                             | 3,997        |   |                           |  
|Foreign currency translation adjustment attributable to Zhongpin Inc. shareholders |  |                             | (2,658,679   | ) |                           |  
|                                                                                   |  |                             |              |   |                           |  
|Comprehensive income                                                               |  | $                           | 8,318,138    |   |                           | $
|Comprehensive income (loss) attributable to noncontrolling
    interest            |  |                             | 4,012        |   |                           |  
|Comprehensive income attributable to Zhongpin Inc. shareholders                    |  |                             | 8,322,150    |   |                           |  
|                                                                                   |  |                             |              |   |                           |  
|Basic earnings per common share                                                    |  | $                           | 0.29         |   |                           | $
|Diluted earnings per common share                                                  |  | $                           | 0.29         |   |                           | $
|Basic weighted average shares outstanding                                          |  |                             | 37,189,322   |   |                           |  
|Diluted weighted average shares outstanding                                        |  |                             | 37,209,695   |   |                           |  



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



3







ZHONGPIN INC.

CONDENSED CONSOLIDATED STATEMENTS OF
CASH FLOWS

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



|                                                                                  |  | Six Months Ended June 30, |            
|--------------------------------------------------------------------------------- |  | ------------------------- | -----------
|                                                                                  |  | 2012                      |            
|Cash flows from operating activities:                                             |  |                           |            
|Net income                                                                        |  | $                         | 23,175,971 
|Adjustments to reconcile net income to net cash provided by (used in) operations: |  |                           |            
|Depreciation                                                                      |  |                           | 11,244,577 
|Amortization of land use rights                                                   |  |                           | 1,089,836  
|Provision for allowance for bad debts                                             |  |                           | 1,854,859  
|Gain (loss) on disposal of property and equipment                                 |  |                           | (114,136   
|Deferred subsidy                                                                  |  |                           | (34,352    
|Stock-based compensation expense                                                  |  |                           | 515,566    
|                                                                                  |  |                           |            
|Changes in operating assets and liabilities:                                      |  |                           |            
|Accounts receivable                                                               |  |                           | (39,733,636
|Other receivables                                                                 |  |                           | (510,391   
|Purchase deposits                                                                 |  |                           | 7,080,865  
|Prepaid expenses                                                                  |  |                           | (170,048   
|Inventories                                                                       |  |                           | (22,447,130
|Allowance receivables                                                             |  |                           | 2,160,085  
|VAT recoverable                                                                   |  |                           | (5,818,467 
|Other current assets                                                              |  |                           | 17,221     
|Deferred charges                                                                  |  |                           | (28,862    
|Accounts payable                                                                  |  |                           | 1,477,457  
|Other payables                                                                    |  |                           | 1,753,707  
|Grants payable                                                                    |  |                           | —          
|Accrued liabilities                                                               |  |                           | 2,326,281  
|Taxes payable                                                                     |  |                           | (91,161    
|Deposits from customers                                                           |  |                           | (5,200,552 
|Deposits from customers - long-term portion                                       |  |                           | (339,809   
|Other non-current assets                                                          |  |                           | (1,850,892 
|Net cash (used in) provided by operating activities                               |  |                           | (23,643,011
|                                                                                  |  |                           |            
|Cash flows from investing activities:                                             |  |                           |            
|Deposits for purchase of land use rights                                          |  |                           | (2,267,500 
|Construction in progress                                                          |  |                           | (38,142,893
|Additions to property and equipment                                               |  |                           | (6,455,137 
|Additions to land use rights                                                      |  |                           | (10,110,809
|Proceeds from sale of property and equipment                                      |  |                           | 11,596     
|Increase in restricted cash                                                       |  |                           | —          
|Net cash used in investing activities                                             |  |                           | (56,964,743
|                                                                                  |  |                           |            
|Cash flows from financing activities:                                             |  |                           |            
|Proceeds from (repayment of) bank notes, net                                      |  |                           | 1,133,867  
|Increase in restricted cash                                                       |  |                           | (6,974,018 
|Proceeds from short-term bank loans                                               |  |                           | 136,477,415
|Repayment of short-term bank loans                                                |  |                           | (64,600,357
|Proceeds from long-term loans                                                     |  |                           | 30,129,745 
|Repayment of long-term loans                                                      |  |                           | (1,659,865 
|Repayment of capital lease obligation                                             |  |                           | (3,023,529 
|Proceeds from offering of common stock                                            |  |                           | —          
|Repurchases of common stock                                                       |  |                           | (2,812,322 
|Capital contribution by non-controlling interest                                  |  |                           | —          



4







|                                                   |  | Six Months Ended June 30, |            
|-------------------------------------------------- |  | ------------------------- | -----------
|                                                   |  | 2012                      |            
|Net cash provided by financing activities          |  |                           | 88,670,936 
|                                                   |  |                           |            
|Effects of rate changes on cash                    |  |                           | (643,533   
|Increase in cash and cash equivalents              |  |                           | 7,419,649  
|Cash and cash equivalents, beginning of period     |  |                           | 135,845,095
|Cash and cash equivalents, end of period           |  | $                         | 143,264,744
|                                                   |  |                           |            
|Supplemental disclosures of cash flow information: |  |                           |            
|Cash paid for interest                             |  | $                         | 14,197,482 
|Cash paid for income taxes                         |  | $                         | 2,992,995  



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



5


ZHONGPIN INC.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS




| | 1. | ORGANIZATION AND NATURE OF OPERATIONS
| | -- | -------------------------------------



Zhongpin Inc. (the “Company”)
was established under the laws of the State of Delaware on February 4, 2003.  The Company is a public holding company holding
equity interests 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 divisions: pork and pork products, and vegetables and fruits.The
pork and pork products division is involved primarily in the processing of live 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 division is involved primarily in the processing
of frozen vegetables and fruits that are sold to the Company’s branded stores and food retailers.



The Company holds a 100% interest in Falcon
Link Investment Limited, a company organized under the laws of the British Virgin Islands (“Falcon”), through which
the Company holds a 100% interest in its China-based subsidiaries, each of which was organized under the laws of China. The Company’s
China-based subsidiaries include the following:



|Name                                                           |  | Date of Incorporation |  | Registered Capital               |  | Percentage  of Ownership |    
|-------------------------------------------------------------- |  | --------------------- |  | -------------------------------- |  | ------------------------ | ---
|                                                               |  |                       |  |                                  |  |                          |    
|Henan Zhongpin Food Company Limited                            |  | May 20, 2005          |  | $203,300,000                     |  |                          | 100
|                                                               |  |                       |  |                                  |  |                          |    
|Henan Zhongpin Food Share Company Limited (“Henan Zhongpin”)   |  | Jan. 20, 2000         |  | 1,430,000,000 RMB ($219,699,181) |  |                          | 100
|                                                               |  |                       |  |                                  |  |                          |    
|Henan Zhongpin Import and Export Trading Company Limited       |  | Aug. 11, 2004         |  | 5,060,000 RMB ($611,111)         |  |                          | 100
|                                                               |  |                       |  |                                  |  |                          |    
|Zhumadian Zhongpin Food Company Limited                        |  | June 7, 2006          |  | 60,000,000 RMB ($8,585,398)      |  |                          | 100
|                                                               |  |                       |  |                                  |  |                          |    
|Anyang Zhongpin Food Company Limited                           |  | Aug. 21, 2006         |  | 34,800,000 RMB ($5,094,422)      |  |                          | 100
|                                                               |  |                       |  |                                  |  |                          |    
|Henan Zhongpin Fresh Food Logistics Company Limited            |  | Sept. 14, 2006        |  | 1,500,000 RMB ($189,665)         |  |                          | 100
|                                                               |  |                       |  |                                  |  |                          |    
|Deyang Zhongpin Food Company Limited                           |  | Sept. 25, 2006        |  | 15,000,000 RMB ($1,893,652)      |  |                          | 100
|                                                               |  |                       |  |                                  |  |                          |    
|Henan Zhongpin Business Development Company Limited            |  | Sept. 27, 2006        |  | 5,000,000 RMB ($632,215)         |  |                          | 100
|                                                               |  |                       |  |                                  |  |                          |    
|Luoyang Zhongpin Food Company   Limited (“Luoyang Zhongpin”)   |  | Jan.18, 2007          |  | 60,000,000 RMB ($8,703,452)      |  |                          | 100
|                                                               |  |                       |  |                                  |  |                          |    
|Yongcheng Zhongpin Food Company Limited (“Yongcheng Zhongpin”) |  | Mar. 1, 2007          |  | 60,000,000 RMB ($8,783,487)      |  |                          | 100
|                                                               |  |                       |  |                                  |  |                          |    
|Tianjin Zhongpin Food Company Limited (“Tianjin Zhongpin”)     |  | Sept. 14, 2007        |  | 100,000,000 RMB ($14,639,145 )   |  |                          | 100
|                                                               |  |                       |  |                                  |  |                          |    
|Jilin Zhongpin Food Company Limited                            |  | Dec. 11, 2008         |  | 1,000,000 RMB ($145,688)         |  |                          | 100



6


ZHONGPIN INC.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS




|Name                                                                                 |  | Date of Incorporation |  | Registered Capital                |  | Percentage  of Ownership |    
|------------------------------------------------------------------------------------ |  | --------------------- |  | --------------------------------- |  | ------------------------ | ---
|                                                                                     |  |                       |  |                                   |  |                          |    
|Henan Zhongpin Agriculture and Animal Husbandry Industry Development Company Limited |  | Dec. 26, 2008         |  | 10,000,000 RMB ($1,461,796)       |  |                          | 100
|                                                                                     |  |                       |  |                                   |  |                          |    
|Taizhou Zhongpin Food Company Limited                                                |  | May 12, 2010          |  | 100,000,000 RMB ($15,872,008)     |  |                          | 100
|                                                                                     |  |                       |  |                                   |  |                          |    
|Changchun Zhongpin Food Company
    Limited (“Changchun Zhongpin”)                   |  | Aug. 6, 2010          |  | 170,000,000 RMB ($27,011,138)     |  |                          | 100
|                                                                                     |  |                       |  |                                   |  |                          |    
|Henan Zhongpin Xinda Agriculture and Animal Husbandry Company Limited                |  | June 1, 2011          |  | 15,000,000 RMB
    ($2,287,841)   |  |                          | 65 
|                                                                                     |  |                       |  |                                   |  |                          |    
|Kunshan Zhongpin Cold Chain Logistics Company Limited                                |  | June 3, 2011          |  | 300,000,000 RMB
    ($46,356,388) |  |                          | 100
|                                                                                     |  |                       |  |                                   |  |                          |    
|Tangshan Zhongpin Food Company Limited                                               |  | Nov. 15, 2011         |  | 5,000,000 RMB ($788,196)          |  |                          | 100










(1)           Includes
a 1.19% ownership interest of another six stockholders with respect to which Henan Zhongpin Food Company Limited is entitled to
all economic benefits and the right to vote pursuant to the terms of a trust agreement with such stockholders.



| | 2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
| | -- | ------------------------------------------



Consolidation and Basis of Presentation



The condensed consolidated financial statements
include the accounts of Zhongpin Inc. and its wholly owned subsidiaries (collectively referred to herein as the “Company”).
All significant intercompany accounts and transactions have been eliminated during the process of consolidation. The condensed
consolidated financial statements were prepared in accordance with GAAP for interim financial information.



Non-controlling Interests



Effective July 1, 2009, the Company adopted
the authoritative pronouncement issued by the Financial Accounting Standards Board (the “FASB”) regarding non-controlling
interests in consolidated financial statements. The pronouncement requires non-controlling interests to be separately presented
as a component of equity in the consolidated financial statements.



Foreign Currency Translations and Transactions



RMB, the national currency of China, is
the primary currency that the Company’s China-based subsidiaries use. The United States dollar (“U.S. dollar”)
is the functional currency used by Falcon and Zhongpin Inc. to record all of their activities. The Company uses the U.S. dollar
for financial reporting purposes.



The Company translates assets and liabilities
into U.S. dollars using the middle rate published by the People’s Bank of China as of the balance sheet date. The condensed
consolidated statement of income is translated at average rates during the reporting period. Adjustments resulting from the translation
of financial statements from RMB into U.S. dollars are recorded in stockholders' equity as part of accumulated other comprehensive
income. Gains or losses resulting from transactions in currencies other than RMB are reflected in income for the reporting period.



7


ZHONGPIN INC.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS




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
reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.



Certain accounting principles require subjective
and complex judgments to be used in the preparation of financial statements. Accordingly, a different financial presentation could
result depending on the judgments, estimates, or assumptions that are used. Such estimates and assumptions include, but are not
specifically limited to, those required in the valuation of long-lived assets, allowance for doubtful accounts, reserves for inventory
obsolescence, valuation allowances for value added tax (“VAT”) recoverable, and determination of stock based compensation.



Revenue Recognition



Revenues generated from the sales of various
meat products and vegetables and fruits are recognized 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 the Company are primarily perishable and frozen food products, the right of return is only valid for a few days and has
been determined to be insignificant by the management of the Company. Accordingly, no provision has been made for returnable goods.
Revenues presented on the consolidated statements of operations and comprehensive income are net of sales taxes.



Cash and Cash Equivalents



The Company considers all highly-liquid
investments with maturity of three months or less to be cash equivalents. The Company maintains its cash accounts at creditworthy
financial institutions and closely monitors the movements of its cash positions.



Restricted Cash and Bank Notes Payable



Under the terms of the credit agreements
with certain of its lenders, 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 the consolidated balance sheets.



Bank Notes Receivable



The Company only accepts notes issued by
banks in the normal course of business as payment for products sold by the Company. These bank notes receivable have maturity dates
of up to 180 days and bear no interest. The Company can hold the bank notes until the maturity date and collect the amount from
the issuing banks, or the Company can use these bank notes as a means for payment for goods or services received. The Company accrues
no provision for these bank notes because such bank notes have little risk of default in China.



Accounts Receivable



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



8


ZHONGPIN INC.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS




The Company regularly evaluates and monitors
the creditworthiness of each of its customers in accordance with the prevailing practice in the meat industry and based on general
economic conditions in China. The Company maintains a general policy of providing 100% 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 5% of the aggregate
amount of accounts receivable less than one year old. After all attempts to collect a receivable have failed, the receivable is
written off against the allowance. The Company also examines the credit terms of significant customers regularly and asks for more
cash deposits if these customers appear to have any indicators of delaying their payments to the Company. Such deposits are usually
applied for the collection of the outstanding accounts receivable during the year. With such a practice in place, the Company did
not have any specific allowance for doubtful accounts provided against specific customers as of June 30, 2012 and December 31,
2011, respectively.



The following table presents allowance activities
in accounts receivable.



|                                             |  | June 30, 2012 |           |  | December 31, 2011 |  
|-------------------------------------------- |  | ------------- | --------- |  | ----------------- | -
|                                             |  |               |           |  |                   |  
|Beginning balance                            |  | $             | 2,323,920 |  |                   | $
|Additions to allowance for doubtful accounts |  |               | 2,003,243 |  |                   |  
|Ending balance                               |  | $             | 4,327,163 |  |                   | $



Inventories



Inventories are comprised of raw materials
and low-value consumables, work-in-progress, and finished goods. Inventories are stated at the lower of cost or the market-based
prices according to the weighted average method. Production cost components include the purchase cost of live hogs, direct labor,
depreciation, packaging material, utility expense and other manufacturing overhead. By using a systematic costing system, the production
cost is allocated to various products at the stage of work-in-progress and finished goods, respectively. Net realizable value is
the estimated selling price, in the ordinary course of business, less estimated costs to complete and dispose. The Company regularly
inspects the shelf life of prepared foods and, if necessary, writes down their carrying value based on their salability and expiration
dates as cost of goods sold.



Property, Plant and Equipment



Property, plant and equipment are recorded
at cost and are stated net of accumulated depreciation. Depreciation expense is determined using the straight-line method over
the estimated useful lives of the assets, as follows:



|                               | Estimated Useful
        Economic Life
|------------------------------ | --------------------------------------
|Plant and buildings            | 5-30 years                            
|                               |                                       
|Machinery and equipment        | 5-20 years                            
|                               |                                       
|Office furniture and equipment | 3-5 years                             
|                               |                                       
|Vehicles                       | 5 years                               



Maintenance and repairs are charged directly
to expense as incurred, whereas improvements and renewals are generally capitalized in their respective property accounts. When
an item is retired or otherwise disposed of, the cost and applicable accumulated depreciation are removed and the resulting gain
or loss is recognized and reflected as a line item before income from operations.



Land Use Rights



The Chinese government
owns all of the parcels of land on which the Company's plants are built. In China, land use rights for commercial purposes are
granted by the PRC government typically for a term of 40-50 years. The Company is required to pay a lump sum of money to the State
Land and Resource Ministry of the applicable locality to acquire such rights.The Company capitalizes the lump sum of money paid and amortizes these land use rights by using the straight line method over the
term of the land use license granted by the applicable governmental authority.



9


ZHONGPIN INC.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS




Construction in Progress and Interest Capitalization



Construction
in progress is stated at cost. The cost accumulation process starts from the time the construction project is set-up and ends at
the time the project has been put into service and all regulatory permits and approvals have been received.Borrowing costs
attributable directly to the acquisition, construction or production of qualifying assets which require a substantial period of
time to be ready for their intended use or sale, are capitalized as part of the cost of those assets.



Impairment of Long-Lived Assets



The Company reviews long-lived assets 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 that asset. Whenever any such
impairment exists, an impairment loss will be recognized for the amount by which the carrying value exceeds the fair value.



Fair Value of Financial Instruments



The carrying amount of cash and cash equivalents,
accounts receivable, other receivables, advance to vendor, accounts payable and accrued liabilities, capital lease obligations
and short-term loans are reasonable estimates of their fair value because of the short maturity of these items. The carrying amounts
of capital lease obligations approximate their fair value based on the Company’s current incremental borrowing rates for
similar types of arrangements. Long-term debt approximates fair value since the bank term loans are fixed rate instruments and
bear interests at the rate dictated and published by the People's Bank of China. The current rates published by the People's Bank
of China approximate the interest rates of the loans outstanding.



Shipping and Handling Cost



All shipping and handling fees are included
in selling expenses. Shipping and handling fees amounted to $3.2 million and $2.7 million for the three months ended June 30, 2012
and 2011, respectively, and $5.5 million and $4.9 million for the six months ended June 30, 2012 and 2011, respectively.



Advertising Costs



Advertising costs are expensed as incurred.
Advertising expense amounted to $0.3 million and $1.2 million for the three months ended June 30, 2012 and 2011, respectively,
and $0.6 million and $2.0 million for the six months ended June 30, 2012 and 2011, respectively.



Value Added Tax



All China-based enterprises are subject
to a VAT imposed by the PRC government on their domestic product sales. The output VAT is charged to customers who purchase goods
from the Company and the input VAT is paid when the Company purchases goods from its vendors. Input VAT rates are 13% for most
of the purchasing activities conducted by the Company. Output VAT rate is 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 recoverable balance presented on the consolidated balance sheets represents either the input VAT less than or larger than the
output VAT. The debit balance represents a credit against future collections of output VAT instead of a receivable. On a quarterly
basis, the Company forecasts for each of its subsidiaries separately the amount of sales revenue necessary to fully utilize the
VAT recoverable. The factors considered in performing these forecasts include industry-specific and local economic conditions,
as well as consumer behavior by the subsidiaries' designated geographical region and the demographics within those regions. Once
the VAT recoverable for a subsidiary is determined to be non-recoverable in part or in full, the VAT recoverable is written-off
as cost of sales.



10


ZHONGPIN INC.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS




Stock Compensation



The Company receives
employee and certain non-employee services in exchange for (a) equity instruments of the Company or (b) liabilities that are based
on the fair value of the Company's equity instruments or that may be settled by the issuance of such equity instruments. The Company
accounts for stock compensation expense under the fair value recognition provisions ofthe FASB Accounting Standards Codification
(ASC) Topic 718 (ASC 718), which requires companies to estimate the fair value of share-based payment awards on the date of grant
using an option pricing model. See Note 9, "Equity Transactions", for further discussion on stock compensation expense.



Earnings Per Share



Basic earnings per share does not
include dilution and is computed by dividing income available to common shareholders by the weighted average number of common
shares outstanding during the period. Diluted earnings per share reflects the potential dilution of securities that could
share in the earnings of an entity, similar to fully-diluted earnings per share.All of such
securities are included in the computation of diluted earnings per share. Of the 1,312,189 options and warrants outstanding
at June 30, 2012, 1,007,000 options were anti-dilutive and therefore excluded from the computation of diluted earnings
per share for the three and six months ended June 30, 2012. The number of shares of common stock
underlying the outstanding stockwarrants and options which were included in the computation of diluted earnings per
share for the three and six months ended at June 30, 2012 and 2011 were 305,189 and 1,314,564, respectively.



Government Subsidies



The Company's subsidiaries in China receive
government subsidies from local Chinese government agencies in accordance with relevant Chinese government policies. In general,
the Company presents the government subsidies received as part of other income unless the subsidies received are earmarked to compensate
a specific expense, which have been accounted for by offsetting the specific expense, such as research and development expense
or interest expenses. Unearned government subsidies received are deferred for recognition until the criteria for such recognition
could be met.



Research and Development Expenses



Research and development costs are expensed
as incurred. Gross research and development expenses for new product development and improvements of existing products by the Company
incurred for the three-month periods ended June 30, 2012 and 2011 were $157,016 and $23,804, respectively, and for the six-month
periods ended June 30, 2012 and 2011 were $243,644 and $455,310, respectively. The Company did not receive government subsidies
that were specified for supporting the Company’s research and development efforts for the three-month and six-month periods
ended June 30, 2012 and 2011, respectively.



Appropriation of Statutory Reserve



Under the corporate law and relevant regulations
in the PRC, all of the subsidiaries of the Company located in the PRC are required to appropriate a portion of its retained earnings
to statutory reserve. All subsidiaries located in the PRC are required to appropriate 10% of its annual after-tax income each year
to the statutory reserve until the statutory reserve balance reaches 50% of the registered capital. In general, the statutory reserve
shall not be used for dividend distribution purposes. As of June 30, 2012 and December 31, 2011, the appropriation of statutory
reserves were $32.6 million and $29.5 million, respectively.



Comprehensive Income (Loss)



The Company adoptedFASB Accounting Standards Codification 220, Comprehensive Income,which establishes standards
for reporting and presentation of comprehensive income (loss) and its components in a full set of general-purpose financial statements.
The Company has chosen to report comprehensive income (loss) in the statements of operations and comprehensive income. Comprehensive
income (loss) is comprised of net income and all changes to stockholders' equity except those due to investments by owners and
distributions to owners.



11


ZHONGPIN INC.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS




Recently Adopted Accounting Pronouncements



Adoption of FASB ASU 2011-11



In December 2011, the FASB issued Accounting
Standards Update (“ASU”) No. 2011-11, Disclosures about Offsetting Assets and Liabilities”(ASU 2011-11). The
amendments in this ASU require an entity to disclose information about offsetting and related arrangements to enable users of its
financial statements to understand the effect of those arrangements on its financial position. An entity is required to apply the
amendments for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods.
An entity should provide the disclosures required by those amendments retrospectively for all comparative periods presented. The
adoption of ASU 2011-11 is not expected to have a significant impact on the Company’s consolidated financial statements.



Adoption of FASB ASU 2011-04



In May 2011, the FASB issued ASU No. 2011-04,
“Fair Value Measurement (Topic 820)”, which provided clarifications for Topic 820 and also included instances where
a particular principle or requirement for measuring fair value or disclosing information about fair value measurement has changed.
This Update results in common principles and requirements for measuring fair value and for disclosing information about fair value
measurements in accordance with U.S. GAAP and is effective during interim and annual periods beginning after December 15, 2011
for public entities. Early application by public entities is not permitted, and the adoption of ASU 2011-04 did not have a material
impact on the Company’s consolidated financial position and results of operations.



| | 3. | INVENTORIES
| | -- | -----------



Inventories at June 30, 2012 and December
31, 2011 consisted of the following:



|                                  |  | June 30, 2012 |            |  | December 31, 2011 |  
|--------------------------------- |  | ------------- | ---------- |  | ----------------- | -
|                                  |  | (Unaudited)   |            |  |                   |  
|                                  |  |               |            |  |                   |  
|Raw materials                     |  | $             | 6,433,461  |  |                   | $
|Low value consumables and packing |  |               | 1,728,026  |  |                   |  
|Work-in-progress                  |  |               | 4,138,709  |  |                   |  
|Finished goods                    |  |               | 51,869,334 |  |                   |  
|Inventories                       |  | $             | 64,169,530 |  |                   | $



| | 4. | PROPERTY, PLANT AND EQUIPMENT
| | -- | -----------------------------



A summary of property, plant and equipment
at cost at June 30, 2012 and December 31, 2011 is as follows:



|                               |  | June 30, 2012 |             |   | December 31, 2011 |  
|------------------------------ |  | ------------- | ----------- | - | ----------------- | -
|                               |  | (Unaudited)   |             |   |                   |  
|                               |  |               |             |   |                   |  
|Plant and buildings            |  | $             | 352,882,535 |   |                   | $
|Machinery and equipment        |  |               | 151,118,798 |   |                   |  
|Office furniture and equipment |  |               | 6,911,909   |   |                   |  
|Vehicles                       |  |               | 4,483,174   |   |                   |  
|Accumulated depreciation       |  |               | (54,926,080 | ) |                   |  
|Total                          |  | $             | 460,470,336 |   |                   | $



12


ZHONGPIN INC.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS




The depreciation expenses for the three-month
periods ended June 30, 2012 and 2011 were $5,706,593 and $4,237,402, respectively, and for the six-month periods ended June 30,
2012 and 2011 were $11,244,577 and $8,201,482, respectively.



Of the above information, property,
plant and equipment under the sale-leaseback agreement at cost at June 30, 2012 and December 31, 2011 is as follows:



|                               |  | June 30, 2012 |            |   | December 31, 2011 |  
|------------------------------ |  | ------------- | ---------- | - | ----------------- | -
|                               |  | (Unaudited)   |            |   |                   |  
|                               |  |               |            |   |                   |  
|Plant and buildings            |  | $             | 161,893    |   |                   | $
|Machinery and equipment        |  |               | 17,963,548 |   |                   |  
|Office furniture and equipment |  |               | 43,858     |   |                   |  
|Vehicles                       |  |               | 4,433      |   |                   |  
|Accumulated depreciation       |  |               | (3,025,740 | ) |                   |  
|Total                          |  | $             | 15,147,992 |   |                   | $



The deferred losses included in the property
and equipment balance were $624,047 and $1,375,173 at June 30, 2012 and December 31, 2011, respectively, and would be amortized
over the lease term. Of the depreciation expenses, $373,994 and $280,687 were amortization of deferred loss and depreciation expense
from assets under capital lease, respectively, for the three months ended June 30, 2012; $380,451 and $366,317 were amortization
of deferred loss and depreciation expense from assets under capital lease, respectively, for the three months ended June 30, 2011;
$747,989 and $561,375 were amortization of deferred loss and depreciation expense from assets under capital lease, respectively,
for the six months ended June 30, 2012; $756,068 and $727,979 were amortization of deferred loss and depreciation expense from
assets under capital lease, respectively, for the six months ended June 30, 2011.



| | 5. | LAND USE RIGHTS
| | -- | ---------------



The Company’s land use rights at June
30, 2012 and December 31, 2011 are as follows:



|                         |  | June 30, 2012 |             |   | December 31, 2011 |  
|------------------------ |  | ------------- | ----------- | - | ----------------- | -
|                         |  | (Unaudited)   |             |   |                   |  
|                         |  |               |             |   |                   |  
|Land use rights          |  | $             | 113,677,716 |   |                   | $
|Accumulated amortization |  |               | (7,001,240  | ) |                   |  
|Total                    |  | $             | 106,676,476 |   |                   | $



The amortization expenses for the three months
ended June 30, 2012 and 2011 were $572,870 and $462,058, respectively, and for the six-month periods ended June 30, 2012 and 2011
were $1,089,836 and $918,246, respectively.



13


ZHONGPIN INC.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS






| | 6. | CONSTRUCTION IN PROGRESS
| | -- | ------------------------



Construction in progress at June 30, 2012 and December 31, 2011
consisted of the following:



|Construction Project                                                    |  | Date or Estimated Date Put in Service(1) |                |  | June 30, 2012 |   |            | December 31, 
2011 |  
|----------------------------------------------------------------------- |  | ---------------------------------------- | -------------- |  | ------------- | - | ---------- | ------------------ | -
|                                                                        |  |                                          |                |  |               |   |            |                    |  
|Production  facility for chilled and frozen pork in Taizhou             |  | January 2012                             |                |  | $             | — |            |                    | $
|Production  facility for chilled and frozen pork in Changchun           |  | January 2012                             |                |  | —             |   |            | 926,939            |  
|Production facility for prepared pork products in Changge (first phase) |  |                                          | April 2012     |  |               |   | —          |                    |  
|Information system                                                      |  |                                          | May 2012       |  |               |   | —          |                    |  
|Zhongpin Xinda joint venture project                                    |  |                                          | September 2012 |  |               |   | 9,807,109  |                    |  
|Sausage casting facility in Changge                                     |  |                                          | September 2012 |  |               |   | 7,737,983  |                    |  
|Anyang logistic project                                                 |  |                                          | October 2012   |  |               |   | 20,723,184 |                    |  
|Improvement in Changge industrial park                                  |  |                                          | October 2012   |  |               |   | 163,686    |                    |  
|Production  facility for prepared pork products in Tianjin              |  |                                          | November 2012  |  |               |   | 1,966,691  |                    |  
|Upgrade for production facility in other locations                      |  |                                          | November 2012  |  |               |   | 350,047    |                    |  
|Kunshan facility land preparation cost                                  |  |                                          | April 2013     |  |               |   | 6,035,702  |                    |  
|Total                                                                   |  |                                          |                |  |               | $ | 46,784,402 |                    |  





| |  | Estimated cost to complete current construction in progress is $74.9 million.
| |  | -----------------------------------------------------------------------------










| | (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 $186.9 million aggregate principal amount of short-term bank loans at June 30, 2012, loans
in the aggregate principal amount of $132.0 million were secured by the land use rights, property and plant of Company’s
subsidiaries in China, $34.9 million aggregate principal amount of loans was credit loans, and loans in the aggregate principal
amount of $19.0 million were guaranteed byHenanHuangheEnterprisesGroup Co., Ltd., an unaffiliated third party (“Huanghe Group”). These loans bear interest at prevailing lending rates
in China ranging from 6.10% to 7.87% per annum.



| | 8. | LONG-TERM BANK LOANS
| | -- | --------------------



Amounts outstanding under the Company’s
long-term debt arrangements at June 30, 2012 and December 31, 2011 were as follows:



|Bank                              |  | June 30, 2012 |             |   | December 31, 2011 |  
|--------------------------------- |  | ------------- | ----------- | - | ----------------- | -
|                                  |  | (Unaudited)   |             |   |                   |  
|                                  |  |               |             |   |                   |  
|China Construction Bank           |  | $             | 24,506,316  |   |                   | $
|Agriculture Bank of China         |  |               | 79,210,739  |   |                   |  
|China Merchants Bank              |  |               | 15,020,000  |   |                   |  
|Canadian Government Transfer Loan |  |               | 1,124,922   |   |                   |  
|Changge Old Town                  |  |               | 1,613,436   |   |                   |  
|China Development Bank            |  |               | 19,763,158  |   |                   |  
|Current portion                   |  |               | (44,658,520 | ) |                   |  
|Total long-term portion           |  | $             | 96,580,051  |   |                   | $



14


ZHONGPIN INC.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS






In April 2012, Changchun Zhongpin entered into a loan agreement
with China Development Bank pursuant to which Changchun Zhongpin may borrow up to RMB 300 million ($47.4 million).  Changchun
Zhongpin drew down RMB 125 million ($19.8 million) in April 2012. All amounts borrowed under the loan agreement bear interest at
a floating rate that is 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 (7.48% per annum on June 30, 2012 and adjustable immediately following the publishing of rate adjustments
by the People’s Bank of China during the term of the loan) and RMB 125 million ($19.8 million) are payable in installments
on various scheduled repayment dates between April 2013 and May 2017. Borrowings under the loan agreement are guaranteed by Henan
Zhongpin and secured by all of Henan Zhongpin’s equity interests in Tianjin Zhongpin and Yongcheng Zhongpin.



In April 2012, Henan Zhongpin entered into
a loan agreement with China Construction Bank pursuant to which Henan Zhongpin borrowed RMB 15 million ($2.4 million). All amounts
borrowed under the loan agreement bear interest at a floating rate that is 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 (6.65% per annum on June 30, 2012 and adjustable on
each anniversary of the agreement based on the prime rate published by the People’s Bank of China for loans with the same
or similar terms) and are payable in March 2014. Borrowings under the loan agreement are secured by the land use rights, property
and plant of Henan Zhongpin.



In March 2012, Henan Zhongpin entered into
a loan agreement with China Construction Bank pursuant to which Henan Zhongpin borrowed RMB 50 million ($7.9 million). All amounts
borrowed under the loan agreement bear interest at a floating rate that is 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 (6.40% per annum on June 30, 2012 and adjustable on
each anniversary of the agreement based on the prime rate published by the People’s Bank of China for loans with the same
or similar terms) and are payable in March 2014. Borrowings under the loan agreement are secured by the land use rights, property
and plant of Henan Zhongpin.



In June 2011,
Henan Zhongpin entered into a loan agreement with China Construction Bank pursuant to which Henan Zhongpin borrowed RMB 50 million
($7.9 million). All amounts borrowed under the loan agreement bear interest at a floating rate that is 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 (6.08% per annum on
June 30, 2012 and adjustable on the anniversary of the agreement based on the prime rate published by the People’s Bank of
China for loans with the same or similar terms) and are payablein installmentsin March and
June 2013. Borrowings under the loan agreement are secured by the land use rights, property and plant of Henan Zhongpin.



In December 2010, Henan Zhongpin entered
into a loan agreement with Agriculture Bank of China pursuant to which Henan Zhongpin borrowed RMB 25 million ($4.0 million). All
amounts borrowed under the loan agreement bear interest at a floating rate that is 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 (6.40% per annum on June 30, 2012 and adjustable in
the month immediately following the publishing of rate adjustments by the People’s Bank of China during the term of the loan)
and are payable in December 2013. Borrowings under the loan agreement are secured by the land use rights, property and plant of
Henan Zhongpin.



In September
2010, Henan Zhongpin entered into a loan agreement with Agriculture Bank of China pursuant to which Henan Zhongpin borrowed RMB
75 million ($11.9 million). All amounts borrowed under the loan agreement bear interest at a floating rate that is 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 (6.90% per
annum on June 30, 2012 and adjustable in the month immediately following the publishing of rate adjustments by the People’s
Bank of China during the term of the loan) and are payable in installments on various scheduled repayment dates between September
2011 and June 2014. Borrowings under the loan agreement are guaranteed by the Company’s wholly owned subsidiary, Yongcheng
Zhongpin. Henan Zhongpin repaid an aggregate of $0.3 million of the loan in September and December 2011, and $0.2 million
of the loan in May 2012; $11.4 million remained outstanding as of June 30, 2012.



15


ZHONGPIN INC.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS




In July 2010, Tianjin Zhongpin entered
into a loan agreement with the Agriculture Bank of China pursuant to which Tianjin Zhongpin may borrow up to RMB 300 million
($47.4 million). Tianjin Zhongpin drew down RMB 50 million ($7.9 million) in July 2010, RMB 80 million ($12.7 million) in
November 2010 and RMB 110 million ($17.4 million) in May 2011. In June 2012, Tianjin Zhongpin extended the term of $7.9
million of the loan to be repayable in June 2015. Borrowings under the loan agreement are secured by the land use rights,
property and plant of Tianjin Zhongpin. As of June 30, 2012, the total outstanding balance under the agreement was
$38.0 million. All amounts borrowed under the loan agreement bear interest at a floating rate that is 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 (6.65% per
annum on June 30, 2012 and adjustable in the month immediately following the publishing of rate adjustments by the
People’s Bank of China during the term of the loan) and are payable in installments in June 2013, 2014 and 2015.



In June 2010,
Henan Zhongpin entered into a loan agreement with China Construction Bank pursuant to which Henan Zhongpin borrowed RMB 40 million
($6.3 million). All amounts borrowed under the loan agreement bear interest at a floating rate that is 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 (5.76% per annum on
June 30, 2012 and adjustable on each anniversary of date of the agreement based on the prime rate published by the People’s
Bank of China for loans with the same or similar terms) and are payable on June 29, 2013. Borrowings
under the loan agreement are secured by the land use rights, property and plant of Henan Zhongpin.



In April 2010,
in connection with the purchase of a piece of land from Changge Old Town, Changge Old Town extended a loan to Henan Zhongpin with
a principal amount of RMB 10.2 million ($1.6 million) and bearing interest at the rate of 7.00% per annum payable on June 30, 2010
and each anniversary thereafter. Such loan does not have a fixed term and the principal amount of the loan should be repaid by
Henan Zhongpin upon six months prior written notice from Changge Old Town. The loanremained outstanding as of June 30,
2012.



In March 2010,
Henan Zhongpin entered into a loan agreement with the Agriculture Bank of China pursuant to which Henan Zhongpin borrowed RMB 53
million ($8.4 million). All amounts borrowed under the loan agreement bear interest at a floating rate that is 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 (6.65% per annum
on June 30, 2012 and adjustable in the month immediately following the publishing of rate adjustments by the People’s Bank
of China during the term of the loan) and are payable in installmentson various scheduled repayment dates between December
2011 and December 2013. Borrowings under the loan agreement are secured by the land use rights, property
and plant of Henan Zhongpin. Henan Zhongpin repaid $1.3 million of the loan in March 2011, $1.0 million of the loan in December
2011 and $1.3 million of the loan in May 2012; $4.9 million remained outstanding as of June 30, 2012.



In February 2010, Henan Zhongpin entered
into a loan agreement with the Agriculture Bank of China pursuant to which Henan Zhongpin borrowed RMB 71 million ($11.2 million).
All amounts borrowed under the loan agreement bear interest at a floating rate that is 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 (6.65% per annum on June 30, 2012 and
adjustable in the month immediately following the publishing of rate adjustments by the People’s Bank of China during the
term of the loan) and are payable on February 3, 2013. Borrowings under the loan agreement are secured by the land use rights,
property and plant of Henan Zhongpin.



In December 2009,
Henan Zhongpin entered into a loan agreement with the Agriculture Bank of China pursuant to which Henan Zhongpin borrowed RMB 70
million ($11.1 million). All amounts borrowed under the loan agreement bear interest at a floating rate that is 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 (6.90% per annum
on June 30, 2012 and adjustable in the month immediately following the publishing of rate adjustments by the People’s Bank
of China during the term of the loan) and are payable in installments onvarious scheduled repayment dates between December
2010 and December 2014. Borrowings under the loan agreement are secured by the land use rights, property
and plant of Luoyang Zhongpin. Henan Zhongpin repaid $0.7 million
of the loan in December 2010,, an aggregate of $0.4 million of the loan in October and December 2011 and $0.2 million in May 2012; $9.8 million remained outstanding as of June 30, 2012.



16


ZHONGPIN INC.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS




In November 2009,
Henan Zhongpin entered into a loan agreement with China Merchants Bank pursuant to which Henan Zhongpin borrowed RMB 95 million
($15.0 million). The first 50% of the loan was drawn down in November 2009 and the remaining 50% of the loan was drawn down in
March 2010. All amounts borrowed under the loan agreement bear interest at a floating rate that is 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 (6.65% per annum on June 30,
2012 and adjustable in the month immediately following the publishing of rate adjustments by the People’s Bank of China during
the term of the loan) and are payable in installments onvarious scheduled repayment dates between November 2012 and November
2014. Borrowings under the loan agreement are guaranteed by Luoyang Zhongpin.



In May 2002,
Henan Zhongpin entered into a loan agreement with the Bank of Communications, 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 November 15, 2041. Borrowings under the loan agreement are guaranteed by the Financing
Department of Henan province.



Of the Company’s long term loans outstanding
at June 30, 2012, $93.1 million are secured by land use rights and property, plant and equipment of the Company’s subsidiaries.
Total of land use rights and property, plant and equipment pledged amounts to $110.9 million at June 30, 2012.



| | 9. | EQUITY TRANSACTIONS
| | -- | -------------------



During the three-month periods ended June
30, 2012 and 2011, the stock-based compensation expenses were $97,817 and $406,689, respectively, and for the six-month periods
ended June 30, 2012 and 2011, the stock-based compensation expenses were $515,566 and $775,316, respectively.



For the six-month periods ended June 30,
2012, the Company repurchased 368,300 shares of common stock from the public market, and no repurchase occurred during the second
quarter of 2012. The average cost per share, including commission, was $8.4023.





On April 9, 2012, 2,375 warrants were exercised on a cashless
basis in exchange for 680 shares of the Company's common stock in accordance with the terms of the warrant.







| | 10. | EARNINGS PER SHARE
| | --- | ------------------



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



|                                                               |  | Three Months Ended June 30, |            |  | Six Months Ended June 30, |  
|-------------------------------------------------------------- |  | --------------------------- | ---------- |  | ------------------------- | -
|                                                               |  | 2012                        |            |  | 2011                      |  
|                                                               |  | (Unaudited)                 |            |  | (Unaudited)               |  
|Numerator:                                                     |  |                             |            |  |                           |  
|Net income attributable to common shareholders                 |  | $                           | 10,980,829 |  |                           | $
|                                                               |  |                             |            |  |                           |  
|Denominator:                                                   |  |                             |            |  |                           |  
|Weighted average number of common shares outstanding – basic   |  |                             | 37,189,322 |  |                           |  
|                                                               |  |                             |            |  |                           |  
|Dilutive effect of stock options                               |  |                             | 20,373     |  |                           |  
|                                                               |  |                             |            |  |                           |  
|Weighted average number of common shares outstanding – diluted |  |                             | 37,209,695 |  |                           |  
|                                                               |  |                             |            |  |                           |  
|Basic earnings per share                                       |  | $                           | 0.29       |  |                           | $
|                                                               |  |                             |            |  |                           |  
|Diluted earnings per share                                     |  | $                           | 0.29       |  |                           | $



17


ZHONGPIN INC.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS




Of
the 1,312,189 options and warrants outstanding at June 30, 2012, 1,007,000 options were anti-dilutive and
therefore excluded from the computation of diluted earnings per share for the three and six months ended June 30, 2012.
305,189 options and warrants were dilutive and therefore included in the computation of diluted earnings per share for the
three and six months ended June 30, 2012. All potentially dilutive securities were included in
diluted earnings per share for the three and six months ended June 30, 2011 as the average market price is greater than the
exercise price of the warrants and options outstanding.



| | 11. | GOVERNMENT SUBSIDIES
| | --- | --------------------



The central and local governments in China
provided Henan Zhongpin with various subsidies to encourage its research and development activities, its construction of new facilities
using information technology, its building cold chain logistics and distribution networks, and its other contributions to the local
community, such as increasing employment opportunities. The government subsidies are generally classified as earmarked (such as
research and development activities) or non-earmarked. The interest subsidies were earmarked to offset the Company’s interest
expenses incurred in relation to the construction of its vegetable and fruit production facility. All subsidies were accounted
for based on evidence that cash has been received and the earmarked activities have taken place. Subsidies earmarked for research
and development activities were first offset against relevant research and development expenses incurred, and interest subsidies
were offset against the relevant interest expense incurred.



Government subsidies received by the Company
during the three-month and six-month periods ended June 30, 2012 and 2011 were as follows:



|                                        |  | Three Months Ended June 30, |           |  | Six Months Ended June 30, |  
|--------------------------------------- |  | --------------------------- | --------- |  | ------------------------- | -
|                                        |  | 2012                        |           |  | 2011                      |  
|Deferred subsidies opening balance:     |  |                             |           |  |                           |  
|Interest subsidies                      |  | $                           | —         |  |                           | $
|Earmarked subsidies                     |  |                             | 2,042,412 |  |                           |  
|Non-earmarked subsidies                 |  |                             | —         |  |                           |  
|Total                                   |  | $                           | 2,042,412 |  |                           | $
|                                        |  |                             |           |  |                           |  
|Subsidies received:                     |  |                             |           |  |                           |  
|Interest subsidies                      |  | $                           | —         |  |                           | $
|Earmarked subsidies                     |  |                             | —         |  |                           |  
|Non-earmarked subsidies                 |  |                             | 623,479   |  |                           |  
|Total                                   |  | $                           | 623,479   |  |                           | $
|                                        |  |                             |           |  |                           |  
|Subsidies recognized:                   |  |                             |           |  |                           |  
|Interest subsidies                      |  | $                           | —         |  |                           | $
|Earmarked subsidies                     |  |                             | 27,009    |  |                           |  
|Non-earmarked subsidies                 |  |                             | 623,479   |  |                           |  
|Total                                   |  | $                           | 650,488   |  |                           | $
|                                        |  |                             |           |  |                           |  
|Deferred subsidies year ending balance: |  |                             |           |  |                           |  
|Interest subsidies                      |  | $                           | —         |  |                           | $
|Earmarked subsidies                     |  |                             | 2,015,403 |  |                           |  
|Non-earmarked subsidies                 |  |                             | —         |  |                           |  
|Total                                   |  | $                           | 2,015,403 |  |                           | $



18


ZHONGPIN INC.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS




Subsidies received and other income recognized
are translated at the average exchange rate. The beginning and ending balances are translated at the period-end exchange rates.



| | 12. | FAIR VALUE MEASUREMENT
| | --- | ----------------------



The Company has adopted ASC Topic 820,
Fair Value Measurement and Disclosure, which defines fair value, establishes a framework for measuring fair value in GAAP,
and expands disclosures about fair value measurements. It does not require any new fair value measurements, but provides guidance
on how to measure fair value by providing a fair value hierarchy used to classify the source of the information. It establishes
a three-level valuation hierarchy of valuation techniques based on observable and unobservable inputs, which may be used to measure
fair value and include the following:



Level 1 – Quoted prices in active markets for identical
assets or liabilities.



Level 2 – Inputs other than Level 1 that are observable,
either directly or indirectly, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active;
or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets
or liabilities.



Level 3 – Unobservable inputs that are supported by little
or no market activity and that are significant to the fair value of the assets or liabilities.



Classification within the hierarchy is
determined based on the lowest level of input that is significant to the fair value measurement.



The Company’s financial items are
classified within Level 1 of the fair value hierarchy. The carrying amount of cash and cash equivalents, accounts receivable, other
receivables, advance to vendors, accounts payable and accrued liabilities and short-term loans are reasonable estimates of their
fair value because of the short term nature of these items.



The following table sets forth the Company's
financial assets and liabilities not measured at fair value on a recurring basis and where they are classified within the hierarchy
as of June 30, 2012:



|                |  | Total |             |  | Level 1 |  |   | Level 2 |  |   | Level 3     | 
|--------------- |  | ----- | ----------- |  | ------- |  | - | ------- |  | - | ----------- | 
|                |  |       |             |  |         |  |   |         |  |   |             | 
|Capital leases  |  | $     | 2,732,592   |  |         |  | - |         |  | $ | 2,732,592   | 
|Long term loans |  | $     | 141,238,571 |  |         |  | - |         |  | $ | 141,238,571 | 



19


ZHONGPIN INC.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS




Long-term debt approximates fair value since
the bank term loans are fixed rate instruments and bear interests at the rate dictated and published by the People's Bank of China.
The current rates published by the People's Bank of China approximate the interest rates of the loans outstanding.



| | 13. | SEGMENT REPORTING
| | --- | -----------------



The Company operates in only one segment:
meat production. The Company’s vegetable and fruit operations, both financially and operationally, do not represent a significant
enough portion of its business to constitute a separate segment. However, the Company’s product lines are divided into two
divisions: pork and pork products, and vegetables and fruits.



The pork and pork products division is involved
primarily in the processing of live hogs into fresh, frozen and processed pork products. The pork and pork products division markets
its products domestically to retail stores and to food retailers, food service distributors, restaurant operators and noncommercial
food service establishments, such as schools, hotel chains, healthcare facilities, the military and other food processors, as well
as in certain international markets on a limited basis.



The vegetables and fruits division is involved
primarily in the processing of fresh vegetables and fruits. The Company contracts 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 operations ensures freshness from harvest to processing. The Company contracts with those farms to grow more than 25 categories
of vegetables and fruits, including asparagus, sweet corn, broccoli, mushrooms, lima beans and strawberries.



|                        |  | Sales by Division (U.S. dollars in millions) |      
|----------------------- |  | -------------------------------------------- | -----
|                        |  | Three Months Ended June 30,                  |      
|                        |  | 2012                                         |      
|                        |  | (Unaudited)                                  |      
|Pork and Pork Products: |  |                                              |      
|Chilled pork            |  | $                                            | 247.7
|Frozen pork             |  |                                              | 91.4 
|Prepared pork products  |  |                                              | 65.1 
|Vegetables and Fruits   |  |                                              | 4.0  
|Total                   |  | $                                            | 408.2
|                        |  |                                              |      
|Cost of Sales:          |  |                                              |      
|Pork products           |  | $                                            | 369.1
|Vegetables and fruits   |  | $                                            | 3.5  
|                        |  |                                              |      
|Gross Profit Margin:    |  |                                              |      
|Pork products           |  |                                              | 8.7  
|Vegetables and fruits   |  |                                              | 12.5 



20


ZHONGPIN INC.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS




| | 14. | COMMITMENTS AND CONTINGENCIES
| | --- | -----------------------------



On March 27, 2012, the Company announced
that its Board of Directors had received a preliminary, non-binding proposal from the Company’s Chairman and Chief Executive
Officer, Xianfu Zhu, stating that Mr. Zhu intended to seek to purchase the remaining shares of the Company that he does not presently
own (the “Proposed Buyout”). Following this announcement, at least three lawsuits have been filed in Delaware naming
the members of the Company's Board of Directors and/or the Company as defendants.



On April 3, 2012, a verified shareholder
class action lawsuit was filed by Phillip Meeks in the Court of Chancery of the State of Delaware against the Company and members
of its Board of Directors, alleging that, inter alia, the Company's Board of Directors breached their fiduciary duties in connection
with the Proposed Buyout, and that the price per share proposed by Mr. Zhu represented inadequate consideration in light of the
Company’s intrinsic value and future prospects, and that the Company aided and abetted the breach of fiduciary duties. The
plaintiff seeks damages, declaratory relief and injunctive relief, including an order preventing the Company from proceeding with
the Proposed Buyout or any transaction with Mr. Zhu, as well as an award of plaintiffs’ attorneys’ fees and costs.
The Company believes that none of the defendants has yet responded to the complaint.



On April 11, 2012, a verified shareholder
class action lawsuit was filed by Richard Bauschard in the Court of Chancery of the State of Delaware against members of the Company's
Board of Directors, alleging that, inter alia, the Board of Directors breached their fiduciary duties in connection with the Proposed
Buyout, and that the price per share proposed by Mr. Zhu represented inadequate consideration in light of the Company’s intrinsic
value and future prospects. The plaintiff seeks damages, declaratory relief and injunctive relief, including an order preventing
the defendants from proceeding with the Proposed Buyout or any transaction with Mr. Zhu, as well as an award of plaintiffs’
attorneys’ fees and costs. The Company believes that none of the defendants has yet responded to the complaint.



On April 18, 2012, a verified shareholder
class action lawsuit was filed by Harry Vonderlieth in the Court of Chancery of the State of Delaware against the Company and members
of its Board of Directors, alleging that, inter alia, the Company's Board of Directors breached their fiduciary duties to the shareholders
in connection with the Proposed Buyout, and that the price per share proposed by Mr. Zhu represented inadequate consideration in
light of the Company’s intrinsic value and future prospects, and that the Company aided and abetted the breach of fiduciary
duties. The plaintiff seeks damages, declaratory relief and injunctive relief, including an order preventing the Company from proceeding
with the Proposed Buyout or any transaction with Mr. Zhu, as well as an award of plaintiffs’ attorneys’ fees and costs.
The Company believes that none of the defendants has yet responded to the complaint.



The Company intends to defend against the
pending class action litigation vigorously.



In accordance with accounting standards
regarding loss contingencies, the Company accrues an undiscounted liability for those contingencies where the incurrence of a loss
is probable and the amount can be reasonably estimated, and the Company discloses the amount accrued and an estimate of any reasonably
possible loss in excess of the amount accrued, if such disclosure is necessary for the Company’s financial statements not
to be misleading. The Company does not accrue liabilities when the likelihood that the liability has been incurred is probable
but the amount cannot be reasonably estimated, or when the liability is believed to be only reasonably possible or remote.



Because litigation outcomes are inherently
unpredictable, the evaluation of legal proceedings often involves a series of complex assessments by management about future events
and can rely heavily on estimates and assumptions. If the assessments indicate that loss contingencies that could be material to
any one of the Company’s financial statements are not probable, but are reasonably possible, or are probable, but cannot
be estimated, then the Company discloses the nature of the loss contingencies, together with an estimate of the possible loss or
a statement that such loss is not reasonably estimable.



21


ZHONGPIN INC.NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS




With respect to the legal proceedings and
claims described above, such litigation is still in its preliminary stages and the final outcome, including the Company’s
liability, if any, with respect to such litigation, is uncertain. At present, the Company is unable to estimate a reasonably possible
range of loss, if any, that may result from such litigation. If an unfavorable outcome were to occur in the litigation described
above, the impact could be material to the Company’s business, financial condition, or results of operations.



In addition, it is not possible to determine
the maximum potential amount under the indemnification provisions under the terms and conditions of applicable bylaws, certificates
or articles of incorporation, agreements or applicable law due to the limited history of prior indemnification claims and the
preliminary stages of the litigation.







22







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 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”
under Part II, Item 1A herein and in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2011.



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 China. Currently, we have 16 processing plants in China, located in Henan, Jiangsu,
Jilin and Sichuan provinces and in the municipality of Tianjin. Our total production capacity for chilled pork and frozen pork
is approximately 2,024.3 metric tons per eight-hour day, or approximately 728,760 metric tons on an annual basis. In addition,
we have production capacity for prepared meats of approximately 488.9 metric tons per eight-hour day, or approximately 176,000
metric tons on an annual basis, and for vegetables and fruits of approximately 83.3 metric tons per eight-hour day, or approximately
30,000 metric tons on an annual basis. We also have annual production capacity for food oil (pork oil) of approximately 20,000
metric tons. We use state-of-the-art equipment in all of our processing facilities and sell all of our products under our “Zhongpin”
brand name.



In December 2009, the PRC Ministry of Commerce
issued the Hog Slaughtering Industry Development Guidelines for 2010−2015. The guidelines state that the government will
control the number of slaughterhouses in China and specifically that there should be less than four slaughterhouses in urban areas
of municipalities and cities with a resident population of five million or more, and less than two slaughterhouses in urban areas
of other cities at or above the prefecture level.



23







In June 2010, the China Meat Association
(“CMA”) announced the China Meat Industry Development Strategy Report for 2011−2015. In that report, CMA provided
a development roadmap and targets for the meat industry for the coming five years:



| | Ø | To decrease sales of room temperature pork to below
50% of total pork sales in cities at or above county level in China by 2015;
| | - | --------------------------------------------------------------------------------------------------------------------------------



| | Ø | To increase the sales of chilled pork to around 30%
of the total pork sales in China by 2015;
| | - | ---------------------------------------------------------------------------------------------



| | Ø | To decrease outstanding licenses for slaughterhouses
from more than 21,000 to around 3,000 in China; by 2015; and
| | - | -----------------------------------------------------------------------------------------------------------------



| | Ø | To build pork and pork products production bases in
North China, Northeast China, East China and Southwest China.
| | - | -----------------------------------------------------------------------------------------------------------------



The report
indicates to us that there is an opportunity to consolidate and integrate the industry for companies
with strong brand recognition in China's meat industry, high quality facilities and products, strict quality control systems and
cold chain logistics capabilities.



Government and consumers take food safety
as one of their top priorities. With the government support, the consolidation of the industry is accelerating.



Our growth strategy
will include expanding our production capacity in the strategic areas in response to the suggestions in the report. We plan to
build new facilities for chilled and frozen pork, as well as new facilities for prepared pork products and cold chain logistic
distribution centers. We may also explore opportunities to acquire companies with strong regional brand recognition that produce
prepared pork products using high quality facilities. We expect that these new facilities, together with our existing ones, will
help us to build “Zhongpin” into a stronger, national brand, increase our market share, revenues and net income and
strengthen our ability totake advantage of consolidation opportunities
inthe meat industry in China.



We put into operation, are currently constructing,
or plan to construct, additional production facilities in different parts of China:



| | • | We are investing approximately $18.0 million in a cold-chain
logistic distribution center in Anyang, Henan province. This distribution center will have a 27,000 square meters temperature
adjustable warehouse, processing capacity, distribution center and quality control center. This distribution center will be used
for third-party cold-chain logistics service. We expect to put this distribution center into operation in the third quarter of
2012.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | • | We are investing approximately $87.5 million in a chilled
and frozen food processing and distribution center in Kunshan, Jiangsu province, which is near Shanghai city. The whole center
will be built in three phases. The first phase will include a processing center, cold chain logistics center and business complex.
We plan to invest about $35.0 million on the first phase and put it into operation in the fourth quarter of 2012.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | • | We are investing approximately $58.5 million to build
a new production, research and development, and training complex in Changge, Henan province excluding the cost of land use rights
that we have already obtained. When completed, we anticipate that this new facility will have a production capacity of approximately
100,000 metric tons for prepared pork products. Adjacent to this new production facility, we also plan to develop a center for
research and development, training, as well as quality assurance and control. Construction for the first phase with a production
capacity of approximately 50,000 metric tons for prepared pork products started in the second quarter of 2011 and was completed
in the second quarter of 2012. We started trial production in this facility from July 2012.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





24

















| | • | We will be investing approximately $49.0 million to
build a slaughtering and processing plant, low temperature prepared pork plant, and logistics center in Tangshan, Hebei province.
This facility will have a production capacity of approximately 60,000 metric tons for chilled pork, 20,000 metric tons for frozen
pork, and 22,000 metric tons for prepared pork products. The construction is scheduled to start in the third quarter of 2012.
We expect to put the new facility for chilled and frozen pork into operation in the second quarter of 2013.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | • | We are investing approximately $10.5 million in a by-product
processing plant in Changge, Henan province. This facility will have a production capacity for 100 million meters of casings and
300 billion units of raw material to make heparin sodium. The construction began in March 2012. We expect to put the new facility
into operation in the fourth quarter of 2012.
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

| | • | We established a joint venture company, of which we
own 65%, with Henan Xinda Animal Husbandry Company Limited in June 2011. The joint venture company is financed by capital contributions
and bank loans. All capital contributions to the joint venture company have been made. We expect the new company will provide
20,000 sire boars annually. We are currently building infrastructures for sire boars breeding and plan to start operations in
the third quarter of 2012.
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------





Our products are sold under the “Zhongpin”
brand name. As of June 30, 2012, our wholesale customers included 140 international and domestic fast food companies in China,
139 processing factories and 1,409 school cafeterias, hotels, factory canteens, army bases, and government departments. As of such
date, we also sold directly to 3,442 retail outlets, including supermarkets, within China.



We have established distribution networks
in 20 provinces and in the four central government- administered municipalities of Beijing, Shanghai, Tianjin and Chongqing in
the North, East, South and Mid-South regions of China, and have also formed strategic business alliances with leading supermarket
chains within China. We also export our products to Europe, Hong Kong as well as other selected countries and regions in Asia.



As of June 30, 2012, we had 7,840 employees,
of whom 5,922 were operating personnel, 1,408 were sales personnel, 130 were research and development personnel and 380 were administrative
personnel.We are not subject to any collective bargaining agreement and we believe our relationship with our employees
is good.



On March 27, 2012, our Board of Directors
received a preliminary non-binding proposal from our Chairman and Chief Executive Officer, Mr. Xianfu Zhu, to buy all of the shares
of our common stock not currently owned by him for $13.50 per share. Following receipt of the proposal, our Board of Directors
formed a special committee of independent directors to consider the proposal and any amendments thereto as well as any alternative
proposals. No decisions have been made by the special committee with respect to our response to Mr. Zhu's proposal and there can
be no assurance that any definitive offer will be made, that any agreement will be executed or that Mr. Zhu's proposal or any other
transaction will be approved or consummated.



Critical Accounting Policies



Unless otherwise
noted, all translations from RMB to U.S. dollars were made at the middle rate published by the People’s Bank of China, or
the middle rate, as of June 29, 2012, which was RMB 6.3249 to $1.00. We make no representation
that the RMB amounts referred to in this Quarterly Report on Form 10-Q could have been or could be converted into U.S. dollars
at any particular rate or at all. On August 6, 2012, the middle rate was RMB6.3353to $1.00.



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. generally accepted accounting principles.  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
continually evaluate our policies and estimation procedures. Estimates are often based on historical experience and on assumptions
that are believed to be reasonable under the circumstances, but which could change in the future.Actual
results may differ from these estimates under different assumptions or conditions.



25







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.  Revenues
generated from the sale of various meat products and vegetables and fruits are recognized 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 us are primarily perishable and frozen food products, the right of return is
only valid for a few days and has been determined to be insignificant by our management. Accordingly, no provision has been made
for returnable goods. Revenues presented on our consolidated income statements are net of sales taxes.



Accounts
Receivable. During the normal course of business, our policy is to ask customers to make deposits in reasonable and
meaningful amounts on a case-by-case basis. For certain customers, the Company may extend unsecured
credit.We have established strict credit policies to manage the credit we give to our customers, and we give different
credit terms to different types of customers in different sales channels. For supermarket customers, the credit terms are generally
two to four weeks. For showcase stores and branded stores, the credit terms are generally cash sales within one week. For food
distributors, the credit terms are generally two weeks. For restaurants and non-commercial customers, the credit terms are from
one week to one month. These credit terms are subject to negotiation if requested by our customers, but any adjustment must be
approved by designated management.



We regularly
evaluate and monitor the creditworthiness of each of our customers in accordance with the prevailing practice in the meat industry,
considering factors such as general economic conditions and industry-specific economic condition in China, historical customer
performance, as well as anticipated customer performance. We maintain a general policy of providing 100% 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 5% of the aggregate amount of accounts receivable less than one year old. After all attempts to collect a receivable have failed,
the receivable is written off against the allowance. We also examine the credit terms of significant customers regularly and ask
for more cash deposits if these customers appear to have any indicators of delaying their payments to us.Such deposits
are usually applied towards the outstanding accounts receivable. The focus of our collection effort is on receivable balances less
than one year old, as receivable over a year old has typically been insignificant compared to the total gross receivable. With
such a practice in place, we did not have any specific bad debt allowance provided against specific customers as of June 30, 2012.



Inventories.Inventories
are comprised of raw materials and low-value consumables, work-in-progress, and finished goods. Inventories are stated at the lower
of cost or market-based prices according to the weighted average method. Production cost components include the purchase cost of
live hogs, direct labor, depreciation, packaging material, utility expense and other manufacturing overhead. By using a systematic
costing system, the production cost is allocated to various products at the stage of work-in-progress and finished goods, respectively.
Net realizable value is the estimated selling price, in the ordinary course of business, less estimated costs to complete and dispose.
We regularly inspect the shelf life of prepared foods and, if necessary, write down their carrying value based on their salability
and expiration dates as cost of goods sold.



Results of Operations



In 2012, we intend to continue to focus
on the implementation of our strategic plan to sustain the growth we have experienced since becoming a U.S. public company in 2006.
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 further improve and expand our unified, safe and efficient cold-chain logistics system. We also have
invested in employee training and development to help sustain our rapid and healthy growth while maintaining a satisfactory profit
margin.



26







In 2012,we
expect that the demand for pork in China and the results of the pork and pork products  division of our business will remain
strong while live hog prices will drop approximately 15% to 20%, compared with 2011. We anticipate that our profit margin in
2012 will decrease due to increased competition in the industry, the expected increase in labor cost and overheads, and the
expected increase in quality control cost in response to increased importance on food safety placed by government and
consumers, partially offset by the expected lower cost of sales due to the drop in live hog prices.



Comparison of Three Months Ended June 30, 2012 and
2011



Revenue. Total
revenue increased from $366.5 million for the three months ended June 30, 2011 to $408.2 million for the three months ended
June 30, 2012, which represented an increase of $41.7 million, or approximately 11%. The increase in revenues during the
second quarter of 2012 was primarily due to increased sales volume in our pork and pork products resulting from the effects
of the continuing increases in the number of our retail outlets, geographic expansion of our distribution network and
processing facilities, and increased sales to chain restaurants, food service providers, and wholesalers and distributors in
China, and higher selling prices of our prepared pork products, partly offset by the lower average selling prices of our
chilled and frozen pork products. The following table presents certain information regarding our sales by
product division for the three months ended June 30, 2012 and 2011.



|                       |  | Sales by Division (unaudited)    |        
|---------------------- |  | -------------------------------- | -------
|                       |  | Three Months Ended June 30, 2012 |        
|                       |  | Metric Tons                      |        
|                       |  |                                  |        
|Pork and Pork Products |  |                                  |        
|Chilled pork           |  |                                  | 101,038
|Frozen pork            |  |                                  | 38,400 
|Prepared pork products |  |                                  | 25,113 
|Vegetables and Fruits  |  |                                  | 2,952  
|Total                  |  |                                  | 167,503



The pork market in China is highly fragmented
and in the markets where 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 second
quarter of 2012, we increased our sales of chilled pork products by approximately $34.5 million over the amount of our sales of
such products in the second quarter of 2011.As shown in the table above, our average price during the second quarter of
2012 was approximately $2,452 per metric ton for chilled pork, compared to $2,717 during the second quarter of 2011, a decrease
of 10%. The number of metric tons of chilled pork sold during the second quarter of 2012 increased by 22,580, or 29% from the second
quarter of 2011. Our total revenue increased primarily due to the increase in sales volume of our chilled products as we increased
our capacity, increased sales to existing customers, and increased volume of sales of our products as we entered new geographic
markets, expanded our points of sales, and acquired new customers. The revenue increase was partly offset by decrease in average
selling price of our chilled pork products due to fluctuations in the market price of pork or pork related products.





27









In the second quarter of 2012, we decreased
our sales of frozen pork products by approximately $13.7 million over the amount of our sales of such products in the second quarter
of 2011. Our average price during the second quarter of 2012 was approximately $2,380 per metric ton for frozen pork compared
to $2,645 during the second quarter of 2011, a decrease of 10%. The number of metric tons of frozen pork sold during the second
quarter of 2012 decreased by 1,329, or 3% from the second quarter of 2011. Our total revenue decreased due to the decrease in
the average selling price of our frozen pork products in the second quarter of 2012 as a result of fluctuations in the market
price of pork or pork related products, and the decrease in the sales volume as we strategically adjusted our product mix towards
selling less frozen pork products which have a lower profit margin.





In the second quarter of 2012, we increased
our sales of prepared pork products by approximately $22.0 million over the amount of our sales of such products in the second
quarter of 2011. Our average price during the second quarter of 2012 was approximately $2,592 per metric ton for prepared pork
products compared to $2,106 during the second quarter of 2011, an increase of 23%. The number of metric tons of prepared pork products
sold during the second quarter of 2012 increased by 4,650, or 23% from the second quarter of 2011. This product division is becoming
more important to our business as customers increasingly demand prepared pork products and are willing to pay higher average prices
for the convenience of such products. We plan to gradually increase sales from prepared pork products by building up our brand
recognition and expanding our capacity for this division.



The sales of pork 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 in the second quarter of 2012 was partly attributable to our efforts to expand our geographic coverage and
broaden our distribution channels. The following table shows the changes in our distribution channels:





|                     |  | Numbers of Stores and Cities Generating Sales Volume (unaudited) |      
|-------------------- |  | ---------------------------------------------------------------- | -----
|                     |  | As of June 30,                                                   |      
|                     |  | 2012                                                             |      
|                     |  |                                                                  |      
|Showcase stores      |  |                                                                  | 162  
|Branded stores       |  |                                                                  | 1,339
|Supermarket counters |  |                                                                  | 1,941
|Total                |  |                                                                  | 3,442
|                     |  |                                                                  |      
|First-tier cities    |  |                                                                  | 29   
|Second-tier cities   |  |                                                                  | 135  
|Third-tier cities    |  |                                                                  | 435  
|Total cities         |  |                                                                  | 599  





The expansion in our distribution channels
and geographical coverage has been a significant factor in the increase in our sales volume. The following table shows our revenues
by distribution channel for the second quarters of 2012 and 2011, respectively.



28









|                              |  | Sales by Distribution Channel (Dollars in millions) (unaudited) |      
|----------------------------- |  | --------------------------------------------------------------- | -----
|                              |  | Three months ended June 30,                                     |      
|                              |  | 2012                                                            |      
|                              |  |                                                                 |      
|Retail channels               |  | $                                                               | 107.9
|Wholesalers and distributors  |  |                                                                 | 169.9
|Restaurants and food services |  |                                                                 | 123.3
|Export                        |  |                                                                 | 7.1  
|Total                         |  | $                                                               | 408.2





The increase in sales to different distribution
channels was mainly due to the following factors:



| | · | our production capacity has increased since we completed the expansion project of our facility in Taizhou, Jiangsu province
and Changchun, Jilin province in December 2011 and we maintained our capacity utilization rate on average for all facilities;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | we have built our brand image and brand recognition through general advertising, display promotions and sales campaigns;
| | - | ------------------------------------------------------------------------------------------------------------------------



| | · | we have increased the number of stores and other channels through which we sell our products; and
| | - | -------------------------------------------------------------------------------------------------



| | · | we believe consumers are placing more importance on food safety and are willing to pay higher prices for safe
food products.
| | - | ----------------------------------------------------------------------------------------------------------------------------



Cost of Sales.
Our cost of sales primarily includes our costs of raw materials, labor costs and overhead. Of our total cost of sales,our
costs of raw materials typically account for approximately 95% to 96%, our overhead typically accounts for 2.5% to 3% and our labor
costs typically account for 1.5% to 1.7%, 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 but
considerably higher than our increase in sales revenue.



|                       |  | Cost of Sales by Division (unaudited) |        
|---------------------- |  | ------------------------------------- | -------
|                       |  | Three Months Ended June 30, 2012      |        
|                       |  | Metric Tons                           |        
|                       |  |                                       |        
|Pork and Pork Products |  |                                       |        
|Chilled pork           |  |                                       | 101,038
|Frozen pork            |  |                                       | 38,400 
|Prepared pork products |  |                                       | 25,113 
|Vegetables and Fruits  |  |                                       | 2,952  
|                       |  |                                       |        
|Total                  |  |                                       | 167,503



29







Our gross profit
margin (gross profit divided by sales revenue) decreased from 10.7% for the three months ended June 30, 2011 to 8.7% for the three
months ended June 30, 2012. The decrease in our gross margin during the second quarter of 2012 was primarily due to(i)
higher competition in the market, (ii) the decrease in the gap between pork prices over hog prices, which is the bulk of our cost
of sales, (iii) increased promotional activities to grow our market share, and (iv) the increase in overhead due to the higher
labor costs and utility costs.



General and Administrative Expenses.
General and administrative expenses increased from $7.0 million for the three months ended June 30, 2011 to $8.9 million for the
three months ended June 30, 2012, which represented an increase of $1.9 million, or approximately 27%. As a percentage of revenues,
general and administrative expenses increased from 1.9% for the three months ended June 30, 2011 to 2.2% for the three months ended
June 30, 2012.



The increase in general and
administrative expenses during the three months ended June 30, 2012 was primarily the result of a $0.8 million increase in
salary expense due to the expansion of our business, which required us to hire more employees, and an increase in the average
salary we paid to our employees; and a $0.4 million increase in other taxes as a result of the land and property placed into
service in December 2011 in Taizhou and Changchun and therefore we started paying land and property taxes in the first
quarter of 2012.



Selling Expenses. Selling expenses
increased from $8.5 million for the three months ended June 30, 2011 to $8.8 million for the three months ended June 30, 2012,
which represented an increase of $0.3 million, or approximately 4%. The increase in selling expenses was primarily the result
of our increased sales of pork and pork products and was primarily due to a $0.4 million increase in transportation fees, a $0.3
million increase in supermarket management fees, and a $0.3 million increase in salaries. The increase was partly offset by a $0.9
million decrease in advertising cost because we sponsored a market event in the same period last year. As a percentage of revenues, selling
expenses decreased from 2.3% for the three months ended June 30, 2011 to 2.2% for the three months ended June 30, 2012.



Interest Expense (net of interest income).
Interest expense net of interest income increased from $3.4 million for the three months ended June 30, 2011 to $6.3 million for
the three months ended June 30, 2012, which represented an increase of $2.9 million, or approximately 85%. The increase in interest
expense was primarily the result of an increase of $28.0 million in long-term bank loans and an increase of $71.2 million in short-term
bank loans. The increase was partly offset by an increase in interest income due to increased bank deposits.



Other Income, and Government Subsidies.
Other income and government subsidies increased from $0.3 million for the three months ended June 30, 2011 to $1.2 million for
the three months ended June 30, 2012, which represented an increase of $0.9 million. This increase was primarily the result of
an increase in government subsidies. The changes in government subsidies are discussed in Note 11 of Notes to Condensed Consolidated
Financial Statements.



Income Taxes. The enterprise income
tax rate in China 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 vegetable and fruit products. The increase of $0.5 million in
the provision for income taxes for the three months ended June 30, 2012 over the three months ended June 30, 2011 resulted from
the increased sales of prepared meat products.



Comparison of Six Months Ended June 30, 2012 and 2011



Revenue. Total revenue increased
from $652.2 million for the six months ended June 30, 2011 to $782.3 million for the six months ended June 30, 2012, which represented
an increase of $130.1 million, or approximately 20%. The increase in revenues during the first half of 2012 was primarily due to
higher average selling prices of our products in the market, increased sales volume in our meat and meat products segment resulting
from the effects of the continuing increases in the number of our retail outlets, geographic expansion of our distribution network
and processing facilities, and increased sales to chain restaurants, food service providers and wholesalers and distributors in
China. The following table presents certain information regarding our sales by product division for the six months ended June 30,
2012 and 2011.



30







|                       |  | Sales by Division (unaudited)  |        
|---------------------- |  | ------------------------------ | -------
|                       |  | Six Months Ended June 30, 2012 |        
|                       |  | Metric Tons                    |        
|                       |  |                                |        
|Pork and Pork Products |  |                                |        
|Chilled pork           |  |                                | 188,185
|Frozen pork            |  |                                | 63,923 
|Prepared pork products |  |                                | 46,539 
|Vegetables and Fruits  |  |                                | 5,858  
|Total                  |  |                                | 304,505



The pork market in China is highly fragmented
and in the markets where 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 first
half of 2012, we increased our sales of chilled pork products by approximately $114.7 million over the amount of our sales of such
products in the first half of 2011.As shown in the table above, our average price during the first half of 2012 was approximately
$2,638 per metric ton for chilled pork, compared to $2,570 during the first half of 2011, an increase of 3%. The number of metric
tons of chilled pork sold during the first half of 2012 increased by 39,628, or 27% from the first half of 2011. Our total revenue
increased due to the average price increase in the first half of 2012 as a result of fluctuations in the market price of pork or
pork related products, successful capacity expansion, increased sales to existing customers, and increased volume of sales of our
products as we entered new geographic markets, expanded our points of sales and acquired new customers.





In the first half of 2012, we decreased
our sales of frozen pork products by approximately $20.2 million over the amount of our sales of such products in the first half
of 2011. Our average price during the first half of 2012 was approximately $2,478 per metric ton for frozen pork compared to $2,465
during the first half of 2011, an increase of 1%. The number of metric tons of frozen pork sold during the first half of 2012 decreased
by 8,542, or 12% from the first half of 2011. Our total revenue decreased mainly due to the decrease in the sales volume as we
strategically adjusted our product mix towards selling less frozen pork products which have a lower profit margin.



In the first half of 2012, we increased
our sales of prepared pork products by approximately $36.5 million over the amount of our sales of such products in the first
half of 2011. Our average price during the first half of 2012 was approximately $2,596 per metric ton for prepared pork products
compared to $2,078 during the first half of 2011, an increase of 25%. The number of metric tons of prepared pork products sold
during the first half of 2012 increased by 5,962, or 15% from the first half of 2011. This product division is becoming more important
to our business as customers increasingly demand prepared pork products and are willing to pay higher average prices for the convenience
of such products. We plan to gradually increase sales from prepared pork products by building up our brand recognition and expanding
our capacity for this division.





31







The following table shows our revenues by
distribution channel for the first half of 2012 and 2011, respectively.





|                              |  | Sales by Distribution Channel (Dollars in millions) (unaudited) |      
|----------------------------- |  | --------------------------------------------------------------- | -----
|                              |  | Six Months Ended June 30,                                       |      
|                              |  | 2012                                                            |      
|                              |  |                                                                 |      
|Retail channels               |  | $                                                               | 224.8
|Wholesalers and distributors  |  |                                                                 | 323.6
|Restaurants and food services |  |                                                                 | 219.5
|Export                        |  |                                                                 | 14.4 
|Total                         |  | $                                                               | 782.3





The increase in sales to different
distribution channels was mainly due to the following factors:



| | · | our production capacity has increased since we completed the expansion project of our facility in Taizhou, Jiangsu province
and Changchun, Jilin province in December 2011 and we maintained our capacity utilization rate on average for all facilities;
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | · | we have built up our brand image and brand recognition through general advertising display promotions and sales campaigns;
| | - | --------------------------------------------------------------------------------------------------------------------------



| | · | we have increased the number of stores and other channels through which we sell our products; and
| | - | -------------------------------------------------------------------------------------------------



| | · | we believe consumers are placing increased importance on food safety and are willing to pay higher prices for safe food products.
| | - | ---------------------------------------------------------------------------------------------------------------------------------



Cost of
Sales. Our cost of sales primarily includes our costs of raw materials, labor costs and overhead. Of our total cost of
sales,our costs of raw materials typically account for approximately 95% to 96%, our overhead typically accounts for
2.5% to 3% and our labor costs typically account for 1.5% to 1.7%, 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.



|                       |  | Cost of Sales by Division (unaudited) |        
|---------------------- |  | ------------------------------------- | -------
|                       |  | Six Months Ended June 30, 2012        |        
|                       |  | Metric Tons                           |        
|                       |  |                                       |        
|Pork and Pork Products |  |                                       |        
|Chilled pork           |  |                                       | 188,185
|Frozen pork            |  |                                       | 63,923 
|Prepared pork products |  |                                       | 46,539 
|Vegetables and Fruits  |  |                                       | 5,858  
|Total                  |  |                                       | 304,505



Our gross profit
margin (gross profit divided by sales revenue) decreased from 11.5% for the six months ended June 30, 2011 to 9.1% for the six
months ended June 30, 2012. The decrease in our gross margin during the first half of 2012 was primarily due to (i) the competition
in the market, (ii) the decrease in the gap between pork prices over hog prices, which is the bulk of our cost of sales,(iii) increased promotional activities to grow our market share, and (iv)the increase
in overhead due to the higher labor costs and utility costsAs a result, our gross profit margin was
lower than the level we would expect to achieve once we fully integrate our new production facilities and expand into 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.



32







General and Administrative Expenses.
General and administrative expenses increased from $13.5 million for the six months ended June 30, 2011 to $18.3 million for the
six months ended June 30, 2012, which represented an increase of $4.8 million, or approximately 36%. As a percentage of revenues,
general and administrative expenses increased from 2.1% for the six months ended June 30, 2011 to 2.3% for the six months ended
June 30, 2012.



The increase in general and administrative
expenses during the six months ended June 30, 2012 was primarily the result of a $1.7 million increase in salary expense due to
the expansion of our business, which required us to hire more employees. Also the increase was the result of a $1.2 million increase
in accounts receivable provisions and a $1.0 million increase in other taxes as a result of the land and property placed
into service in December 2011 in Taizhou and Changchun and therefore we started paying land and property taxes in the first quarter
of 2012.



Selling Expenses. Selling expenses
increased from $14.7 million for the six months ended June 30, 2011 to $15.3 million for the six months ended June 30, 2012, which
represented an increase of $0.6 million, or approximately 4%. The increase in selling expenses was primarily due to the increase
in sales of pork and pork products and was primarily due to a $0.3 million increase in supermarket management fee, a $0.7 million
increase in salaries and a $0.7 million increase in transportation fees. The increase was partly offset by $1.5 million decrease
in advertising and promotional fees because we sponsored a market event in the same period last year. As a percentage of revenues, selling
expenses decreased from 2.3% for the six months ended June 30, 2011 to 2.0% for the six months ended June 30, 2012.



Interest Expense (net of interest income).
Interest expense net of interest income increased from $8.8 million for the six months ended June 30, 2011 to $13.9 million for
the six months ended June 30, 2012, which represented an increase of $5.1 million, or approximately 58%. The increase in interest
expense was primarily the result of an increase of $28.0 million in long-term bank loans, an increase of $71.2 million in short-term
bank loans, and an increase in interest rate by the central bank of China. The increase was partly offset by increase in interest
income due to increased bank deposits.



Other Income and Government Subsidies.
Other income and government subsidies increased from $1.3 million for the six months ended June 30, 2011 to $2.7 million for the
six months ended June 30, 2011, which represented an increase of $1.4 million.



Income Taxes. The enterprise income
tax rate in China 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 $0.1 million
in the provision for income taxes for the six months ended June 30, 2012 over the six months ended June 30, 2011 resulted from
the increased sales from prepared meat products.



Segment Information



Under generally accepted accounting principles
in the United States, we operate in only one segment: meat production.  Our vegetable and fruit operations, both financially
and operationally, do not represent a significant enough portion of our business to constitute a separate segment.  However,
our product lines have been divided into two divisions: pork and pork products, and vegetables and fruits.



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



33







Our vegetables and fruits division 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. The proximity of the contracted farms to our operations
ensures freshness from harvest to processing. We contract to grow more than 25 categories of vegetables and fruits, including asparagus,
sweet corn, broccoli, mushrooms, lima beans, strawberries and capsicum.



The following tables show our sales in metric
tons and production processed in metric tons by division for the three-month and six-month periods ended June 30, 2012 and 2011.



|                       |  | Sales by Division (in metric tons) |        
|---------------------- |  | ---------------------------------- | -------
|                       |  | Three Months Ended June 30,        |        
|                       |  | 2012                               |        
|                       |  | (Unaudited)                        |        
|Pork and Pork Products |  |                                    |        
|Chilled pork           |  |                                    | 101,038
|Frozen pork            |  |                                    | 38,400 
|Prepared pork products |  |                                    | 25,113 
|Vegetable and Fruits   |  |                                    | 2,952  
|Total                  |  |                                    | 167,503



|                       |  | Production by Division (in metric tons) |        
|---------------------- |  | --------------------------------------- | -------
|                       |  | Three Months Ended June 30,             |        
|                       |  | 2012                                    |        
|                       |  | (Unaudited)                             |        
|Pork and Pork Products |  |                                         |        
|Chilled pork           |  |                                         | 102,138
|Frozen pork            |  |                                         | 44,860 
|Prepared pork products |  |                                         | 26,847 
|Vegetable and Fruits   |  |                                         | 2,389  
|Total                  |  |                                         | 176,234



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 China in which we offered and sold our products at June 30, 2012 and December 31, 2011, 2010 and 2009.



34







|                             |  |               |       |  | December 31, | 
|---------------------------- |  | ------------- | ----- |  | ------------ | 
|                             |  | June 30, 2012 |       |  | 2011         | 
|                             |  |               |       |  |              | 
|Number of products           |  |               | 446   |  |              | 
|Number of retail outlets     |  |               | 3,442 |  |              | 
|Expansion of Market Coverage |  |               |       |  |              | 
|Number of provinces          |  |               | 24    |  |              | 
|Number of first-tier cities  |  |               | 29    |  |              | 
|Number of second-tier cities |  |               | 135   |  |              | 
|Number of third-tier cities  |  |               | 435   |  |              | 



Liquidity and Capital Resources



As of June 30, 2012 and December
31, 2011, we had cash and cash equivalents of $143.3 million and $135.8 million, respectively. As of June 30, 2012, we
had working capital of approximately negative $21.3 million. Based on the anticipated operating cash flow of our company and
subsidiaries, the availability remaining under our banking facilities, as well as alternative sources of financing
available to us, we believe we will have the ability to meet our liabilities as and when they become due within the next
twelve months.



We have established
and implemented corporate policies to manage our cash flows generated by our operating activities.  We have established
strict credit policies to manage the credit we give to our customers, and we give different credit terms to different types of
customers in different sales channels.For supermarket customers, the credit terms are generally two to four
weeks. For showcase stores and branded stores, the credit terms are generally cash sales within one week. For food distributors,
the credit terms are generally two weeks. For restaurants and non-commercial customers, the credit terms are from one week to one
month. These credit terms are subject to negotiation if requested by our customers, but any adjustment
must be approved by designated management.  In general, we ask for credit terms from our suppliers.  We generally
pay for the hogs we purchase within one week after the hogs pass our health and quality examinations.



For the six months ended June 30, 2012,
net cash used in operating activities was $23.6 million, which represented a decrease of $58.8 million as compared to the net cash
provided by operating activities of $35.2 million for the same period of 2011. The decrease was primarily due to a $49.8 million
increase in cash used in operating assets and liabilities, a $13.0 million decrease in net income and partly offset by a $4.0 million
increase in non-cash items. Of the non-cash items, depreciation and amortization accounted for $3.2 million of change due to the
fact that more plant, equipment and machinery were put into use.



Cash flow from changes in operating assets
and liabilities decreased approximately $49.8 million, as compared to the negative cash flow of $11.6 million from changes in operating
assets and liabilities for the same period of the prior year. Of the $49.8 million decrease, $18.9 million was attributable to
the change of cash flow from inventories due to the fact that we increased our inventory level this year because the pork price
was decreasing in the market and we expected it has reached bottom, and because we are operating more facilities we have to maintain
a higher inventory level; $27.4 million was attributable to the change of cash flow from accounts receivable due to the fact that
we are operating more facilities and serving more clients so our accounts receivable balance increased accordingly, and also because
we faced fierce competition and we had to offer better credit terms to our clients; $12.5 million was attributable to the change
of cash flow from accounts payable.



Net cash used in investing activities was
$57.0 million for the six months ended June 30, 2012, which represented a decrease of $65.0 million as compared to the net cash
of $121.9 million used in investing activities for the same period of the prior year. We spent $22.8 million less on the costs
of construction for new production facilities, $40.9 million less on restricted cash and $14.0 million less on purchase deposit
for land use rights during the first half of 2012 compared to the same period of 2011. The decrease was partly offset by our spending
a $10.1 million more on purchase of land use rights.



35







Net cash provided by financing activities
was $88.7 million during the six months ended June 30, 2012, a decrease of $62.1 million compared to the net cash of $150.8 million
provided by financing activities for the same period of the prior year. We received $68.9 million less in net proceeds from bank
notes and received no proceeds from issuing new shares of common stock during the first half of 2012 compared to $66.4 million
in net proceeds from issuing new shares of common stock during the first half of 2011. The decrease was partly offset by our receiving
$65.6 million more in net proceeds from short-term bank loans and $17.6 million more in net proceeds from long-term bank loans
during the first half of 2012.



Capital Commitment



Stock Repurchase Program. In July
2011, the Board of Directors authorized a Stock Repurchase Program to repurchase up to $10 million of our common stock from July
2011 through July 2012. In August 2011, the dollar amount approved under the Stock Repurchase Program was raised to $40 million
and the expiration date was extended to August 2012. As of June 30, 2012, we have repurchased 3,166,838 shares at an aggregate
cost of $26.2 million, while the cost per share, including commission, varied from $6.80 to $9.35. We did not repurchase any shares
during the three months ended June 30, 2012.



Capital Expenditure.See Note 6 “Construction
in Progress” in the Notes to Condensed Consolidated Financial Statements for description of ongoing construction projects
and estimated cost to complete.



Loans.As of June 30, 2012, we had
short-term and long-term bank and governmental loans in the aggregate amount of $328.1 million with interest rates ranging from
5.76% to 7.87% per annum, as shown below.



36







|Bank                                  |  | Amount 
Borrowed |             |  | Interest Rate |  |      | Maturity Date
|------------------------------------- |  | ---------------- | ----------- |  | ------------- |  | ---- | -------------
|                                      |  |                  |             |  |               |  |      |              
|Short-term Loans                      |  |                  |             |  |               |  |      |              
|                                      |  |                  |             |  |               |  |      |              
|China Everbright Bank                 |  |                  | 6,324,211   |  |               |  | 7.22 | %            
|                                      |  |                  | 1,581,053   |  |               |  | 7.22 | %            
|                                      |  |                  | 4,743,158   |  |               |  | 6.94 | %            
|                                      |  |                  | 4,743,158   |  |               |  | 6.63 | %            
|                                      |  |                  |             |  |               |  |      |              
|China Construction Bank               |  |                  | 6,324,211   |  |               |  | 6.56 | %            
|                                      |  |                  | 7,905,263   |  |               |  | 6.56 | %            
|                                      |  |                  |             |  |               |  |      |              
|Agriculture Development Bank of China |  |                  | 959,347     |  |               |  | 6.31 | %            
|                                      |  |                  | 8,695,790   |  |               |  | 6.56 | %            
|                                      |  |                  | 7,905,263   |  |               |  | 6.56 | %            
|                                      |  |                  | 15,020,000  |  |               |  | 6.56 | %            
|                                      |  |                  | 4,870,275   |  |               |  | 6.31 | %            
|                                      |  |                  |             |  |               |  |      |              
|Guangdong Development Bank            |  |                  | 3,162,105   |  |               |  | 7.26 | %            
|                                      |  |                  |             |  |               |  |      |              
|Bank of Shanghai                      |  |                  | 3,952,632   |  |               |  | 6.94 | %            
|                                      |  |                  |             |  |               |  |      |              
|China Minsheng Bank                   |  |                  | 4,743,158   |  |               |  | 7.26 | %            
|                                      |  |                  | 1,581,053   |  |               |  | 6.94 | %            
|                                      |  |                  | 4,743,158   |  |               |  | 6.94 | %            
|                                      |  |                  | 9,486,316   |  |               |  | 7.87 | %            
|                                      |  |                  |             |  |               |  |      |              
|China Merchants Bank                  |  |                  | 9,486,316   |  |               |  | 6.94 | %            
|                                      |  |                  | 4,743,158   |  |               |  | 7.57 | %            
|                                      |  |                  | 4,743,158   |  |               |  | 6.94 | %            
|                                      |  |                  |             |  |               |  |      |              
|China CITIC Bank                      |  |                  | 6,324,211   |  |               |  | 7.22 | %            
|                                      |  |                  |             |  |               |  |      |              
|Industrial Bank                       |  |                  | 3,162,105   |  |               |  | 7.87 | %            
|                                      |  |                  | 7,905,263   |  |               |  | 6.31 | %            
|                                      |  |                  |             |  |               |  |      |              
|Huaxia Bank                           |  |                  | 12,648,421  |  |               |  | 6.31 | %            
|                                      |  |                  |             |  |               |  |      |              
|Rabobank Nederland                    |  |                  | 7,905,263   |  |               |  | 6.10 | %            
|                                      |  |                  | 7,905,263   |  |               |  | 6.41 | %            
|                                      |  |                  |             |  |               |  |      |              
|Zhongyuan Trust Co., Ltd.             |  |                  | 25,296,843  |  |               |  | 7.30 | %            
|                                      |  |                  |             |  |               |  |      |              
|City Finance –short-term              |  |                  | 31,621      |  |               |  | 0.00 | %            
|                                      |  |                  |             |  |               |  |      |              
|Total                                 |  | $                | 186,891,773 |  |               |  |      |              
|                                      |  |                  |             |  |               |  |      |              
|Long-term Loan-Current portion        |  |                  |             |  |               |  |      |              
|                                      |  |                  |             |  |               |  |      |              
|Canadian Government Transfer Loan     |  |                  | 72,835      |  |               |  | 6.02 | %            
|                                      |  |                  |             |  |               |  |      |              
|Agriculture Bank of China             |  |                  | 2,845,895   |  |               |  | 6.65 | %            
|                                      |  |                  | 316,210     |  |               |  | 6.90 | %            
|                                      |  |                  | 11,225,474  |  |               |  | 6.65 | %            
|                                      |  |                  | 1,581,052   |  |               |  | 6.65 | %            
|                                      |  |                  | 9,486,316   |  |               |  | 6.65 | %            
|                                      |  |                  |             |  |               |  |      |              
|China Merchants Bank                  |  |                  | 3,162,105   |  |               |  | 6.65 | %            
|                                      |  |                  |             |  |               |  |      |              
|China Development Bank                |  |                  | 1,739,158   |  |               |  | 7.48 | %            
|                                      |  |                  |             |  |               |  |      |              
|China Construction Bank               |  |                  | 3,162,105   |  |               |  | 6.08 | %            
|                                      |  |                  | 4,743,158   |  |               |  | 6.08 | %            
|                                      |  |                  | 6,324,210   |  |               |  | 5.76 | %            
|                                      |  |                  |             |  |               |  |      |              
|Total                                 |  | $                | 44,658,520  |  |               |  |      |              
|                                      |  |                  |             |  |               |  |      |              
|Long-term Loans                       |  |                  |             |  |               |  |      |              
|                                      |  |                  |             |  |               |  |      |              
|China Construction Bank               |  |                  | 7,905,263   |  |               |  | 6.40 | %            
|                                      |  |                  | 2,371,579   |  |               |  | 6.65 | %            
|                                      |  |                  |             |  |               |  |      |              
|Agriculture Bank of China             |  |                  | 1,581,053   |  |               |  | 6.65 | %            
|                                      |  |                  | 3,952,632   |  |               |  | 6.40 | %            
|                                      |  |                  | 790,526     |  |               |  | 6.65 | %            
|                                      |  |                  | 2,371,579   |  |               |  | 6.90 | %            
|                                      |  |                  | 11,067,369  |  |               |  | 6.90 | %            
|                                      |  |                  | 12,648,421  |  |               |  | 6.65 | %            
|                                      |  |                  | 7,114,737   |  |               |  | 6.90 | %            
|                                      |  |                  | 14,229,474  |  |               |  | 6.65 | %            
|                                      |  |                  |             |  |               |  |      |              
|China Development Bank                |  |                  | 1,739,158   |  |               |  | 7.48 | %            
|                                      |  |                  | 2,055,368   |  |               |  | 7.48 | %            
|                                      |  |                  | 2,055,368   |  |               |  | 7.48 | %            
|                                      |  |                  | 2,371,579   |  |               |  | 7.48 | %            
|                                      |  |                  | 2,371,579   |  |               |  | 7.48 | %            
|                                      |  |                  | 2,687,790   |  |               |  | 7.48 | %            
|                                      |  |                  | 2,687,790   |  |               |  | 7.48 | %            
|                                      |  |                  | 2,055,368   |  |               |  | 7.48 | %            
|                                      |  |                  |             |  |               |  |      |              
|China Merchants Bank                  |  |                  | 4,743,158   |  |               |  | 6.65 | %            
|                                      |  |                  | 7,114,737   |  |               |  | 6.65 | %            
|                                      |  |                  |             |  |               |  |      |              
|Changge Old Town                      |  |                  | 1,613,436   |  |               |  | 7.00 | %            
|                                      |  |                  |             |  |               |  |      |              
|Canadian Government Transfer Loan     |  |                  | 1,052,087   |  |               |  |      | *            
|                                      |  |                  |             |  |               |  |      |              
|Total                                 |  | $                | 96,580,051  |  |               |  |      |              



37


















* The principal amount of this loan is interest
free.



Of our outstanding
short-term loans as of June 30, 2012, $132.0 million aggregate principal amount of loans were guaranteed by our subsidiaries in
China, $34.9 million aggregate principal amount of loans was credit loans, and $19.0 million aggregate principal amount of loans
was guaranteed by HenanHuanghe Enterprises Group Co., Ltd., a group corporation that is not
affiliated with our company or with any of our subsidiaries (“Huanghe Group”).



38







In May 2012, Henan Zhongpin entered into
a mutual guarantee agreement with Huanghe Group, which replaced a previous mutual guarantee agreement between Henan Zhongpin
and Huanghe Group. Under the agreement, Henan Zhongpin agreed to guarantee bank loans of Huanghe Group in an amount up to $23.7
million and Huanghe Group agreed to guarantee Henan Zhongpin’s bank loans in an amount up to $23.7 million. The agreement
will expire in May 2013. At the expiration of the agreement, each party will remain obligated under its guarantee for any loans
of the other party that are outstanding on the date of expiration of the agreement. At June 30, 2012, Henan Zhongpin had
outstanding guarantees for $16.9 million of Huanghe Group’s bank loans under the agreement. All of the bank loans guaranteed
by Henan Zhongpin will mature within the next 12 months





In April 2012, Changchun Zhongpin entered into a loan agreement
with China Development Bank pursuant to which Changchun Zhongpin may borrow up to RMB 300 million ($47.4 million).  Changchun
Zhongpin drew down RMB 125 million ($19.8 million) in April 2012. All amounts borrowed under the loan agreement bear interest at
a floating rate that is 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 (7.48% per annum on June 30, 2012 and adjustable immediately following the publishing of rate adjustments
by the People’s Bank of China during the term of the loan) and RMB 125 million ($19.8 million) are payable in installments
on various scheduled repayment dates between April 2013 and May 2017. Borrowings under the loan agreement are guaranteed by Henan
Zhongpin and secured by all of Henan Zhongpin’s equity interests in Tianjin Zhongpin and Yongcheng Zhongpin.



In April 2012, Henan Zhongpin entered into
a loan agreement with China Construction Bank pursuant to which Henan Zhongpin borrowed RMB 15 million ($2.4 million). All amounts
borrowed under the loan agreement bear interest at a floating rate that is 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 (6.65% per annum on June 30, 2012 and adjustable on
each anniversary of the agreement based on the prime rate published by the People’s Bank of China for loans with the same
or similar terms) and are payable in March 2014. Borrowings under the loan agreement are secured by the land use rights, property
and plant of Henan Zhongpin.



In March 2012, Henan Zhongpin entered into
a loan agreement with China Construction Bank pursuant to which Henan Zhongpin borrowed RMB 50 million ($7.9 million). All amounts
borrowed under the loan agreement bear interest at a floating rate that is 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 (6.40% per annum on June 30, 2012 and adjustable on
each anniversary of the agreement based on the prime rate published by the People’s Bank of China for loans with the same
or similar terms) and are payable in March 2014. Borrowings under the loan agreement are secured by the land use rights, property
and plant of Henan Zhongpin.



In June 2011, Henan Zhongpin entered into
a loan agreement with China Construction Bank pursuant to which Henan Zhongpin borrowed RMB 50 million ($7.9 million). All amounts
borrowed under the loan agreement bear interest at a floating rate that is 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 (6.08% per annum on June 30, 2012 and adjustable on
the anniversary of the agreement based on the prime rate published by the People’s Bank of China for loans with the same
or similar terms) and are payable in installments in March and June 2013. Borrowings under the loan agreement are secured by the
land use rights, property and plant of Henan Zhongpin.



In December 2010, Henan Zhongpin entered
into a loan agreement with the Agriculture Bank of China pursuant to which Henan Zhongpin borrowed RMB 25 million ($4.0 million).
All amounts borrowed under the loan agreement bear interest at a floating rate that is 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 (6.40% per annum on June 30, 2012 and
adjustable in the month immediately following the publishing of rate adjustments by the People’s Bank of China during the
term of the loan) and are payable in December 2013. Borrowings under the loan agreement are secured by the land use rights, property
and plant of Henan Zhongpin.



In
September 2010, Henan Zhongpin entered into a loan agreement with the Agriculture Bank of China pursuant to which Henan
Zhongpin borrowed RMB 75 million ($11.9 million). All amounts borrowed under the loan agreement bear interest at a floating
rate that is 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 (6.90% per annum on June 30, 2012 and adjustable in the month immediately following the publishing of
rate adjustments by the People’s Bank of China during the term of the loan) and are payable in installments onvarious
scheduled repayment dates between September 2011 and June 2014. Borrowings under the loan
agreement are guaranteed by our wholly owned subsidiary, Yongcheng Zhongpin. Henan Zhongpin repaid an aggregate of $0.3
million of the loan in September and December 2011, and $0.2 million of the loan in May 2012; $11.4 million remained
outstanding as of June 30, 2012.



39







In July 2010, Tianjin Zhongpin
entered into a loan agreement with the Agriculture Bank of China pursuant to which Tianjin Zhongpin may borrow up to RMB 300
million ($47.4 million). Tianjin Zhongpin drew down RMB 50 million ($7.9 million) in July 2010, RMB 80 million ($12.7
million) in November 2010 and RMB 110 million ($17.4 million) in May 2011. In June 2012, Tianjin Zhongpin extended the term
of $7.9 million of the loan to be repayable in June 2015. Borrowings under the loan agreement are secured by the land use
rights, property and plant of Tianjin Zhongpin. As of June 30, 2012, the total outstanding balance under the agreement was
$38.0 million. All amounts borrowed under the loan agreement bear interest at a floating rate that is 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 (6.65% per annum
on June 30, 2012 and adjustable in the month immediately following the publishing of rate adjustments by the People’s
Bank of China during the term of the loan) and are payable in installments in June 2013, 2014 and 2015.



In June 2010,
Henan Zhongpin entered into a loan agreement with China Construction Bank pursuant to which Henan Zhongpin borrowed RMB 40 million
($6.3 million). All amounts borrowed under the loan agreement bear interest at a floating rate that is 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 (5.76% per annum on
June 30, 2012and adjustable on each anniversary of date of the agreement based on the prime rate published by the People’s
Bank of China for loans with the same or similar terms) and are payable on June 29, 2013. Borrowings
under the loan agreement are secured by the land use rights, property and plant of Henan Zhongpin.



In April 2010,
in connection with the purchase of a piece of land from Changge Old Town, Changge Old Town extended a loan to Henan Zhongpin with
a principal amount of RMB 10.2 million ($1.6 million) and bearing interest at the rate of 7.00% per annum payable on June 30, 2010
and each anniversary thereafter. Such loan does not have a fixed term and the principal amount of the loan should be repaid by
Henan Zhongpin upon six months prior written notice from Changge Old Town. The loanremained outstanding as of June 30,
2012.



In March 2010,
Henan Zhongpin entered into a loan agreement with the Agriculture Bank of China pursuant to which Henan Zhongpin borrowed RMB 53
million ($8.4 million). All amounts borrowed under the loan agreement bear interest at a floating rate that is 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 (6.65% per annum
on June 30, 2012 and adjustable in the month immediately following the publishing of rate adjustments by the People’s Bank
of China during the term of the loan) and are payable in installmentson various scheduled repayment dates between December
2011 and December 2013.Borrowings under the loan agreement are secured by the land use rights, property
and plant of Henan Zhongpin. Henan Zhongpin repaid $1.3 million of the loan in March 2011, $1.0 million of the loan in December
2011 and $1.3 million of the loan in May 2012; $4.9 million remained outstanding as of June 30, 2012.



In February 2010, Henan Zhongpin entered
into a loan agreement with the Agriculture Bank of China pursuant to which Henan Zhongpin borrowed RMB 71 million ($11.2 million).
All amounts borrowed under the loan agreement bear interest at a floating rate that is 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 (6.65% per annum on June 30, 2012 and
adjustable in the month immediately following the publishing of rate adjustments by the People’s Bank of China during the
term of the loan) and are payable on February 3, 2013. Borrowings under the loan agreement are secured by the land use rights,
property and plant of Henan Zhongpin.



In December 2009,
Henan Zhongpin entered into a loan agreement with the Agriculture Bank of China pursuant to which Henan Zhongpin borrowed RMB 70
million ($11.1 million). All amounts borrowed under the loan agreement bear interest at a floating rate that is 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 (6.90% per annum
on June 30, 2012 and adjustable in the month immediately following the publishing of rate adjustments by the People’s Bank
of China during the term of the loan) and are payable in installments on various scheduled repayment dates between December
2010 and December 2014. Borrowings under the loan agreement are secured by the land use rights, property
and plant of Luoyang Zhongpin.Henan Zhongpin repaid$0.7 million
of the loan in December 2010 and an aggregate of $0.4 million of the loan in October and December 2011 and $0.2 million in May
2012; $9.8 million remained outstanding as of June 30, 2012.



40







In November 2009,
Henan Zhongpin entered into a loan agreement with China Merchants Bank pursuant to which Henan Zhongpin borrowed RMB 95 million
($15.0 million). The first 50% of the loan was drawn down in November 2009 and the remaining 50% of the loan was drawn down in
March 2010. All amounts borrowed under the loan agreement bear interest at a floating rate that is 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 (6.65% per annum on June 30,
2012 and adjustable in the month immediately following the publishing of rate adjustments by the People’s Bank of China during
the term of the loan) and are payable in installments onvarious scheduled repayment dates between November 2012 and November
2014. Borrowings under the loan agreement are guaranteed by Luoyang Zhongpin.



In May 2002,
Henan Zhongpin entered into a loan agreement with the Bank of Communications, 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 November 15, 2041. Borrowings under the loan agreement are guaranteed by the Financing
Department of Henan province.



Of our long term loans outstanding at June
30, 2012, $93.1 million are secured by land use rights and property, plant and equipment
of our subsidiaries. Total of land use rights and property, plant and equipment pledged amounts to $110.9 million at June 30,
2012



We believe our existing cash and cash equivalents,
together with our ability to secure bank borrowings, will be sufficient to finance our investment in new facilities, with budgeted
capital expenditures of approximately $125.2 million over the next 12 months, and to satisfy our working capital needs. We intend to
satisfy our short-term debt obligations that mature over the next 12 months through additional short-term bank loans, in most
cases by rolling the maturing loans into new short-term loans with the same lenders as we have done in the past.



Contractual Obligations



For information on our contractual obligations,
please refer to Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity
and Capital Resources and Capital Commitment - Contractual Commitments.” as presented in our Annual Report on Form 10-K for
the fiscal year ended December 31, 2011.



Off-Balance Sheet Arrangements



We do not have off-balance sheet arrangements
that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition,
revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to investors.



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 seasonality. In addition, certain components of our operations, such as revenue and cost of sales,
have partially increased due to inflation; however, we do not believe that our overall results of operations have been materially
affected by inflation.



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.



41







Currency Fluctuations and Foreign Currency
Risk. Substantially all of our operations are conducted in China, with the exception of our export
business and limited overseas purchases of raw materials. Most of our sales and purchases are conducted within China in RMB, which
is the official currency of China. 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 RMB 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 RMB, there can be no assurance that such exchange rate will not again become volatile
or that 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 China.



Interest Rate Risk. We
are exposed to interest rate risk through our short-term and long-term loans. We have $186.9 million short-term bank loans and
$141.2 million long-term bank loans outstanding as of June 30, 2012, and we have not used any derivative financial instruments
or engaged in any interest rate hedging activities to manage our interest rate risk exposure. Our future interest expense on short-term
or long-term bank loans may increase or decrease due to changes in market interest rates. We monitor interest rates in conjunction
with our cash requirements to determine the appropriate level of bank loans relative to other sources of funds.



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. No single customer or supplier constitute more than 5% of our consolidated sales revenue for
the three months ended June 30, 2012 and 2011.



| | Item 4. | Controls and Procedures
| | ------- | -----------------------



Our management, with the participation of
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 Securities Exchange Act of 1934 (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
concluded that, as of the end of such period, our disclosure controls and procedures were effective to ensure that information
that we are required to disclose in reports that we file or submit under the Exchange Act was recorded, processed, summarized and
reported within the time periods specified in SEC rules and forms and accumulated and communicated to our management, including
our chief executive officer and chief financial officer, or persons performing similar functions, as appropriate to allow timely
decisions regarding required disclosure.



There were no 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.



42







Part II – Other Information



| | Item 1. | Legal Proceedings
| | ------- | -----------------



On March 27, 2012, we announced that our
Board of Directors had received a preliminary, non-binding proposal from our Chairman and Chief Executive Officer, Xianfu Zhu,
stating that Mr. Zhu intended to seek to purchase the remaining shares of our company that he does not presently own (the “Proposed
Buyout”). Following this announcement, at least three lawsuits have been filed in Delaware naming the members of our Board
of Directors and/or us as defendants. The resolution of any of these lawsuits, claims or legal proceedings could materially and
adversely affect our business, results of operations and financial position. The terms and conditions of applicable bylaws, certificates
or articles of incorporation, agreements or applicable law may obligate us to indemnify our directors, officers or employees with
respect to certain of the matters described below.



On April 3, 2012, a verified shareholder
class action lawsuit was filed by Phillip Meeks in the Court of Chancery of the State of Delaware against us and members of our
Board of Directors, alleging that, inter alia, our Board of Directors breached their fiduciary duties in connection with
the Proposed Buyout, and that the price per share proposed by Mr. Zhu represented inadequate consideration in light of our company’s
intrinsic value and future prospects, and that we aided and abetted the breach of fiduciary duties. The plaintiff seeks damages,
declaratory relief and injunctive relief, including an order preventing us from proceeding with the Proposed Buyout or any transaction
with Mr. Zhu, as well as an award of plaintiffs’ attorneys’ fees and costs. We believe that none of the defendants
has yet responded to the complaint.



On April 11, 2012, a verified shareholder
class action lawsuit was filed by Richard Bauschard in the Court of Chancery of the State of Delaware against members of our Board
of Directors, alleging that, inter alia, our Board of Directors breached their fiduciary duties in connection with the Proposed
Buyout, and that the price per share proposed by Mr. Zhu represented inadequate consideration in light of our company’s intrinsic
value and future prospects. The plaintiff seeks damages, declaratory relief and injunctive relief, including an order preventing
the defendants from proceeding with the Proposed Buyout or any transaction with Mr. Zhu, as well as an award of plaintiffs’
attorneys’ fees and costs. We believe that none of the defendants has yet responded to the complaint.



On April 18, 2012, a verified shareholder
class action lawsuit was filed by Harry Vonderlieth in the Court of Chancery of the State of Delaware against us and members of
our Board of Directors, alleging that, inter alia, our Board of Directors breached their fiduciary duties to our shareholders
in connection with the Proposed Buyout, and that the price per share proposed by Mr. Zhu represented inadequate consideration in
light of our company’s intrinsic value and future prospects, and that we aided and abetted the breach of fiduciary duties.
The plaintiff seeks damages, declaratory relief and injunctive relief, including an order preventing us from proceeding with the
Proposed Buyout or any transaction with Mr. Zhu, as well as an award of plaintiffs’ attorneys’ fees and costs. We believe
that none of the defendants has yet responded to the complaint.



We intend to defend against the pending
class action litigation vigorously.



For a description of our accounting policy
regarding loss contingencies, see Note 14 “Commitments and Contingencies” in the Notes to Condensed Consolidated Financial
Statements.  With respect to the legal proceedings and claims described above, such litigation is still in its preliminary
stages and the final outcome, including our liability, if any, with respect to such litigation, is uncertain.  In addition,
it is not currently possible to determine the maximum potential amount under the indemnification provisions under the terms and
conditions of applicable bylaws, certificates or articles of incorporation, agreements or applicable law due to the limited history
of prior indemnification claims and the preliminary stages of the litigation.  At present, we are unable to estimate a reasonably
possible range of loss, if any, that may result from such litigation. If an unfavorable outcome were to occur in the litigation
described above, the impact could be material to our business, financial condition, or results of operations.



| | Item 1A. | Risk Factors
| | -------- | ------------



Except as set forth below, there have been
no material changes to the risk factors disclosed in Item 1A of our Annual Report on Form 10-K for the year ended December 31,
2011.



43







Potential continuing uncertainty resulting from our Chairman
and Chief Executive Officer’s proposal and other related matters, including lawsuits, may adversely affect our business.



On March 27, 2012, our Board of Directors
received a preliminary non-binding proposal from our Chairman and Chief Executive Officer, Mr. Xianfu Zhu, to buy all of the shares
of our common stock not currently owned by him for $13.50 per share. Following receipt of the proposal, our board of directors
formed a special committee of independent directors to consider the proposal and any amendments thereto as well as any alternative
proposals.  No decisions have been made by the special committee with respect to our response to Mr. Zhu's proposal and there
can be no assurance that any definitive offer will be made, that any agreement will be executed or that Mr. Zhu's proposal or any
other transaction will be approved or consummated.  However, Mr. Zhu's proposal, whether or not consummated, presents a risk
of diverting management focus, employee attention and resources from other strategic opportunities and from operational matters.
Additionally, we and members of our Board of Directors have been named in a number of purported shareholder class action complaints
relating to Mr. Zhu's proposal as more fully described in Part II, Item 1 “Legal Proceedings” of this Quarterly
Report on Form 10-Q.  These lawsuits or any future lawsuits may become time consuming and expensive. These matters, alone
or in combination, may harm our business.



Our auditor, like other independent registered public accounting
firms operating in China, is not permitted to be subject to inspection by the Public Company Accounting Oversight Board, and as
such, investors may be deprived of the benefits of such inspection.



Our independent registered public accounting
firm that issues the audit reports included in our annual reports filed with the SEC, as an auditor of companies that are traded
publicly in the United States and a firm registered with the Public Company Accounting Oversight Board (United States), or PCAOB,
is required by the laws of the United States to undergo regular inspections by PCAOB to assess its compliance with the laws of
the United States and professional standards. Because our auditor is located in China, a jurisdiction where PCAOB is currently
unable to conduct inspections without the approval of the PRC authorities, our auditor, like other independent registered public
accounting firms operating in China, is currently not inspected by PCAOB.



Inspections of other firms that PCAOB has
conducted outside of China have identified deficiencies in those firms’ audit procedures and quality control procedures,
which may be addressed as part of the inspection process to improve future audit quality. The inability of PCAOB to conduct inspections
of independent registered public accounting firms operating in China makes it more difficult to evaluate the effectiveness of our
auditor’s audit procedures or quality control procedures. As a result, investors may be deprived of the benefits of PCAOB
inspections.



| | Item 2. | Unregistered Sales of Equity Securities and Use of
Proceeds
| | ------- | -----------------------------------------------------------



(a)          None.



(b)          Not
Applicable.



(c)          Issuer
Purchases of Equity Securities.



The table below is
a summary of the shares repurchased by us during the second quarter of the year ending December 31, 2012.



44







|                         |  | (a) Total Number of Shares Purchased |   |  | (b) Average Price Paid per Share |  |   | (c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs |  |  | (d) Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plan or Programs (1) | 
|------------------------ |  | ------------------------------------ | - |  | -------------------------------- |  | - | ------------------------------------------------------------------------------------ |  |  | ----------------------------------------------------------------------------------------------- | 
|April 1 - April 30, 2012 |  |                                      | - |  |                                  |  | - |                                                                                      |  |  | -                                                                                               | 
|May 1 - May 31, 2012     |  |                                      | - |  |                                  |  | - |                                                                                      |  |  | -                                                                                               | 
|June 1 - June 30, 2012   |  |                                      | - |  |                                  |  | - |                                                                                      |  |  | -                                                                                               | 
|Total                    |  |                                      | - |  |                                  |  | - |                                                                                      |  |  | -                                                                                               | 



(1) In July 2011, we announced that the
Board of Directors had authorized a Stock Repurchase Program to repurchase up to $10 million of our common stock from July 2011
through July 2012. In August 2011, the dollar amount approved under the Stock Repurchase Program was raised to $40 million and
the expiration date was extended to August 2012. We did not repurchase any shares during the three months ended June 30, 2012.
We do not intend to make further purchases under the Stock Repurchase Program going forward.



| | Item 3. | Defaults Upon Senior Securities
| | ------- | -------------------------------



Not Applicable.



| | Item 4. | Mine Safety Disclosures
| | ------- | -----------------------



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.



45







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.



|Date:  August 9, 2012 |  | Zhongpin Inc.
|--------------------- |  | -------------
|                      |  | (Company)    
|                      |  |              
|                      |  | By:          
|                      |  |              
|                      |  |              
|                      |  |              
|                      |  | By:          
|                      |  |              
|                      |  |              



46







Exhibit Index

|Exhibit
        Number |  | Exhibit Title                                                                                                                                                             
|---------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|                       |  |                                                                                                                                                                           
|10.1*                  |  | Mutual Guarantee Agreement dated May 25, 2012 between Henan Zhongpin Food Share Co., Ltd.
    and     Henan Huanghe Enterprises Group 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.                                                                   



XBRL Interactive Data File will be filed by amendment to this
Form 10-Q within 30 days of the filing date of this Form 10-Q, as permitted by Rule 405(a)(2)(ii) of Regulation S-T.










*	          Filed herewith



47