United
States


Securities
and Exchange Commission


Washington,
D. C. 20549





FORM
10-Q







[X]
            QUARTERLY
      REPORT PUSUANT SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934





For the quarterly period ended September 30, 2008





[ 
      ]
            TRANSITION
      REPORT PUSUANT SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934




For the transition period from _____ to _____







Commission
File No.
0-25380







CHINA
HUAREN ORGANIC PRODUCTS, INC.


(Exact
Name of Small Business Issuer as specified in its Charter.)










DELAWARE
            
            43-1401158(State of Other
      Jurisdiction of incorporation or organization)
            
            (I.R.S. Employer
      I.D. No.)








c/o
American Union Securities, Inc. , 100 Wall Street, 15thFloor,
New York, NY 10005


(Address
of Principal Executive Offices, including zip code)






212-232-0120


(Issuer's
Telephone Number, Including Area Code)







Indicate
by check mark whether the registrant: (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.  Yes ý    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
definitions of "large accelerated filer", "accelerated filer" and "smaller
reporting company" in Rule 12b-2 of the Exchange Act.




Large
      accelerated filer o
            
            Accelerated
      filer o
            
            Non-accelerated
      filer o
            
            Smaller
      reporting company ý





Indicate
by check mark whether the registrant is a shell company (as defined in
Rule 12b-2 of the Exchange Act).  Yes o    No ý




The
number of shares of common stock, par value $0.01 per share, outstanding as
of November 19, 2008 was 15,000,712














TABLE
      OF CONTENTS
            PagePART
      I. FINANCIAL INFORMATIONItem 1.
            Financial
      Statements
            1Consolidated Balance
      Sheets as of September 30, 2008 (Unaudited) and December 31, 2007
            1Consolidated
      Statements of Operations and Comprehensive Income for the three and nine
      months ended September 30, 2008 and 2007 (Unaudited)
            2Consolidated
      Statements of Cash Flows for the nine months ended September 30, 2008 and
      2007 (Unaudited)
            3Notes to
      Consolidated Financial Statements
            4-7Item 2.
            Management's
      Discussion and Analysis of Financial Condition and Results of
      Operation
            8Item 3.
            Quantitative and
      Qualitative Disclosures About Market Risk
            9Item 4.
            Controls and
      Procedures
            9PART
      II. OTHER INFORMATIONItem 1.
            Legal
      Proceedings
            10Item 2.
            Unregistered Sales
      of Equity Securities and Use of Proceeds
            10Item 3.
            Defaults Upon Senior
      SecuritiesItem 4.
            Submission of
      Matters to a Vote of Security Holders
            10Item 5A.
            Other
      Information
            10Item
      6.
            Exhibits
            10Signatures
            
            11





PART
I.


FINANCIAL
INFORMATION





Item
      1.
            Financial
      Statements





CHINA
      HUAREN ORGANIC PRODUCTS INC. AND SUBSIDIARYCONSOLIDATED
      BALANCE SHEETSSeptember
      30, 2008
            
            
            December
      31, 2007Assets
            
            
            Unaudited
            
            
            AuditedCurrent
      Assets:Cash
      and equivalents
            
            $
            9,013
            
            $
            76,658Accounts
      receivable, net of allowance for doubtful amounts of zeroand
      $45,668 , respectively
            
            
            -
            
            
            4,521,106Inventories
            
            
            
            
            -
            
            
            762,972Prepaid
      expenses
            
            
            1,558,954
            
            
            1,591,952Other
      current assets
            
            
            736
            
            
            110Total
      Current Assets
            
            
            1,568,703
            
            
            6,952,798Property
      and Equipment, Net
            
            
            11,474
            
            
            10,670Deposit
      for Purchase of Fixed Assets
            
            
            3,967,462
            
            
            3,692,950Deferred
      Tax Asset
            
            
            56,537
            
            
            -Total
      Assets
            
            
            5,604,176
            
            
            10,656,418Liabilities
      and Stockholders' EquityCurrent
      Liabilities:Accounts
      payable and accrued expenses
            
            
            122,830
            
            
            87,732Loan
      from officers/stockholders
            
            
            129,317
            
            
            90,132Tax
      payable
            
            
            
            1,694,681
            
            
            1,570,078Other
      current liabilities
            
            
            2,106
            
            
            5,127Total
      Current Liabilities
            
            
            1,948,934
            
            
            1,753,069Stockholders'
      EquitySeries
      C preferred stock, $0.01 par value, 150,000 shares
    authorized,zero
      and 100,000  shares issued and outstanding
            
            
            -
            
            
            1,000Common
      stock, $0.01 par value,100,000,000 shares authorized,15,000,712
      and 14,699,853 shares issued and outstanding
            
            
            150,007
            
            
            146,999Additional
      paid-in capital
            
            
            6,041,868
            
            
            6,043,876Reserve
      fund
            
            
            
            259,244
            
            
            259,244Retained
      earnings
            
            
            (4,301,992)
            
            
            1,447,838Accumulated
      other comprehensive income
            
            
            1,506,115
            
            
            1,004,392Total
      Shareholders’ Equity
            
            
            3,655,242
            
            
            8,903,349Total
      Liabilities and Stockholders’ Equity
            
            $
            5,604,176
            
            $
            10,656,418See
      notes to consolidated financial
statements.





1




CHINA
      HUAREN ORGANIC PRODUCTS INC. AND SUBSIDIARYCONSOLIDATED
      STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
      (UNAUDITED)Three
      Months Ended September 30,
            
            
            Nine
      Months Ended September 30,2008
            
            
            2007
            
            
            2008
            
            
            2007Unaudited
            
            
            Unaudited
            
            
            Unaudited
            
            
            UnauditedRevenues
            
            $
            -
            
            
            $
            733,914
            
            
            $
            -
            
            
            $
            7,314,592Cost
      of Goods Sold
            
            
            -
            
            
            
            345,740
            
            
            
            -
            
            
            
            6,119,578Gross
      Profit
            
            
            -
            
            
            
            388,174
            
            
            
            -
            
            
            
            1,195,014Operating
      ExpensesSelling
      expenses
            
            
            3,271
            
            
            
            43,785
            
            
            
            8,183
            
            
            
            116,833General and administrative expenses
            
            
            56,594
            
            
            
            74,175
            
            
            
            118,429
            
            
            
            238,261Total
      Operating Expenses
            
            
            59,865
            
            
            
            117,960
            
            
            
            126,612
            
            
            
            355,094(Loss)
      Income  From Operations
            
            
            (59,865
            )
            
            
            270,214
            
            
            
            (126,612
            )
            
            
            839,920Other
      Income (Expense)Interest
      income
            
            
            4,744
            
            
            
            4,297
            
            
            
            13,924
            
            
            
            12,720Other
      expense, net
            
            
            (36,245
            )
            
            
            (33,319
            )
            
            
            (116,827
            )
            
            
            (110,782
            )Bad
      debts
            
            
            (4,731,192
            )
            
            
            -
            
            
            
            (4,731,192
            )
            
            
            -Loss
      on disposal of inventory
            
            
            (301,173
            )
            
            
            -
            
            
            
            (844,110
            )
            
            
            -Total
      Other Expense
            
            
            (5,063,866
            )
            
            
            (29,022
            )
            
            
            (5,678,205
            )
            
            
            (98,062
            )(Loss)
      Income  Before Income Taxes
            
            
            (5,123,731
            )
            
            
            241,192
            
            
            
            (5,804,817
            )
            
            
            741,858Provision
      for Income Taxes
            
            
            (54,987
            )
            
            
            87,105
            
            
            
            (54,987
            )
            
            
            252,325Net
      (Loss)  Income
            
            $
            (5,068,744
            )
            
            $
            154,087
            
            
            $
            (5,749,830
            )
            
            $
            489,533Foreign
      Currency Translation Adjustment
            
            
            (45,348
            )
            
            
            138,586
            
            
            
            501,723
            
            
            
            348,060Comprehensive
      (Loss) Income
            
            $
            (5,114,092
            )
            
            $
            292,673
            
            
            $
            (5,248,107
            )
            
            $
            837,593Net
      (Loss) Income  Per Common Share-Basic
            
            $
            (0.34
            )
            
            $
            0.01
            
            
            $
            (0.38
            )
            
            $
            0.03-Diluted
            
            $
            (0.34
            )
            
            $
            0.01
            
            
            $
            (0.38
            )
            
            $
            0.03Weighted
      Common Shares Outstanding*-Basic
            
            
            15,000,712
            
            
            
            14,699,853
            
            
            
            14,936,083
            
            
            
            14,699,853-Diluted
            
            
            15,000,712
            
            
            
            14,999,850
            
            
            
            14,936,083
            
            
            
            14,999,850*
      As restated to reflect recapitalization and the subsequent reverse stock
      split.See
      notes to consolidated financial statements.





2




CHINA
      HUAREN ORGANIC PRODUCTS INC. AND SUBSIDIARYCONSOLIDATED
      STATEMENTS OF CASH FLOWS (UNAUDITED)Nine
      Months Ended September 30,2008
              
              
              2007Unaudited
              
              
              UnauditedCash
      Flows From Operating Activities:Net  (Loss)
      Income
              
              
              $
              (5,749,830)
              
              $
              489,533Adjustments
      to Reconcile Net (Loss) Income to Net CashProvided
      by Operating ActivitiesBad
      debts
              
              
              
              4,731,192
              
              
              52,515Depreciation
              
              
              
              3,258
              
              
              9,340Loss
      on disposal of inventory
              
              
              844,110
              
              
              -Deferred
      tax benefit
              
              
              
              (54,987)
              
              
              -Changes
      in operating assets and liabilitiesAccounts
      receivable
              
              
              
              -
              
              
              (3,758,991)Inventories
              
              
              
              (48,214)
              
              
              4,369,121Other
      receivable
              
              
              
              (575)
              
              
              (107)Advances
      to suppliers
              
              
              
              -
              
              
              -Prepaid
      expenses
              
              
              
              140,863
              
              
              287,780Other
      current assets
              
              
              
              -
              
              
              76,266Accounts
      payable and accrued expenses
              
              
              26,599
              
              
              85,288Customer
      deposit
              
              
              
              -
              
              
              (78,684)Tax
      payable
              
              
              
              9,468
              
              
              533,768Other
      current liabilities
              
              
              (3,167)
              
              
              2,597Net
      Cash (Used in) Provided by Operating Activities
              
              
              (101,283)
              
              
              2,068,426Cash
      Flows From Investing ActivitiesPurchases
      of property and equipment
              
              
              (3,361)
              
              
              (1,630)Proceeds
      from repayment of related party advance
              
              
              -
              
              
              37,441Payment
      for deposit of purchase of fixed assets
              
              
              -
              
              
              (2,154,719)Net
      Cash Used in Investing Activities
              
              
              (3,361)
              
              
              (2,118,908)Cash
      Flows From Financing ActivitiesProceeds
      from officers/shareholders loan
              
              
              108,355
              
              
              4,143Payment
      for loan to officers/shareholders
              
              
              (75,701)
              
              
              -Net
      Cash Provided by Financing Activities
              
              
              32,654
              
              
              4,143Net
      Decrease in Cash and Equivalents
              
              
              (71,990)
              
              
              (46,339)Effect
      of Exchange Rate Changes on Cash
              
              
              4,345
              
              
              (20,603)Cash
      and Equivalents, at Beginning of Period
              
              
              76,658
              
              
              86,266Cash
      and Equivalents, at End of Period
              
              $
              9,013
              
              $
              19,324See
      notes to consolidated financial
statements.
  3
 CHINA
HUAREN ORGANIC PRODUCTS INC. AND SUBSIDIARY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 (UNAUDITED)
 
 1.
Basis of Preparing Accounting Statement
 
 The
accompanying unaudited consolidated financial statements of China Huaren Organic
Products Inc. and subsidiary (the "Company") have been prepared in
accordance with U.S. generally accepted accounting principles for interim
financial information and pursuant to the requirements for reporting on Form
10-Q. Accordingly, they do not include all the information and footnotes
required by accounting principles generally accepted in the United States of
America for annual financial statements. However, the information included in
these interim financial statements reflects all adjustments (consisting solely
of normal recurring adjustments) which are, in the opinion of management,
necessary for the fair presentation of the consolidated financial position and
the consolidated results of operations. Results shown for interim periods are
not necessarily indicative of the results to be obtained for a full year. The
consolidated balance sheet information as of December 31, 2007 was derived from
the audited consolidated financial statements included in the Company's Annual
Report on Form 10-KSB. These interim financial statements should be read in
conjunction with that report.
 
 2.
Organization and Nature of Business
 
 China
Huaren Organic Products Inc. (“the Company”) is a holding company with one
direct subsidiary: China Organic Health Products Inc. (“China Organic”). China
Organic was incorporated in 2006 as a Delaware corporation. China Organic is a
holding company that owned 100% of registered capital of Jilin Huaren Organic
Health Products Co., Ltd. ("Jilin Huaren "), a corporation organized under the
laws of The People’s Republic of China (“PRC”).
 
 In
November 2006, the Company acquired China Organic in exchange for shares of
common stock and shares of Series D Preferred Stock of the Company. The
capitalizations are described in further detail in Note 13 to the accompanying
consolidated financial statements.
 
 China
Organic never initiated any business activity. Most of the Company's activities
are conducted through its 100% owned subsidiary Jilin Huaren. Jilin Huaren is
engaged in the business of research, development, production and sale of organic
foods and healthcare products.  All of Jilin Huaren’s business is currently
in PRC.
 
 Jilin
Huaren is a domestic enterprise incorporated in Jilin district of PRC in
February 2000. Jilin Huaren was formerly known as Jilin KangJian Technology
Trade Center (Jilin KangJian) and changed its name to Jilin Huaren Organic
Health Products Co., Ltd. in December 23, 2004.
 
 3.
Net Loss during Transition Period and Management Plans
 
 During
the fourth quarter of 2007, the sales revenue of Jilin Huaren had dropped down
significantly and the Company incurred a net loss. For the nine months ended
September 30, 2008, the sales revenue was none. As of September 30, 2008, the
Company had $9, 013 cash and equivalents to fund the short-term working capital
requirements. The Company’s ability to continue as a going concern and its
future success is dependent upon its new management team’s ability to better
handle the Company’s business in China, to merge with a better business, and to
raise capital in the near term to (1) satisfy its current obligations, and (2)
fund the successful wide scale development and marketing of its
products.
 
 The
Company presently has ongoing discussions and negotiations with a number of
additional financing alternatives and merger targets. However, the Company has
no definitive agreements to provide funding at this time. In addition, the
Company has no firm commitment with any merger target.
 
 The
accompanying financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
  4.
Summary of Significant Accounting Policies
 
 a.
Use of Estimates
 
 The
preparation of financial statements requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, and the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reported
period. Actual results could differ from these estimates.
  b.
Revenue Recognition
 
 Revenue
is recognized at the date of shipment to customers, and when the price is fixed
or determinable, the delivery is completed, no other significant obligations of
us exist and collectibles is reasonably assured. All revenues for the nine
months ended September 30, 2007 were product sales revenue recorded net of value
added taxes. There were no sales during the first nine months of
2008.
 
 Sales
transactions not meeting all the conditions of the full accrual method are
accounted for using the deposit method of accounting. Under the deposit method,
all costs are capitalized as incurred, and payments received from the buyer are
recorded as a customer deposits.
 
 c.
Foreign Currency Translation
 
 The
Company’s reporting currency is the U.S. dollar. The functional currencies of
the Company's subsidiaries are local currencies, primarily the Chinese Renminbi.
The financial statements are translated into U.S. dollars using period-end rates
of exchange for assets and liabilities and average rates of exchange for the
period for revenues and expenses. Translation adjustments resulting from the
process of translating the local currency financial statements into U.S. dollars
are included in other comprehensive income or loss of statements of operations
and comprehensive income (loss).
 
 d.
Income Taxes
 
 The
Company and its U. S. subsidiary will file consolidated federal income tax
returns and individual state franchise tax returns. The Company’s PRC subsidiary
files income tax returns under the Income Tax Law of the People's Republic of
China concerning Foreign Investment Enterprises and Foreign Enterprises and
local income tax laws.
 
 The
Company follows Statement of Financial Accounting Standards No. 109 - Accounting
for Income Taxes, which requires recognition of deferred tax assets and
liabilities for the expected future tax consequences of events that have been
included in the financial statements or tax returns. Under this method, deferred
tax assets and liabilities are based on the differences between the financial
statement and tax bases of assets and liabilities using enacted tax rates in
effect for the year in which the differences are expected to reverse. Deferred
taxes also are recognized for operating losses that are available to offset
future income taxes.
  e.
Comprehensive Income
 
 SFAS 130,
Reporting Comprehensive
Income, defines comprehensive income to include all changes in equity
except those resulting from investments by owners and distributions to owners
and requires that the period’s comprehensive income, its components and
accumulated balances be disclosed. Among other disclosures, SFAS 130 requires
that all items that are required to be recognized under current accounting
standards as components of comprehensive income be reported in a financial
statement that is presented with the same prominence as other financial
statements. The Company’s only current component of comprehensive income is the
foreign currency translation adjustment.
  4
 CHINA
HUAREN ORGANIC PRODUCTS INC. AND SUBSIDIARY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 (UNAUDITED)
 f.
Segment Reporting
 
 SFAS 131,
Disclosure about Segments of
an Enterprise and Related Information, requires disclosure of reportable
segments used by management for making operating decisions and assessing
performance. Reportable segments are categorized by products and services,
geography, legal structure, management structure, or any other manner in which
management disaggregates a company. SFAS 131 has no effect on the Company’s
financial statements as substantially all of our operations and management is
under a single operating segment.
  g.
Recent Pronouncements
 
 In May
2008, the Financial Accounting Standards Board ("FASB") issued Statement of
Financial Accounting Standards ("SFAS") No.162, “The Hierarchy of Generally
Accepted Accounting Principles”. SFAS 162 indicates the entity (not its auditor)
that is responsible for selecting accounting principles for financial statements
that are presented in conformity with GAAP. Accordingly, the GAAP hierarchy
should reside in the accounting literature established by the FASB and is
issuing SFAS 162 to achieve that result. SFAS 162 also identifies the sources of
accounting principles and the framework for selecting the principles to be used
in the preparation of financial statements of nongovernmental entities that are
presented in conformity with generally accepted accounting principles (GAAP) in
the United States (the GAAP hierarchy).SFAS 162 is effective 60 days following
the SEC’s approval of the Public Company Accounting Oversight Board amendments
to AU Section 411, The Meaning
of Present Fairly in Conformity With Generally Accepted Accounting
Principles. The Company is in the process of evaluating the new disclosure
requirements under SFAS 162.
 
 In March
2008, the Financial Accounting Standards Board ("FASB") issued Statement of
Financial Accounting Standards ("SFAS") No.161,"Disclosures about Derivative
Instruments and Hedging Activities - An Amendment of SFAS No. 133" ("SFAS 161").
SFAS 161 seeks to improve financial reporting for derivative instruments and
hedging activities by requiring enhanced disclosures regarding the impact on
financial position, financial performance, and cash flows. To achieve this
increased transparency, SFAS 161 requires (1) the disclosure of the fair value
of derivative instruments and gains and losses in a tabular format;(2) the
disclosure of derivative features that are credit risk-related; and
(3)cross-referencing within the footnotes. SFAS 161 is effective for financial
statements issued for fiscal years and interim periods beginning after November
15, 2008 (that is, January 1, 2009, for entities with calendar year-ends), with
early application encouraged.  The Company is in the process of
evaluating the new disclosure requirements under SFAS 161.
 
 In
December 2007, the Financial Accounting Standard Board (“FASB”) issued SFAS No.
160, “Non-controlling Interests in Consolidated Financial Statements-an
amendment of ARB No. 51” which clarifies that a non-controlling interest in a
subsidiary is an ownership interest in the consolidated entity that should be
reported as equity in the consolidated financial statements. This statement also
changes the way the consolidated income statement is presented. It requires
consolidated net income to be reported at amounts that include the amounts
attributable to both the parent and the non-controlling interest. In addition,
it requires disclosure, on the face of the consolidated statement of income, of
the amounts of consolidated net income attributable to the parent and to the
non-controlling interest. SFAS No. 160 is effective for fiscal years, and
interim periods within those fiscal years beginning on or after December 15,
2008 (that is, January 1, 2009, for entities with calendar year-ends). Earlier
adoption is prohibited. The company is currently in the process of evaluating
the effect, if any, the adoption of SFAS No. 160 will have on its consolidated
results of operations, financial position, and financial
disclosure.
 
 In
December 2007, Statement of Financial Accounting Standards No. 141(R), Business
Combinations, was issued. SFAS No. 141R replaces SFAS No. 141, Business
Combinations. SFAS 141R retains the fundamental requirements in SFAS 141 that
the acquisition method of accounting (which SFAS 141 called the purchase method)
be used for all business combinations and for an acquirer to be identified for
each business combination. SFAS 141R requires an acquirer to recognize the
assets acquired, the liabilities assumed, and any non-controlling interest in
the acquiree at the acquisition date, measured at their fair values as of that
date, with limited exceptions. This replaces SFAS 141's cost-allocation process,
which required the cost of an acquisition to be allocated to the individual
assets acquired and liabilities assumed based on their estimated fair values.
SFAS 141R also requires the acquirer in a business combination achieved in
stages (sometimes referred to as a step acquisition) to recognize the
identifiable assets and liabilities, as well as the non-controlling interest in
the acquiree, at the full amounts of their fair values (or other amounts
determined in accordance with SFAS 141R). SFAS 141R applies prospectively to
business combinations for which the acquisition date is on or after the
beginning of the first annual reporting period beginning on or after December
15, 2008 (that is, January 1, 2009, for entities with calendar year-ends). An
entity may not apply it before that date. The Company is currently evaluating
the impact that adopting SFAS 141R will have on its financial statements.
  5.
Accounts receivable
 
 During
the first quarter of 2007, the Company, facing an imminent expiration date on
organic crops that it had received from Wancheng, sold those crops at cost to
Yushu Wanli Co., Ltd (“Yushu”) pursuant to a sales contract. This sale on March
15, 2007 increased the Company’s accounts receivable by approximately $5,937,186
(equivalent to RMB 40,312,786), which included the merchandise price plus VAT
and other sales taxes. Yushu Wanli Co., Ltd. is a non-related third party. Based
upon the sales contract, Yushu began to pay the amount due to the Company in May
2007. As of September 30, 2007, there was outstanding balance due from
Yushu in amount of $4,906,241 (equivalent to RMB 33,312,786).After
more than one year waiting for this outstanding payment, the new management team
of the Company decided to write the debt. As a result, the Company
recognized approximately $4.7 million bad debts loss as of September 30,
2008
 
 6.
Inventories
 
 Inventories
consist of the following:
 September
      30, 2008
                
                
                December
      31, 2007Unaudited
                
                
                AuditedFinished
      goods
                
                $
                -
                
                
                $
                242,633Work
      in process
                
                
                -
                
                
                
                480,532Packaging
      materials and others
                
                
                -
                
                
                
                39,807Total
                
                $
                -
                
                
                $
                762,972
  The
Company had disposal of inventory in amounts of $844,110 and $0 for nine months
ended September 30, 2008 and 2007.
 
 7.Prepaid
Expenses
 
 Prepaid
expenses consist of the following:
 September
      30, 2008
                
                
                December
      31, 2007Unaudited
                
                
                AuditedPrepaid
      office rent
                
                $
                4,558
                
                
                $
                267Prepaid
      consultation fees
                
                
                3,068
                
                
                
                -Prepaid
      lease fees for the right to use lands
                
                
                1,551,328
                
                
                
                1,591,685Total
                
                $
                1,558,954
                
                
                $
                1,591,952
   5
 CHINA
HUAREN ORGANIC PRODUCTS INC. AND SUBSIDIARY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 (UNAUDITED)
 8.
Property and Equipment, Net
 
 Property and equipment at cost, less
accumulated depreciation, consists of the following:
  Estimated
      Life
                
                September
      30, 2008
                
                
                December
      31, 2007Unaudited
                
                
                AuditedOffice
      equipments
                5
      years
                
                $
                26,921
                
                
                $
                21,930Subtotal
                
                
                
                26,921
                
                
                
                21,930Less:
      Accumulated depreciation
                
                
                15,447
                
                
                
                11,260Total
                
                
                $
                11,474
                
                
                $
                10,670
 
 Depreciation
expenses charged to operations were $3,258 and $9,340 for the nine months
ended    September 30, 2008 and 2007,
respectively.
 
 9.
Deposit for Purchase of Fixed Assets
 
 Starting
from late 2005, the subsidiary in China, Jilin Huaren, has intended to purchase
an office building from an unrelated company in P. R. China. The purchase price
was $1,104,585 (equivalent to RMB 7,500,000) and fix up construction cost was
$388,607 (equivalent to RMB 2,638,593). During 2006 and 2007, all these
cost had been paid to the seller by Jilin Huaren, but the title to the property
has not been transferred. Jilin Huaren had occupied the property since 2005
without paying any rent. Accordingly, Jilin Huaren has recognized $19,087
(equivalent to RMB 129,600) of rent expenses per year since October 1,
2005, and has recognized an equal amount of interest income imputed on the
payments that Jilin Huaren made to the seller since 2005. Management has
estimated the value of the contribution items and contracted the prior owner and
government in Jilin PRC, and expects to get a full refund of $1,493,192
(equivalent to RMB 10,138,593) if the purchase does not go
through.
 
 On March
1, 2007, Jilin Huaren signed a letter of intent with a village in Jilin
P.R.China to purchase a land use right from the village. This letter of intent
did not list the total purchase price, but Jilin Huaren had deposited $2,474,270
(equivalent to RMB16,800,000) to the village as of September 30, 2008. In
addition, the title to the land use rights has not passed to Jilin Huaren yet as
of September 30, 2008. Management had contacted the government in the village of
Jilin PRC, and expects to get a full refund of all deposits in amount of
$2,474,270 (equivalent to RMB16,800,000) if the purchase does not go
through.
 
 The
Company’s total deposits for purchase of fixed assets, therefore, consist of the
following:
  September
      30, 2008
                
                
                December
      31, 2007Unaudited
                
                
                AuditedDeposit
      for purchase office building
                
                $
                1,493,192
                
                
                $
                1,389,876Deposit
      for purchase land use right from village
                
                
                2,474,270
                
                
                
                2,303,074Total
                
                $
                3,967,462
                
                
                $
                3,692,950
 
 10.
Operating Lease Commitments
 
 The
Company leases office space and plant lands under operating lease
agreements.
 
 The
following is a schedule of future minimum rental payments required under
operating leases that had initial or remaining non-cancelable lease terms
beyond September 30, 2008.
  Quarter
      Ending September 30,2009
                
                $
                156,8582010
                
                
                147,2782011
                
                
                147,2782012
                
                
                147,2782013
                
                
                147,278Thereafter
                
                
                6,308,408Total
      minimum payments required
                $
                7,054,378
 
 Rent
expenses amounted to $125, 694 and $304,740 for the nine months ended September
30, 2008 and 2007, respectively.
 
 11.
Taxation
 
 a.
Corporation Income Tax (“CIT”)
 
 The
Company and its US subsidiary will file consolidated federal and
individual state franchise tax returns. The Company’s PRC subsidiary files
income tax returns under the Income Tax Law of the People's Republic of China
concerning Foreign Investment Enterprises and Foreign Enterprises and local
income tax laws.
 
 In
accordance with the relevant PRC tax laws and regulations, the Company’s PRC
subsidiary was subject to CIT at 33% and 25% tax rate before and after January
1, 2008, respectively. The Company did not record U.S. and PRC current
income tax for nine months ended September 30, 2008, since there was no taxable
income during this period, whereas the Company had recorded the deferred benefit
for income tax in the amount of $54,987 for the nine months ended
September 30, 2008, respectively, due to the operations loss occurred during
this period.
  b.
Value Added Tax (“VAT”)
 
 The
Company is subjected to VAT on merchandise sales in PRC. For the nine months
ended September 30, 2008 and 2007, a small scale VAT tax rate of 4% was
applicable.
 
 c.
Business Tax (“BT”)
 
 The
Company is also subject to Business Tax, which is charged on the service
income at a rate of 5% in accordance with the tax law in Jilin District of
PRC.
  d.
Taxes Payable
 
 As of
September 30, 2008 and December 31, 2007, tax payable consists of the
following:
 
 September
      30, 2008
                
                
                December
      31, 2007Unaudited
                
                
                AuditedValue-added
      tax
                
                $
                599,277
                
                
                $
                557,813Income
      tax
                
                
                1,036,263
                
                
                
                964,564Delaware
      franchise taxes
                
                
                30,654
                
                
                
                21,186Individual
      income tax withholdings
                
                
                6,581
                
                
                
                6,126City
      construction, education, and other taxes
                
                
                21,906
                
                
                
                20,389Total
                
                $
                1,694,681
                
                
                $
                1,570,078
   6
 CHINA
HUAREN ORGANIC PRODUCTS INC. AND SUBSIDIARY
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
 (UNAUDITED)
 12.
Foreign Subsidiary
 
 a. Operations
 
 Substantially
all of the Company’s operations are carried out through its subsidiary located
in the PRC. Accordingly, the Company’s business, financial condition and results
of operations may be influenced by the political, economic and legal
environments in the PRC. The Company’s business may be influenced by
changes in governmental policies with respect to laws and regulations,
anti-inflationary measures, currency fluctuation and remittances and methods of
taxation, among other things.
 
 b. Dividends
and Reserves
 
 Under
laws of the PRC, net income after taxation can only be distributed as dividends
after appropriation has been made for the following: (i) cumulative prior years'
losses, if any; (ii) allocations to the "Statutory Surplus Reserve" of at least
10% of net income after tax, as determined under PRC accounting rules and
regulations, until the fund amounts to 50% of the Company's registered capital;
(iii) allocations of 5-10% of income after tax, as determined under PRC
accounting rules and regulations, to the Company's "Statutory Common Welfare
Fund", which is established for the purpose of providing employee facilities and
other collective benefits to employees in China; and (iv) allocations to any
discretionary surplus reserve, if approved by shareholders.
 
 As
of September 30, 2008 and as of December 31, 2007, the Company’s PRC
subsidiaries established and segregated in retained earnings an aggregate amount
of $259,244 and $259,244, respectively, for the Statutory Surplus Reserve and
the Statutory Common Welfare Fund.
 
 13.
Stockholders Equity
 
 Before
acquisition (the “Share Exchange”), the Company had 17,548,665 shares of common
stock outstanding. On November 13, 2006, the Company acquired all of the
outstanding capital stock of China Organic Health Products, Inc. (“China
Organic”).  In connection with the closing of the acquisition (the “Share
Exchange”), the Company issued to the shareholders of China Organic (a)
27,486,175 shares of common stock and (b) Series D Preferred Stock, which was
convertible into 469,760,000 shares of common stock. In addition, effective
on January 16, 2007, the Company (i) changed its name to “China Huaren
Organic Products, Inc” from “Ultradata Systems, Inc., (ii) brought into
effect a 1:39 reverse split of its outstanding common shares, and
(iii)  increased  the number of authorized shares of common
stock from 50,000,000 shares, par value $0.01 to 100,000,000 shares, $0.01 par
value. After recapitalization, the Series D Preferred Stock was converted into
12,045,128 common shares.
 
 On
January 5, 2007, the shareholder of Series B Preferred Stock exercised its right
to convert all of the outstanding Series B Preferred Stock into 58,499,413
shares of common stock. After giving effect to the reverse stock split on
January 16, 2007, the shares obtained by this shareholder on conversion of the
Series B Preferred Stock totaled 1,499,985. As a result, there were
14,699,853 common shares issued and outstanding, par value $0.01 as of December
31, 2007 and 2006.
 
 On
February 28, 2008, certain individuals converted all of the outstanding Series C
Preferred Stock into 300,859 shares of the Company’s common stock. Therefore the
Company had 15,000,712 common shares issued and outstanding, par value $0.01, on
September 30, 2008.
  7
  Item
      2.
              Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
 
 The following analysis of our
consolidated financial condition and results of operations for the nine months
ended September 30, 2008 and 2007, should be read in conjunction with the
consolidated financial statements, including footnotes, and other information
presented in our annual report on Form 10-KSB for the year ended December 31,
2007, as filed with the Securities and Exchange Commission onMay 9,
2008.
  Results
of Operations
  Jilin Huaren commenced its marketing
operations in March of 2005. In the spring of both 2006 and 2007, however, we
found ourselves with large inventories of perishable goods that we were unable
to sell before their expiration dates.  So at both times we
transferred the goods to another distributor at cost.  The transaction
in 2007 involved a sale to Yushu Wanli Co., Ltd. of foodstuffs for $5,937,186
(equivalent at that time to RMB 40,312,786) (including tax) under a contract
that called for payments to begin in cash in May 2007. This transaction relieved
us of the problem of perishable inventory. But the result was that we realized
only $251,319 in gross profit on the transaction. This gross margin is
inadequate to provide the funds we need for more than a minimal level of
operations.
  The
problem with the Yushu Wanli transaction was compounded when Yushu Wanli stopped
making payments on the account. During the second and third quarters of 2007, we
received $934,227 from this client. Since that time we have received nothing.
After more than one year waiting for this outstanding payment, the new
management team of the Company decided to write the debt. As a result, we
recognized approximately $4.7 million bad debts loss as of September 30,
2008.
  Due to the slow growth of sales and low
margins achieved in the fall of 2007 we transferred operational control over
Jilin Huaren to a group of experienced food supplies managers.  Our
contract with the management group provided that they would receive all net
earnings from Jilin Huaren in excess of specified amounts: 3 million RMB in the
period from August to December 2007, 14 million RMB in 2008, etc. Unfortunately,
the transfer of control to this new group brought sales to a halt.  In
the fourth quarter of 2007 we realized only $134,778 in revenue; in the first
three months of 2008 we had no revenue.  For this reason we terminated
the management agreement and appointed new managers, who assumed their
positions in late May 2008. Nevertheless we still had no revenue as of
September 30, 2008.
  Our operations during the first nine
months of 2008 produced only a low level of operating expenses.  For
the three and nine month periods ended September 30, 2008, our operating
expenses were $59,865 and $126,612, respectively, with the third and second
quarters being somewhat higher than the first quarter due to the arrival of new
managers in May 2008. Those amounts likewise represented our loss from
operations for those periods, since we had no revenue.  By comparison,
during the three and nine month periods ended September 30, 2007, during
which our company had profitable operations, we incurred operating expenses of
$117,960 and $355,094, respectively.  Our operating expenses for the
future will depend in large part on the level of operations that our new
managers are able to achieve.
  During the nine months
ended September 30, 2008, we incurred a net loss of $5,749, 830. The
greater portion of this loss was caused by a loss on bad debts recognized in the
amount of $4,731,192 for accounts receivable outstanding for more than one year
which also represented all outstanding balance of YuShu Wanli as of September
30, 2008. The other portion of the loss was caused by a loss on disposal of
inventory in amount of $844,110. Part of the loss on disposal of inventory
occurred as we were unable to process the organic grains and raw materials into
final packaged goods for sale to the end-user consumers. The perishable
foodstuffs became unusable and subsequently marked as a loss on the disposal of
inventory. Other part of the loss on disposal of inventory occurred as we
cleaned out the old cosmetics products which had expired useful life, and unused
containers which were used to package the cosmetics products.
  If our new managers are able to revive our business operations, our business
plan should provide an opportunity for those operations to be
profitable.  By way of example, in the first nine months of 2007,
despite the relatively low margin realized on our sales, our operations were
profitable due to our low level of expenses. Our net income for the first
nine months of 2007 was $489,533. The fact that we are able to operate
profitably in the first nine months of 2007, despite low gross profit, is
attributable to two essential characteristics of our business
model:
  ·
              There
      are thousands of individuals involved in selling our products – but we
      incur no payroll obligation for them. They are owners or employees of the
      companies that distribute for us.  So our selling expenses were
      less than 2% of revenue in the first nine months of 2007 and have
      been less than 4% of our revenue since we began operations in
      2005.
  ·
              Our
      manufacturing activity is completely outsourced to enterprises dedicated
      to organic agricultural manufacturing.  As a result, during the
      first nine months of 2007 our general and administrative expense
      equaled less than 3.5% of our revenue.  During the first
      nine months of 2008 and 2007 our depreciation expense – often a major
      factor in agribusiness operations – were only $3,258 and 9,340,
      respectively, since we own no manufacturing
  equipment.
  Our business operates entirely in Chinese Renminbi, but we report our results in
our SEC filings in U.S. Dollars.  The conversion of our accounts from
RMB to Dollars results in translation adjustments, which are reported as a
middle step between net income and comprehensive income. The net income is added
to the retained earnings on our balance sheet; while the translation adjustment
is added to a line item on our balance sheet labeled “accumulated other
comprehensive income,” since it is more reflective of changes in the relative
values of U.S. and Chinese currencies than of the success of our
business.  During the first nine months of 2008 and 2007, the
unrealized gain on foreign currency translations added $501,723, and
$348,060 to our accumulated other comprehensive income.
  Our prospects for the future will depend on the success of our new managers, who
assumed control of Jilin Huaren in May 2008.  We believe that our
business plan, if properly implemented by competent management, can be
successful and that we have put in place most of the resources necessary to
permit the plan to be implemented.  But the new management will have
to revive the Company’s operations almost completely.  Whether they
will be able to overcome the inertia of recent stagnancy in our operations will
be known only with the passage of time.
  Liquidity and Capital
Resources
  On September 30, 2008 we had a working capital deficit of $380,231, a
reduction of $5,579, 960 from our working capital on December 31,
2007. The reduction was primarily the result of the loss we sustained in the
nine months of 2008.  We had no long-term liabilities. However, our
working capital consisted primarily of the prepaid expenses, which are mostly
advances for lease fees of land on which we will plant our future
crops.  In addition, we lack the cash necessary to make our
distribution network more efficient, having had only $9,013 in cash and
equivalents as of September 30, 2008.  To obtain the necessary cash,
we expect to acquire the necessary funds from outside sources or majority
shareholders in the next quarter of 2008.
  During 2005, we contracted to purchase an office building for our operations. We
have deposited $1,493,192 (equivalent to RMB 10,138,593) with the seller to
cover the cost of the building and certain improvements that we
require.  Title to the building has not passed to us yet,
however.  So our investment is recorded on the balance sheet as a
“deposit for purchase of fixed assets.”  In addition, on March 1,
2007, we signed a letter of intent with a village in Jilin, PRC to purchase a
land use right from the village. This letter of intent did not list the total
purchase price, but we have deposited $2,474,270 (equivalent to RMB16.8 million)
to the village. This sum represents the remainder of the “deposit for purchase
of fixed assets” on our balance sheet. We had tried to negotiate with the prior
owner of the building and the controller of village in Jilin PRC, and expect to
get those payments back to us, if they could not transfer the title of the
properties to us within short period of next year.
  The cash demands of our business mean that in order to make capital improvements
we will require additional capital from external sources.  Our plan is
to acquire additional organic soil resources in the near future, and to invest
in manufacturing capability over the longer term.  To fund those
additions to our balance sheet, we intend to sell equity.  At the
present time, however, we have received no commitments from any
source.
  8
  
 Off-Balance Sheet
Arrangements
  We do not have any off-balance sheet arrangements that have or are reasonably
likely to have a current or future effect on our financial condition or results
of operations.
 
 Item
      3.
              Quantitative and Qualitative Disclosures about Market
      Risk
 Not applicable.
 
 Item
      4.
              Controls and
Procedures
 Evaluation of Disclosure Controls and Procedures.
  Our Chief Executive Officer and Chief Financial Officer carried out an
evaluation of the effectiveness of our disclosure controls and procedures as of
September 30, 2008. Pursuant to Rule13a-15(e) promulgated by the Securities and
Exchange Commission pursuant to the Securities Exchange Act of 1934, “disclosure
controls and procedures” means controls and other procedures that are designed
to insure that information required to be disclosed by China Huaren in the
reports that it files with the Securities and Exchange Commission is recorded,
processed, summarized and reported within the time limits specified in the
Commission’s rules.  “Disclosure controls and procedures” include,
without limitation, controls and procedures designed to insure that information
China Huaren is required to disclose in the reports it files with the Commission
is accumulated and communicated to our Chief Executive Officer and Chief
Financial Officer as appropriate to allow timely decisions regarding required
disclosure.  Based on his evaluation, our Chief Executive Officer and
Chief Financial Officer concluded that China Huaren’s system of disclosure
controls and procedures was effective as of September 30, 2008 for the purposes
described in this paragraph.
  Changes
in Internal Control overFinancial
Reporting
  During the nine months ended September 30, 2008, there has been no change in our
internal control over financial reporting (as defined in Rule 13a-15(f) and
15d-15(f) under the Exchange Act) ) that has materially affected, or is
reasonably likely to materially affect, our internal control over financial
reporting.
 
 9
 PART
II.
 OTHER
INFORMATION
 Item
1.      Legal Proceedings
 
 None
 
 Item
1A.   Risk Factors
  Not applicable
 
 Item
2.      Unregistered Sales of Equity Securities
and Use of Proceeds.
  None
 
 Item
3.      Defaults upon Senior
Securities
  None
 
 Item
4.      Submission of Matters to a Vote of
Security Holders
  None
 
 Item
5A.   Other Information
  None
 
 Item
6.      Exhibits
  Exhibit
      Number
              Description
 31
              Certification
      of Chief Executive Officer and Chief Financial Officer pursuant to 18
      U.S.C. Section 1350, as adopted pursuant to Section 302 of
      theSarbanes-Oxley
      Act of 200232
              Certification of Chief
      Executive Officer and Chief Financial Officer pursuant to 18 U.S.C.
      Section 1350, as adoptedpursuant to Section 906
      of the Sarbanes-Oxley Act of 2002


SIGNATURES
 
 
 In
accordance with the requirements of the Exchange Act, the registrant has caused
his report to be signed on its behalf by the undersigned, thereunto duly
authorized.
 
 
 CHINA HUAREN ORGANIC PRODUCTS,
INC.
 
 Date:
      November 19, 2008
              By:
      /s/ Yushu
    Cao
 Mrs.
      Yushu Cao, Chief Executive Officer and Chief Financial
    Officer
 
 
  11