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 March 31,
  2010.
  o
              TRANSITION
      REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
      1934 FOR THE TRANSITION PERIOD FROM ________ TO
  __________


COMMISSION
FILE NUMBER: 333-150388





Granto,
Inc.


(EXACT
NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)





NEVADA
              
              98-0655634(STATE
      OR OTHER JURISDICTION OF
              
              (I.R.S.
      EMPLOYER IDENTIFICATION NO.)INCORPORATION
      OR ORGANIZATION




Dongdu
Room 321, No. 475 Huanshidong Road


Gaungzhou
City, People’s Republic of China 510075


(ADDRESS
OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)





REGISTRANT’S
TELEPHONE NUMBER, INCLUDING AREA CODE:011-86-20-8762-1778





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 x  No o .





Indicate
by check mark whether the Registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Date File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this
chapter) during the preceding 12 months (or for such shorter period that the
Registrant was required to submit and post such files). Yes o  No o





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




Large
      accelerated filero
            Accelerated
      fileroNon-accelerated
      filero
            Smaller
      reporting companyx




Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Exchange Act.) Yes o Nox




The
number of shares of Common Stock of the Registrant, par value $.001 per share,
outstanding on May 15, 2010 was 21,286,789.





GRANTO,
INC.





INDEX
TO MARCH 31, 2010 FORM 10-Q




Page
                    NumberPart
      I - Financial Information
                  
                  3Item
      1 - Financial Statements
                  
                  F-1Report
      of Independent Registered Public Accounting Firm
                  
                  F-1Consolidated
      Balance Sheets as of March 31, 2010 (unaudited) and December 31,
      2009
                  
                  F-2Consolidated
      Statements of Income for the Three Months ended March 31, 2010 and 2009
      (unaudited)
                  
                  F-3Consolidated
      Statements of Cash Flows for the Three Months ended March 31, 2010 and
      2009 (unaudited)
                  
                  F-4Consolidated
      Statements of Stockholders’ equity for the Three Months Ended March 31,
      2010 and the Year Ended December 31, 2009
                  
                  F-5Notes
      to the Consolidated Financial Statements (unaudited)
                  
                  F-6Item
      2 - Management's Discussion and Analysis of Results of Operations and
      Financial Condition
                  
                  4Item
      4 - Controls and Procedures
                  
                  11Part
      II - Other Information
                  
                  11Item
      2 - Unregistered Sales of Equity Securities and Use of
      Proceeds
                  
                  11Item
      6 - Exhibits
                  
                  11Signature
      Page
                  
                  12


2




PART
I - FINANCIAL INFORMATION





FORWARD-LOOKING
STATEMENTS





The discussions of the business and
activities of Granto, Inc. (“we,” “us,” “our” or “the Company”) set forth in
this Form 10-Q and in other past and future reports and announcements by the
Company may contain forward-looking statements and assumptions regarding future
activities and results of operations of the Company.  You can identify
these statements by the fact that they do not relate strictly to historical or
current facts. Forward-looking statements involve risks and uncertainties.
Forward-looking statements include statements regarding, among other things, (a)
our projected sales, profitability, and cash flows, (b) our growth strategies,
(c) anticipated trends in our industry, (d) our future financing plans and (e)
our anticipated needs for working capital. They are generally identifiable by
use of the words "may," "will," "should," "anticipate," "estimate," "plans,"
“potential," "projects," "continuing," "ongoing," "expects," "management
believes," "we believe," "we intend" or the negative of these words or other
variations on these words or comparable terminology. These statements may be
found under "Management's Discussion and Analysis of Financial Condition and
Results of Operations” as well as in this Form 10-Q generally. In particular,
these include statements relating to future actions, prospective products or
product approvals, future performance or results of current and anticipated
products, sales efforts, expenses, the outcome of contingencies such as legal
proceedings, and financial results.




Any or
all of our forward-looking statements in this report may turn out to be
inaccurate. They can be affected by inaccurate assumptions we might make or by
known or unknown risks or uncertainties. Consequently, no forward-looking
statement can be guaranteed. Actual future results may vary materially as a
result of various factors, including, without limitation, the risks outlined
under "Risk Factors" and matters described in the most recent Form 10-K filed by
the Company. In light of these risks and uncertainties, there can be no
assurance that the forward-looking statements contained in this filing will in
fact occur. You should not place undue reliance on these forward-looking
statements.





We undertake no obligation to update
forward-looking statements to reflect subsequent events, changed circumstances,
or the occurrence of unanticipated events.


3





Item
1. Financial Statements




ACSBAcquavella, Chiarelli,
Shuster, Berkower & Co., LLP
 517
      Route one
              1
      Penn PlazaIselin,
      New Jersey, 08830
              36th  Floor732.855.9600
              New
      York, NY 10119
 
 Report of Independent
Registered Public Accounting Firm
 
 Board of
Directors and Stockholders of
 Granto,
Inc.
  We have
reviewed the accompanying balance sheet of Granto, Inc. (the “Company”) as of
March 31, 2010, and the related statements of income, stockholders’ equity and
comprehensive income, and cash flows for the three-month period ended March 31,
2010. These financial statements are the responsibility of the company’s
management.
  We
conducted our review in accordance with the standards of the Public Company
Accounting Oversight Board (United States). A review of interim financial
information consists principally of applying analytical procedures and making
inquiries of persons responsible for financial and accounting matters. It is
substantially less in scope than an audit conducted in accordance with standards
of the Public Company Accounting Oversight Board (United States), the objective
of which is the expression of an opinion regarding the financial statements
taken as a whole. Accordingly, we do not express such an opinion.
  Based on
our review, we are not aware of any material modifications that should be made
to the accompanying interim financial statements for them to be in conformity
with accounting principles generally accepted in the United States of
America.
  We have
previously audited, in accordance with auditing standards of the Public Company
Accounting Oversight Board (United States), the consolidated balance sheet of
the Company as of December 31, 2009 and the related consolidated statements of
income, retained earnings and comprehensive income, and consolidated statement
of cash flows for the year then ended; and in our report dated April 30, 2010,
we expressed an unqualified opinion on those financial statements. In our
opinion, the information set forth in the accompanying consolidated balance
sheet as of December 31, 2009, is fairly stated, in all material respects, in
relation to the consolidated balance sheet from which it has been
derived.
 
 /s/
Aquavella, Chiarelli, Shuster, Berkower & Co., LLP
 
 Acquavella,
Chiarelli, Shuster, Berkower & Co., LLP
 
 Certified
Public Accountants
 
 New York,
N.Y.
 May 24,
2010
  F-1
  GRANTO,
INC
 CONSOLIDATED
BALANCE SHEETS
 AS
OF MARCH 31, 2010 AND DECEMBER 31, 2009
 
 3/31/2010
                        
                        
                        12/31/2009ASSETSCurrent
      AssetsCash
                        
                        $
                        1,594,034
                        
                        
                        $
                        3,194,248Accounts
      receivable
                        
                        
                        2,473,454
                        
                        
                        
                        236,374Inventories
                        
                        
                        5,159,849
                        
                        
                        
                        2,979,753Due
      from shareholders
                        
                        
                        -
                        
                        
                        
                        4,008,659Other
      receivable
                        
                        
                        21,211
                        
                        
                        
                        21,208Trade
      deposit
                        
                        
                        -
                        
                        
                        
                        121,224Prepaid
      expenses
                        
                        
                        217,199
                        
                        
                        
                        230,247Financial
      receivable
                        
                        
                        6,561,077
                        
                        
                        
                        -Escrow
      account
                        
                        
                        100,000
                        
                        
                        
                        -Total
      Current Assets
                        
                        
                        16,126,824
                        
                        
                        
                        10,791,713Fixed
      assets
                        
                        
                        395,941
                        
                        
                        
                        405,147Biological
      assets
                        
                        
                        474,349
                        
                        
                        
                        432,808Total
      Assets
                        
                        $
                        16,997,114
                        
                        
                        $
                        11,629,668LIABILITIES
      AND STOCKHOLDERS' EQUITYCurrent
      LiabilitiesAccounts
      payable
                        
                        $
                        4,832,915
                        
                        
                        $
                        -Other
      payable
                        
                        
                        255,035
                        
                        
                        
                        2,743,960Advance
      from clients
                        
                        
                        -
                        
                        
                        
                        498,785Short-term
      bank loan
                        
                        
                        1,023,976
                        
                        
                        
                        380,273Dividend
      payable
                        
                        
                        -
                        
                        
                        
                        3,466,331Income
      tax payable
                        
                        
                        236,483
                        
                        
                        
                        995,313Total
      Current Liabilities
                        
                        
                        6,348,409
                        
                        
                        $
                        8,084,662Derivative
      liability
                        
                        
                        7,830,045
                        
                        
                        
                        -Long-term
      bank loan
                        
                        
                        -
                        
                        
                        
                        1,170,070Total
      liabilities
                        
                        
                        14,178,454
                        
                        
                        
                        9,254,732Stockholders'
      EquityCommon
      stock, par value, $0.001 per share, 90,000,000 shares authorized,
      21,286,789 and 20,810,713 shares issued and outstanding at March 31, 2010
      and December 31, 2009
                        
                        
                        21,287
                        
                        
                        
                        20,811Preferred
      stock, par value, $0.001 per share, 10,000,000 shares authorized,
      2,768,721 shares issued and outstanding at March 31, 2010
                        
                        
                        2,769
                        
                        
                        
                        -Additional
      paid in capital
                        
                        
                        8,561,235
                        
                        
                        
                        796,621Subscription
      receivables
                        
                        
                        -
                        
                        
                        
                        -Statutory
      reserve
                        
                        
                        1,076,488
                        
                        
                        
                        1,051,089Other
      comprehensive income
                        
                        
                        863,248
                        
                        
                        
                        866,699Retained
      earnings
                        
                        
                        (7,706,367
                        )
                        
                        
                        (360,284
                        )Total
      Stockholders' Equity
                        
                        
                        2,818,660
                        
                        
                        
                        2,374,936Total
      Liabilities and Stockholders' Equity
                        
                        $
                        16,997,114
                        
                        
                        $
                        11,629,668
 
 The
accompanying notes are an integral part of these financial
statements.
  F-2
 
 GRANTO,
INC.
 CONSOLIDATED
STATEMENTS OF INCOME
 FOR
THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009
 (UNAUDITED)
  
 2010
                                  
                                  
                                  2009Revenue,
      net
                                  
                                  $
                                  9,923,527
                                  
                                  
                                  $
                                  9,406,428Cost
      of goods sold
                                  
                                  
                                  6,719,795
                                  
                                  
                                  
                                  6,266,745Gross
      profit
                                  
                                  
                                  3,203,732
                                  
                                  
                                  
                                  3,139,683Operating
      expenses:Selling
      expenses
                                  
                                  
                                  285,932
                                  
                                  
                                  
                                  87,591General
      and administrative expenses
                                  
                                  
                                  406,888
                                  
                                  
                                  
                                  680,706Total
      operating expenses
                                  
                                  
                                  692,820
                                  
                                  
                                  
                                  768,297Net
      income (loss) from operations
                                  
                                  
                                  2,510,912
                                  
                                  
                                  
                                  2,371,386Other
      income (expenses)Loss
      on Fair value of derivative liability
                                  
                                  
                                  (4,562,248
                                  )
                                  
                                  
                                  -Interest
      income
                                  
                                  
                                  2,762
                                  
                                  
                                  
                                  11,847Interest
      expense
                                  
                                  
                                  (17,394
                                  )
                                  
                                  
                                  (209
                                  )Total
      other (expenses) income
                                  
                                  
                                  (4,576,880
                                  )
                                  
                                  
                                  11,638Net
      income before income taxes
                                  
                                  
                                  (2,065,968
                                  )
                                  
                                  
                                  2,383,024Income
      taxes
                                  
                                  
                                  236,486
                                  
                                  
                                  
                                  201,527Net
      (loss) income
                                  
                                  $
                                  (2,302,454
                                  )
                                  
                                  $
                                  2,181,497Deemed
      dividend from beneficial conversion feature ofSeries
      A preferred stock
                                  
                                  
                                  (4,374,579
                                  )
                                  
                                  
                                  -Dividends
      paid or declared
                                  
                                  
                                  (643,651
                                  )
                                  
                                  
                                  -Net
      income (loss) available to common shareholders
                                  
                                  $
                                  (7,320,684
                                  )
                                  
                                  $
                                  2,181,497Net
      income for common shareEarnings
      per share – Basic
                                  
                                  $
                                  (0.34
                                  )
                                  
                                  $
                                  0.10Earnings
      per share – Diluted
                                  
                                  $
                                  (0.34
                                  )
                                  
                                  $
                                  0.10Weighted
      average common shares outstandingBasic
                                  
                                  
                                  21,286,789
                                  
                                  
                                  
                                  20,810,713Diluted
                                  
                                  
                                  21,334,742
                                  
                                  
                                  
                                  20,810,713Net
      income
                                  
                                  $
                                  (2,302,454
                                  )
                                  
                                  $
                                  2,181,497Other
      comprehensive income (loss)
                                  
                                  
                                  (3,451
                                  )
                                  
                                  
                                  28,158Comprehensive income (loss)
                                  
                                  $
                                  (2,305,905
                                  )
                                  
                                  $
                                  2,209,655
 
 The
accompanying notes are an integral part of these financial
statements.
  F-3
 
 GRANTO,
INC.
 CONSOLIDATED
STATEMENTS OF CASH FLOWS
 FOR
THE THREE MONTHS ENDED MARCH 31, 2010 AND 2009
 (UNAUDITED)
 
 2010
                    
                    
                    2009CASH
      FLOWS FROM OPERATING ACTIVITIESNet
      Income
                    
                    $
                    (2,302,454
                    )
                    
                    $
                    2,181,497Adjustments
      to reconcile net income to net cash provided by operating
      activities:Depreciation
                    
                    
                    27,946
                    
                    
                    
                    26,860Amortization
      of biological assets
                    
                    
                    115,352
                    
                    
                    
                    81,742Change
      in Derivative liability value
                    
                    
                    4,562,248
                    
                    
                    
                    -(Increase)
      / decrease in assets:Accounts
      receivables
                    
                    
                    (2,237,074
                    )
                    
                    
                    3,169,097Inventories
                    
                    
                    (2,179,648
                    )
                    
                    
                    2,243,115Prepaid
      expense and other receivables
                    
                    
                    12,356
                    
                    
                    
                    159,710Trade
      deposit
                    
                    
                    121,246
                    
                    
                    
                    -Due
      from shareholder
                    
                    
                    4,009,362
                    
                    
                    
                    (1,460,583
                    )Escrow
      account
                    
                    
                    (100,000
                    )
                    
                    
                    -Increase
      / (decrease) in current liabilities:Accounts
      payable
                    
                    
                    4,832,987
                    
                    
                    
                    (205,118
                    )Other
      payable
                    
                    
                    (2,489,402
                    )
                    
                    
                    (732,600
                    )Advances
      from clients
                    
                    
                    (498,873
                    )
                    
                    
                    -Income
      taxes payable
                    
                    
                    (759,002
                    )
                    
                    
                    (52,193
                    )Net
      cash provided by operating activities
                    
                    
                    3,115,044
                    
                    
                    
                    5,411,527CASH
      FLOWS FROM INVESTING ACTIVITIESPurchased
      fixed assets
                    
                    
                    (18,740
                    )
                    
                    
                    (52,820
                    )Biological
      assets
                    
                    
                    (156,892
                    )
                    
                    
                    -Net
      cash used by investing activities
                    
                    
                    (175,632
                    )
                    
                    
                    (52,820
                    )CASH
      FLOWS FROM FINANCING ACTIVITIESDue
      to shareholder
                    
                    
                    -
                    
                    
                    
                    (6,322,573
                    )Borrowings
      (payment) of short-term loan, net
                    
                    
                    (380,339
                    )
                    
                    
                    730,292Borrowings
      (payment) of long-term bank loan
                    
                    
                    (146,284
                    )
                    
                    
                    1,752,700Dividend
      paid
                    
                    
                    (4,110,591
                    )
                    
                    
                    (1,388,026
                    )Proceeds
      from issuance of preferred stock
                    
                    
                    100,000
                    
                    
                    
                    -Net
      cash used by financing activities
                    
                    
                    (4,537,214
                    )
                    
                    
                    (5,227,607
                    )Effect
      of exchange rate changes on cash and cash equivalents
                    
                    
                    (2,412
                    )
                    
                    
                    (2,686
                    )Net
      change in cash and cash equivalents
                    
                    
                    (1,600,214
                    )
                    
                    
                    128,414Cash
      and cash equivalents, beginning balance
                    
                    
                    3,194,248
                    
                    
                    
                    14,823,476Cash
      and cash equivalents, ending balance
                    
                    $
                    1,594,034
                    
                    
                    $
                    14,951,890SUPPLEMENTAL
      DISCLOSURES:Cash
      paid during the year for:Income
      tax payments
                    
                    $
                    995,488
                    
                    
                    $
                    254,112Interest
      payments
                    
                    $
                    17,393
                    
                    
                    $
                    209
 
 The
accompanying notes are an integral part of these financial
statements.
  F-4
  GRANTO,
INC.
 CONSOLIDATED STATEMENT
OF STOCKHOLDERS' EQUITY
 FOR
THE THREE MONTHS ENDED MARCH 31, 2010 AND THE YEAR ENDED DECEMBER
31,2009
 (UNAUDITED)
 
 Additional
                        
                        
                        Other
                        
                        
                        
                        
                        
                        
                        
                        
                        TotalPreferred
      Shares
                        
                        
                        Common
      Stock
                        
                        
                        Paid-in
                        
                        
                        Comprehensive
                        
                        
                        Statutory
                        
                        
                        Retained
                        
                        
                        StockholdersShares
                        
                        
                        Amount
                        
                        
                        Shares
                        
                        
                        Amount
                        
                        
                        Capital
                        
                        
                        Income
                        
                        
                        Reserves
                        
                        
                        Earnings
                        
                        
                        EquityBalance
      December 31, 2009
                        
                        
                        -
                        
                        
                        $
                        -
                        
                        
                        
                        20,180,713
                        
                        
                        $
                        20,811
                        
                        
                        $
                        796,621
                        
                        
                        $
                        866,699
                        
                        
                        $
                        1,051,089
                        
                        
                        $
                        (360,284
                        )
                        
                        $
                        2,374,936Foreign
      currency translation adjustments
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        (3,451
                        )
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        (3,451
                        )Issuance
      preferred Stock
                        
                        
                        2,768,721
                        
                        
                        
                        2,769
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        3,390,511
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        3,393,280Stock
      Based Compensation – issued in conjunction with
    financing
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        476,076
                        
                        
                        
                        476
                        
                        
                        
                        (476
                        )
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        -Dividends
      Paid or Declared
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        (643,651
                        )
                        
                        
                        (643,651
                        )Transferred
      to Statutory reserve
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        25,399
                        
                        
                        
                        (25,399
                        )
                        
                        
                        -Deemed dividend
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        4,374,579
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        (4,374,579
                        )
                        
                        
                        -Income
      for the three months ended March 31, 2009
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        (2,302,454
                        )
                        
                        
                        (2,302,454
                        )Balance
      March 31, 2010
                        
                        
                        2,768,721
                        
                        
                        $
                        2,769
                        
                        
                        
                        21,286,789
                        
                        
                        $
                        21,287
                        
                        
                        $
                        8,561,235
                        
                        
                        $
                        863,248
                        
                        
                        $
                        1,076,488
                        
                        
                        $
                        (7,706,367
                        )
                        
                        $
                        2,818,660Balance
      December 31, 2008
                        
                        
                        -
                        
                        
                        $
                        -
                        
                        
                        
                        20,810,713
                        
                        
                        $
                        20,811
                        
                        
                        $
                        796,621
                        
                        
                        $
                        861,166
                        
                        
                        $
                        665,852
                        
                        
                        $
                        12,653,251
                        
                        
                        $
                        14,997,701Foreign
      currency translation adjustments
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        5,533
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        5,533Transferred
      to Statutory reserve
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        385,237
                        
                        
                        
                        (385,237
                        )
                        
                        
                        -Dividend
      paid or declared
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        (25,704,486
                        )
                        
                        
                        (25,704,486
                        )Income
      for the year ended December 31, 2009
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        
                        13,076,088
                        
                        
                        
                        13,076,088Balance
      December 31, 2009
                        
                        
                        -
                        
                        
                        $
                        -
                        
                        
                        
                        20,810,713
                        
                        
                        $
                        20,811
                        
                        
                        $
                        796,621
                        
                        
                        $
                        866,699
                        
                        
                        $
                        1,051,089
                        
                        
                        $
                        (360,284
                        )
                        
                        $
                        2,374,936
 
 The
accompanying notes are an integral part of these financial
statements
  F-5
  GRANTO,
INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 MARCH
31, 2010
 (UNAUDITED)
 
 Note
1 - ORGANIZATION
 
 Granto,
Inc. (the “Company”) was incorporated in Nevada on February 29, 2008. On March
29, 2010, the Company entered into a Share Exchange Agreement with Rongfu
Aquaculture, Inc. (“Rongfu”), certain stockholders and warrant holders of
Rongfu (the “Rongfu Stockholders”) and a stockholder of Granto (the “Share
Exchange Agreement”).  Pursuant to the Share Exchange Agreement, on March
29, 2010, 9 Rongfu Stockholders transferred 100% of the outstanding shares of
common stock and 100% of the warrants to purchase common stock of Rongfu held by
them, in exchange for an aggregate of 19,810,713 newly issued shares of our
Common Stock. In addition the shareholders received warrants to purchase an
aggregate of 666,666 shares of our Common Stock. In connection with the closing
of the Share Exchange Agreement, the former principal stockholder agreed to and
did cancel 1,150,000 of the 1,200,000 shares of Granto, Inc. Common Stock held
by her.
 
 Rongfu
was incorporated in Delaware on January 13, 2009. Flourishing Blessing (Hong
Kong) Co., Ltd. (“Hong Kong Rongfu”) was incorporated on November 11, 2008.
Pursuant to a Share Exchange Agreement, dated as of December 29, 2009,
(the “December 2009 Agreement") all of the shareholders of Hong Kong Rongfu
exchanged all of the outstanding shares of Hong Kong Rongfu for shares of common
stock of Rongfu and Rongfu became the owner of 100% of the outstanding capital
stock of Hong Kong Rongfu. Hong Kong Rongfu owns 100% of the capital stock of
Guangzhou Flourishing Blessing Hansen Agriculture Technology Limited (“Guangzhou
Flourishing”). Guangzhou Flourishing is a wholly foreign-owned enterprise, or
“WFOE,” under the laws of the PRC by virtue of its status as a wholly-owned
subsidiary of a non-PRC company, Hong Kong Rongfu.  In connection with
the closing of the December 2009 Agreement, Guangzhou
Flourishing  entered into and consummated a series of agreements (the
"Contractual Agreements”),with Chen Zhisheng and Foshan Nanhai Ke Da Heng Sheng
Aquatic Co., Ltd. (“Nanhai Ke Da Heng Sheng”).  Under the Contractual
Agreements, Guangzhou Flourishing agreed to assume control of the operations and
management of Nanhai Ke Da Heng Sheng in exchange for a management fee equal to
Nanhai Ke Da Heng Sheng’s earnings before taxes. As a result, the business of
Nanhai Ke Da Heng Sheng  and Hainan Ke Da Heng Sheng Aquit Germchit
Co., Ltd., a PRC corporation (“Hainan Ke Da Heng Sheng”) , 70% of the
outstanding stock of which is owned by Nanhai Ke Da Heng Sheng,  will
be conducted by Guangzhou Flourishing. We anticipate that Nanhai Ke Da Heng
Sheng and Hainan Ke Da Heng Sheng will continue to be the contracting parties
under their customer contracts, bank loans and certain other assets until such
time as those may be transferred to Guangzhou Flourishing. Nanhai Ke Da Heng
Sheng was formed in the PRC on April 30, 2003 as a limited liability company (a
company solely owned by a natural person). Hainan Ke Da Heng Sheng was formed in
the PRC on August 6, 2007 as a limited liability company. Guangzhou Flourishing
was incorporated in the PRC on January 9, 2009 as a wholly owned foreign
enterprise.
 
 The
Contractual Agreements completed in December 2009 provide that Guangzhou
Flourishing has controlling interest in Nanhai Ke Da Heng Sheng under FASB
Accounting Standards Codification “Consolidation of Variable Interest Entities”,
an Interpretation of an Accounting Research Bulletin, which requires Guangzhou
Flourishing to consolidate the financial statements of Nanhai Ke Da Heng Sheng
and Hainan Ke Da Heng Shen and ultimately consolidate with its parent company,
Rongfu Aquaculture, Inc.
  F-6
  GRANTO,
INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 MARCH
31, 2010
 (UNAUDITED)
 
 Note
1 – ORGANIZATION
-continued
  The
Company, through its subsidiaries, and Contractual Agreements, is engaged in
integrated business of aquaculture including Tilapia brood stock, Tilapia fry,
Tilapia farming, and marketing for Tilapia. It is specializing in the production
of the Hengsheng Brand Nile Tilapia and the new licensed New Jifu
Tilapia.
 
 These
consolidated financial statements have been prepared on a historical pro-forma
basis.
 
 Note
2 - SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES
 
 Basis of
Presentation
 
 The
accompanying consolidated financial statements have been prepared in conformity
with accounting principles generally accepted in the United States of America
and represent the pro forma historical results of the consolidated group. The
Company adopted the Financial Accounting Standards Board (“FASB”) Accounting
Standards Codification (the “Codification”) on July 1, 2009. For the three
months ended March 31, 2010, all reference for periods subsequent to January 1,
2010 is based on the Codification. The Company's functional currency is the
Chinese Renminbi, however the accompanying consolidated financial statements
have been translated and presented in United States Dollars.
  Principles of
Consolidation
 
 The
consolidated financial statements include the accounts of Granto ,Inc. and its
wholly owned subsidiaries Hong Kong Rongfu, Guangzhou Flourishing, Nanhai Ke Da
Heng Sheng, and Hainan Ke Da Heng Sheng collectively referred to herein as the
Company. All material inter-company accounts, transactions and profits have
been eliminated in consolidation. The Company has adopted the Consolidation
Topic of the FASB Accounting Standards Codification which requires a variable
interest entity (“VIE”) to be consolidated by a company if that company is
subject to a majority of the risk of loss for the VIE or is entitled to receive
a majority of the VIE’s residual returns.
 
 Translation
Adjustment
 
 As of
March 31, 2010 and December 31, 2009, the accounts of the Company were
maintained, and its financial statements were expressed, in Chinese Yuan
Renminbi (“CNY”). Such financial statements were translated into U.S. Dollars
(“USD”) in accordance with the Foreign Currency Matters Topic of the
Codification, with the CNY as the functional currency. According to the
Codification, all assets and liabilities were translated at the current exchange
rate, stockholders’ equity are translated at the historical rates and income
statement items are translated at the average exchange rate for the period. The
resulting translation adjustments are reported under other comprehensive income
in accordance with the Comprehensive Income Topic of the Codification, as a
component of shareholders’ equity. Transaction gains and losses are reflected in
the income statement.
 
 Statement of Cash
Flows
 
 In
accordance with the Statement of Cash Flows Topic of the Codification, cash
flows from the Company’s operations are based upon the local currencies. As a
result, amounts related to assets and liabilities reported on the statement of
cash flows will not necessarily agree with changes in the corresponding balances
on the balance sheet.
  F-7
  GRANTO,
INC.
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 MARCH
31, 2010
 (UNAUDITED)
 
 Note
2 - SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
 
 Use of
Estimates
  The
preparation of financial statements in conformity with generally accepted
accounting principles 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
theReported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.
 
 Comprehensive
Income
  The
Company follows the Comprehensive Income Topic of the Codification.
Comprehensive income is a more inclusive financial reporting methodology that
includes disclosure of certain financial information that historically has not
been recognized in the calculation of net income.
 
 Risks and
Uncertainties
 
 The
Company’s operations are carried out 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, by the general state of
the PRC’s economy. The Company’s business may be influenced by changes in
governmental policies with respect to laws and regulations, anti-inflationary
measures, currency conversion and remittance abroad, and rates and methods of
taxation, among other things
 
 The
Company is subject to substantial risks from, among other things, intense
competition associated with the industry in general, other risks associated with
financing, liquidity requirements, rapidly changing customer requirements,
limited operating history, foreign currency exchange rates and the volatility of
public markets.
 
 Contingencies
 
 Certain
conditions may exist as of the date the financial statements are issued, which
may result in a loss to the Company but which will only be resolved when one or
more future events occur or fail to occur. The Company’s management and legal
counsel assess such contingent liabilities, and such assessment inherently
involves an exercise of judgment. In assessing loss contingencies related to
legal proceedings that are pending against the Company or unasserted claims that
may result in such proceedings, the Company’s legal counsel evaluates the
perceived merits of any legal proceedings or unasserted claims as well as the
perceived merits of the amount of relief sought or expected to be sought. There
were no contingencies of this type as of March 31, 2010 and December 31,
2009.
  If the
assessment of a contingency indicates that it is probable that a material loss
has been incurred and the amount of the liability can be estimated, then the
estimated liability would be accrued in the Company’s financial statements. If
the assessment indicates that a potential material loss contingency is not
probable but is reasonably possible, or is probable but cannot be estimated,
then the nature of the contingent liability, together with an estimate of the
range of possible loss if determinable and material would be disclosed.There
were no contingencies of this type as of March 31, 2010 and December 31,
2009.
 
 Loss
contingencies considered to be remote by management are generally not disclosed
unless they involve guarantees, in which case the guarantee would be
disclosed.
  F-8
  GRANTO,
INC
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 MARCH
31, 2010
 (UNAUDITED)
 
 Note
2 - SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
 
 Accounts
Receivable
  The
Company maintains reserves for potential credit losses on accounts receivable.
Management reviews the composition of accounts receivable and analyzes
historical bad debts, customer concentrations, customer credit worthiness,
current economic trends and changes in customer payment patterns to evaluate the
adequacy of these reserves. Reserves are recorded primarily on a specific
identification basis. There were no allowances for doubtful accounts as of March
31, 2010 and December 31, 2009.
 
 Inventories
  Inventories
are valued at the lower of cost (determined on a weighted average basis) or
market, if lower. As of March 31, 2010 and December 31, 2009, inventories
consist of the following:
  3/31/2010
                        
                        
                        12/31/2009Raw
      materials
                        
                        $
                        74,974
                        
                        
                        $
                        47,185Work
      in process and finished goods
                        
                        
                        5.084,875
                        
                        
                        
                        2,932,568Total
                        
                        $
                        5,159,849
                        
                        
                        $
                        2,979,753
  Property, Plant &
Equipment
  Property
and equipment are stated at cost. Expenditures for maintenance and repairs are
charged to earnings as incurred; additions, renewals and betterments are
capitalized. When property and equipment are retired or otherwise disposed of,
the related cost and accumulated depreciation are removed from the respective
accounts, and any gain or loss is included in operations. Depreciation of
property and equipment is provided using the straight-line method for
substantially all assets with estimated lives of:
 
 Buildings
                10-20
      yearsFishing
      gear
                5-10yearsTransportation
      equipment
                5-10
      yearsOffice
      equipment
                3-5
      years
  F-9
  GRANTO,
INC
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 MARCH
31, 2010
 (UNAUDITED)
 
 Note
2 - SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
 
 As of
March 31, 2010 and December 31, 2009, Property, Plant & Equipment consist of
the following:
 
 3/31/2010
                    
                    
                    12/31/2009Buildings
                    
                    $
                    73,631
                    
                    
                    $
                    73,631Fishing
      gear
                    
                    
                    424,938
                    
                    
                    
                    424,938Transportation
      equipment
                    
                    
                    37,330
                    
                    
                    
                    37,330Office
      equipment
                    
                    
                    40,102
                    
                    
                    
                    40,102Construction
      in progress
                    
                    
                    18,740
                    
                    
                    
                    -Total
                    
                    
                    594,741
                    
                    
                    
                    576,001Accumulated
      depreciation
                    
                    
                    (198,800
                    )
                    
                    
                    (170,854
                    )$
                    395,941
                    
                    
                    $
                    405,147
 
 Depreciation
expense for the three months ended March 31, 2010 and 2009 was $27,946 and
$26,860, respectively.
  Long-Lived
Assets
  Since
April 30, 2003, the Company adopted the Property, Plant and Equipment Topic of
the Codification, which addresses financial accounting and reporting for the
impairment or disposal of long-lived assets and supersedes previous accounting
guidance, “Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed Of,” and “Reporting the Results of Operations for a
Disposal of a Segment of a Business.” The Company periodically evaluates the
carrying value of long-lived assets to be held and used, which requires
impairment losses to be recorded on long-lived assets used in operations when
indicators of impairment are present and the undiscounted cash flows estimated
to be generated by those assets are less than the assets carrying amounts. In
that event, a loss is recognized based on the amount by which the carrying
amount exceeds the fair market value of the long-lived assets. Loss on
long-lived assets to be disposed of is determined in a similar manner, except
that fair market values are reduced for the cost of disposal. Based on its
review, the Company believes that, as of March 31, 2010, there were no
impairments of its long-lived assets.
  Derivative
Liability
 
 The
Company issued warrants in connection with the Purchase Agreement dated March
29, 2010 with certain reset exercise price provisions.
 
 Adoption
of the Derivative and Hedging Topic of the FASB Accounting Standards
Codification (“ASC 815”), the Company determined that the warrants did not
qualify for a scope exception under ASC 815 as they were determined to not be
indexed to the Company’s stock as prescribed by ASC 815.  The
warrants, under ASC 815, were classified as derivative liability for the then
relative fair market value of $ 3,267,797 and marked to market. For the
three months ended March 31, 2010, the Company recorded a loss on change in fair
value of derivative liability of $684,605 to mark to market for the increase in
fair value of the warrants through ended March 31, 2010.   Under
ASC 815, the warrants will be carried at fair value and adjusted at each
reporting period.
  F-10
  GRANTO,
INC
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 MARCH
31, 2010
 (UNAUDITED)
 
 Note
2 - SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
 
 The
Company determined the fair value of the reset provisions at March 29, 2010 was
$5,817,810 as the initial fair value at the adoption date of EITF No.
07-05.  The fair value was determined using the Black Scholes Option
Pricing Model based on the following assumptions:  dividend
yield: 0%; volatility: 73.27%, risk free rate: 2.6%, expected term: 5
years.
 
 The
Company determined the fair value of the reset provisions at March 31, 2010 was
$6,502,414. The fair value was determined using the Black Scholes Option Pricing
Model based on the following assumptions: dividend yield: -0-%; volatility:
73.27%, risk free rate: 2.55%, expected term: 5 years.
 
 Pursuant
to a Share Exchange Agreement dated March 29, 2010, the Company issued warrants
to purchase an aggregate of 666,666 shares of our Common Stock to certain former
warrantholders of Rongfu. The Company determined the fair value of the reset
provisions at March 31, 2010 was $ 1,327,630. The fair value was determined
using the Black Scholes Option Pricing Model based on the following
assumptions: dividend yield: -0-%; volatility: 73.27%, risk free rate:
2.55%, expected term: 5 years.
 
 Fair Value of Financial
Instruments
  The
Financial Instrument Topic of the Codification requires that the Company
disclose estimated fair values of financial instruments. The carrying amounts
reported in the statements of financial position for current assets and current
liabilities qualifying as financial instruments are a reasonable estimate of
fair value..Revenue
Recognition
  The
Company’s revenue recognition policies are in compliance with the Revenue
Recognition Topic of the Codification. Sales revenue is recognized at the date
of shipment to customers when a formal arrangement exists, the price is fixed or
determinable, the delivery is completed, no other significant obligations of the
Company exist and collectability is reasonably assured. Payments received before
all of the relevant criteria for revenue recognition are satisfied are recorded
as unearned revenue.
  Advertising
 
 Advertising expenses consist primarily
of costs of promotion for corporate image and product marketing and costs of
direct advertising. The Company expenses all advertising costs as incurred.
Advertising expense for the three months ended March 31, 2010 and 2009 were
$7,599 and $2,026, respectively.
  F-11
  GRANTO,
INC
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 MARCH
31, 2010
 (UNAUDITED)
 
 Note
2 - SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
 
 Income
Taxes
 
 The
Company utilizes the accounting guidance, “Accounting for Income Taxes,” which
requires the 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 income taxes are
recognized for the tax consequences in future years of differences between the
tax bases of assets and liabilities and their financial reporting amounts at
each period end based on enacted tax laws and statutory tax rates applicable to
the periods in which the differences are expected to affect taxable income.
Valuation allowances are established, when necessary, to reduce deferred tax
assets to the amount expected to be realized. It is the Company’s intention to
permanently reinvest earnings from activity with china. And thereby indefinitely
postpone repatriation of these funds to the US. Accordingly, no domestic
deferred income tax provision has been made fro US income tax which could result
from paying dividend to the Company.
  There
were no deferred tax difference as of March 31, 2010 and December 31,
2009.
 
 Concentration of Credit
Risk
 
 Financial
instruments that potentially subject the Company to concentrations of credit
risk are cash, accounts receivable and other receivables arising from its normal
business activities. The Company places its cash in what it believes to be
credit-worthy financial institutions. The Company has a diversified customer
base, all are in China. The Company controls credit risk related to accounts
receivable through credit approvals, credit limits and monitoring procedures.
The Company routinely assesses the financial strength of its customers and,
based upon factors surrounding the credit risk, establishes an allowance, if
required, for uncollectible accounts and, as a consequence, believes that its
accounts receivable credit risk exposure beyond such allowance is
limited.
 
 Recent Accounting
Pronouncements
  In
June 2008, the FASB ratified the consensus reached on Emerging Issues Task
Force (“EITF”) Issue No. 07-05, 05”). EITF No. 07-05 clarifies the
determination of whether an instrument (or an embedded feature) is indexed to an
entity’s own stock, which would qualify as a scope exception under SFAS
No. 133, Accounting for Derivative Instruments and Hedging Activities. EITF
No. 07-05 is effective for financial statements issued for fiscal years
beginning after December 15, 2008. EITF No. 07-05 was superseded by the
Derivative and Hedging Topic of FASB Accounting Standards Codification (“ASC
815”). Based on the Company’s evaluation of this issue, the adoption of this
accounting requirement has a material effect on the Company’s consolidated
financial statements, please see note above under “Derivative
Liability”.
 
 In May
2009, the FASB issued accounting guidance for “Subsequent Events”, which is
included in ASC Topic 855, Subsequent Events. ASC Topic 855 established
principles and requirements for evaluating and reporting subsequent events and
distinguishes which subsequent events should be recognized in the financial
statements versus which subsequent events should be disclosed in the financial
statements. ASC Topic 855 also required disclosure of the date through which
subsequent events are evaluated by management.  ASC Topic 855 was
effective for interim periods ending after June 15, 2009 and applies
prospectively.  Because ASC Topic 855 impacted the disclosure
requirements, and not the accounting treatment for subsequent events, the
adoption of ASC Topic 855 did not impact our results of operations or financial
condition.
  F-12
  GRANTO,
INC
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 MARCH
31, 2010
 (UNAUDITED)
 
 Note
2 - SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
 
 In June
2009, the FASB issued ASC 855 (previously SFAS No. 165, Subsequent Events),
which establishes general standards of accounting for and disclosures of events
that occur after the balance sheet date but before the financial statements are
issued or available to be issued. It is effective for interim and annual periods
ending after June 15, 2009. There was no material impact upon the adoption of
this standard on the Company’s consolidated financial statements.
 
 Effective
July 1, 2009, the Company adopted the Codification as the source of
authoritative accounting principles recognized by the FASB to be applied by
nongovernmental entities in the preparation of financial statements in
conformity with U.S. GAAP. Rules and interpretive releases of the SEC under
authority of federal securities laws are also sources of authoritative U.S. GAAP
for SEC registrants. All guidance contained in the Codification carries an equal
level of authority. The Codification superseded all existing non-SEC accounting
and reporting standards. All other non-grandfathered, non-SEC accounting
literature not included in the Codification is non-authoritative. The FASB will
not issue new standards in the form of Statements, FASB Staff Positions or
Emerging Issues Task Force Abstracts. Instead, it will issue Accounting
Standards Updates (“ASUs”). The FASB will not consider ASUs as authoritative in
their own right. ASUs will serve only to update the Codification, provide
background information about the guidance and provide the bases for conclusions
on the change(s) in the Codification. References made to FASB guidance
throughout this document have been updated for the Codification.
 
 In
August 2009, the FASB issued, Measuring Liabilities at Fair
Value, which provides additional guidance on how companies should measure
liabilities at fair value under ASC 820. The ASU clarifies that the quoted price
for an identical liability should be used. However, if such information is not
available, an entity may use, the quoted price of an identical liability when
traded as an asset, quoted prices for similar liabilities or similar liabilities
traded as assets, or another valuation technique (such as the market or income
approach). The ASU also indicates that the fair value of a liability is not
adjusted to reflect the impact of contractual restrictions that prevent its
transfer and indicates circumstances in which quoted prices for an identical
liability or quoted price for an identical liability traded as an asset may be
considered level 1 fair value measurements. This ASU is effective
October 1, 2009. The Company is currently evaluating the impact of this
standard, but would not expect it to have an impact on the Company’s
consolidated results of operations or financial condition.
 
 In
January 2010, the FASB issued Accounting Standards Update No. 2010-06 (ASU
2010-06), Fair Value Measurements and Disclosures which amends ASC Topic 820,
adding new requirements for disclosures for Levels 1 and 2, separate disclosures
of purchases, sales, issuances, and settlements relating to Level 3 measurements
and clarification of existing fair value disclosures. ASU 2010-06 is effective
for interim and annual periods beginning after December 15, 2009, except for the
requirement to provide Level 3 activity of purchases, sales, issuances, and
settlements on a gross basis, which will be effective for fiscal years beginning
after December 15, 2010 (the Company’s fiscal year 2012); early adoption is
permitted. The Company is currently evaluating the impact of adopting ASU
2009-14 on its financial statements.
 
 Note
3 –OTHER
RECEIVABLES
 
 Other
receivables mainly consist of cash advances to rent deposit. As of March 31,
2010 and December 31, 2009, the other receivables were $21,211 and $21,208,
respectively.
  F-13
 
 GRANTO,
INC
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 MARCH
31, 2010
 (UNAUDITED)
 Note 4–BIOLOGICAL
ASSETS
 As of
March 31, 2010 and December 31, 2009, Biological assets at cost consist of the
following:
 3/31/2010
                                    
                                    
                                    12/31/2009Carp
                                    
                                    $
                                    20,562
                                    
                                    
                                    $
                                    20,562Tilapia
                                    
                                    
                                    959,561
                                    
                                    
                                    
                                    959,561Yellow
      bone fish
                                    
                                    
                                    54,807
                                    
                                    
                                    
                                    -California
      bass
                                    
                                    
                                    15,832
                                    
                                    
                                    
                                    -Snakeheads
                                    
                                    
                                    264,457
                                    
                                    
                                    
                                    178,204Total
                                    
                                    
                                    1,315,219
                                    
                                    
                                    
                                    1,158,327Accumulated
      amortization
                                    
                                    
                                    (840,870
                                    )
                                    
                                    
                                    (725,519
                                    )$
                                    474,349
                                    
                                    
                                    $
                                    432,808
 Amortization
expense for the three months ended March 31, 2010 and 2009 was $ 115,352 and $
81,742 respectively.
  Note
5 – RELATED
PARTIES
  One of
the Company’s vendors is a related party. As of and for the three months ended
March 31, 2010, they accounted for approximately 13% of purchases and 36.68% of
accounts payable.
 
 For the
three months ended March 31, 2010, the Company collected all amounts previously
due from the shareholder.
 
 Note
6 – DUE FROM/TO
SHAREHOLDER
 
 As of
March 31, 2010, due from shareholder was $0.
 
 During
the fourth quarter of 2009, the Company loaned an aggregate of RMB 21,900,000
($3,201,343 translated at $1=RMB 6.8372) to a shareholder. The shareholder
invested the entire proceeds of the loan in the construction of Foshan Nanhai
Guanyao Processing Industrial Park, which has a total area of 108,000 square
meters with the construction area of 85,000 square meters. The loan bears
interest and may be paid off by deducting the shareholder’s allocation of
shareholders’ dividends or other means. After the construction has been
completed, the Company has a first option to rent Foshan Nanhai Guanyao
Processing Industrial Park on terms to be determined. This amount is included in
the Due from shareholders of $4,008,659 as of December 31, 2009. During the
three months ended March 31, 2010 this loan was repaid.
  Note
7 – ESCROW
DEPOSITS
 
 Pursuant
to the Purchase Agreement entered into on March 29, 2010, the Company received a
$100,000 deposit in an escrow account. The remaining net proceeds of $6,561,077
had not been received as of March 31, 2010 and are shown on balance sheet as
receivable.
  Note 8 –CONCENTRATIONS
 As of
March 31, 2010, one customer accounted for 48% of accounts receivable. For the
three months ended March 31, 2010, the Company had three vendors who accounted
for 83% of total purchases. As of December 31, 2009, two customers accounted for
20% of accounts receivable. For the three months ended March 31, 2009, the
Company had two vendors who accounted for 73% of total purchases and one related
party vendor who accounted for 13%. At March 31, 2010, 36.68% of Accounts
Payable was due to related parties.
  F-14
  GRANTO,
INC
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 MARCH
31, 2010
 (UNAUDITED)
 
 Note
9 – COMPENSATED
ABSENCES
 
 Regulation
45 of the local labor law of the People’s Republic of China (“PRC”) entitles
employees to annual vacation leave after 1 year of service. In general, all
leave must be utilized annually, with proper notification. Any unutilized leave
is cancelled
 
 Note
10 – COMMON
STOCK
  On March
29, 2010, the Company entered into the Share Exchange Agreement. Pursuant to the
Share Exchange Agreement, on March 29, 2010, 9 Rongfu Stockholders transferred
100% of the outstanding shares of common stock and 100% of the warrants to
purchase common stock of Rongfu held by them, in exchange for an aggregate of
18,623,889 newly issued shares of our Common Stock and warrants to purchase an
aggregate of 666,666 shares of our Common Stock. In connection with the closing
of the Share Exchange Agreement, the former principal stockholder agreed to and
did cancel 1,150,000 of the 1,200,000 shares of Granto, Inc. Common Stock held
by her.
 
 On March
29, 2010 the Company also entered into and consummated the Purchase Agreement
with 18 investors pursuant to which the investors agreed to and did purchase for
an aggregate of $7.7 million an aggregate of (a) 2,768,721 shares of our Series
A Stock, (b) five year (“Series A Warrants”) to purchase an aggregate of
1,730,451 shares of our Common Stock for $3.47 per share and (c) five year
(“Series B Warrants”) to purchase an aggregate of 1,730,451shares of our Common
Stock for $4.17 per share. Each share of Series A Stock will automatically
convert into one share of our Common Stock, subject to adjustment in certain
circumstances to protect the holder against dilution.
 
 The
Company measured and recognized an aggregate of $3,267,797 of the proceeds to
additional paid in capital upon issuance of these warrants. The terms of the
warrants provide for an adjustment to the exercise price of these warrants if
the company closes on the sale or issuance of common stock at a price which is
less than the exercise price then in effect for these warrants. Pursuant to EITF
No. 07-05 on March 29, 2010, the Company determined that the warrants did
not qualify for a scope exception under SFAS No. 133 as they were
determined to not be indexed to the Company’s stock as prescribed by EITF
No. 07-05.  On March 29, 2010, the warrants were reclassified
from equity to derivative liability for the then fair market value and marked to
market (see Note 2 Derivative Liability).
 
 AggregateExercise
                          
                          Remaining
                          
                          IntrinsicTotal
                          
                          
                          Price
                          
                          Life
                          
                          ValueOutstanding,
      December 31, 2009
                          
                          
                          -Granted
      in 2010
                          
                          
                          4,127,568
                          
                          
                          $
                          2.44-4.17
                          
                          5
      yearsExercised
      in 2010Outstanding,
      March 31, 2010
                          
                          
                          4,127,568
  F-15
  GRANTO,
INC
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 MARCH
31, 2010
 (UNAUDITED)
 
 Note
11 – SERIES A CONVERTIBLE PREFERRED STOCK
 
 On March
29, 2010, the Company entered into the Purchase Agreement with eighteen
investors. The Company authorized and issued to Investors $7,700,000, of the
Company’s convertible, redeemable Series A Preferred Stock, $0.001 par value per
share (the “Series A Stock”) at a price of $2.78 per share. The shares are
convertible into shares of the Company’s common stock, par value $0.001 per
share. In connection with the Purchase Agreement the Company incurred offering
costs of $1,038,923, which are subtracted from the total proceeds and against
additional paid in capital.
 
 Pursuant
to the Purchase Agreement the holders of Series A Stock also received 3,460,902
5 year warrants to purchase common shares. The warrants have an exercise price
of $3.47 for 1,730,451 warrants and $4.17 for the remaining 1,730,451
warrants.
 
 Assuming
a valuation of $3.10 per share and the conversion of the Series A Stock into
4,221,389 shares of common stock at an effective conversion price of
approximately $1.52 per share which is obtained by dividing the amount to be
allocated to the BCF by the 2,768,721 common shares, pro forma net income per
common share would be $(0.34).
 
 Note
12- DEBT
 
 As of
March 31, 2010 and December 31, 2009, the Company had debt as
follows:
 As
      of 3/31/2010
                            Credit
      Union –Foshan Naihai Branch
                          
                          Amount
                          
                          
                          Interest
      rate
                          
                          DueShort
      term bank loan
                          
                          $
                          1,023,976
                          
                          
                          
                          4.50
                          %
                          Feb
      13 and 14, 2011As
      of 12/31/2009
                            Credit
      Union –Foshan Naihai Branch
                          
                          Amount
                          
                          
                          Interest
      rate
                          
                          DueShort
      tem bank loan
                          
                          $
                          380,273
                          
                          
                          
                          4.425
                          %
                          Feb
      13,2010Long
      term bank loan
                          
                          $
                          1,170,070
                          
                          
                          
                          4.50
                          %
                          Feb
      13 and 14,
2011
 
 The
Company is using these loans for working capital purposes and secured by certain
real estate and property insurance.
  Note
13 - INCOME
TAXES
 
 The Company operates in more than one
jurisdiction with complex regulatory environments subject to different
interpretations by the taxpayer and the respective governmental taxing
authorities, we evaluate our tax positions and establish liabilities, if
required. For uncertain tax position which may be challenged by local tax
authorities and may not be fully sustained despite our belief that the
underlying tax positions maybe be fully supportable. At this time the Company is
not able to make a reasonable estimate of the impact on the effective tax rate
related these items which could be challenged.
  F-16
  GRANTO,
INC
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 MARCH
31, 2010
 (UNAUDITED)
 
 Note
13 - INCOME TAXES –
(CONTINUED)
 
 Pursuant
to the PRC Income Tax Laws, the Enterprise Income Tax (“EIT”) through December
31, 2007 isat a statutory rate of 33%, which is comprised of 30% national income
tax and 3% local income tax. As ofJanuary 1, 2008, the EIT is at a statutory
rate of 25%. The Company is an agriculture enterprise and under PRC Income Tax
Laws, it is entitled to an exemption for 2006. Starting from January 1, 2008, it
is entitled to have new PRC tax policy for the agriculture enterprise. The
Company’s income come from three parts including fish breeding, fish cultivation
and selling adult fish. For income from fish breeding, it is entitled to an
exemption. For income from fish cultivation, EIT is a discount rate of 12.5%.
For income from selling adult fish, EIT is a rate of 25%.
 
 The
      following is a reconciliation of income tax expense:March
      31, 2010
                                              
                                              International
                                              
                                              
                                              TotalCurrent
                                              
                                              $
                                              236,486
                                              
                                              
                                              $
                                              236,4863/31/2009
                                              
                                              International
                                              
                                              
                                              TotalCurrent
                                              
                                              $
                                              201,527
                                              
                                              
                                              $
                                              201,527
 
 Note
14– COMMITMENTS &
CONTINGENCIES
 
 The
Company leases facilities under operating leases, which expire on different
dates. It pays for on an annual basis and accrues for throughout the year. [pays
for WHAT; accrues for WHAT] For the three months ended March 31, 2010 and 2009,
rent expense was $ 137,485 and $ 209,348. Future payments under these leases are
as follows as of March 31:
 
 2011
                    
                    $
                    52,3392012
                    
                    $
                    52,3392013
                    
                    $
                    52,3392014
                    
                    $
                    18,9032015
                    
                    $
                    13,035Thereafter
                    
                    $
                    31,256Total
                    
                    $
                    220,211
  F-17
  GRANTO,
INC
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 MARCH
31, 2010
 (UNAUDITED)
 
 Note
15– EARNINGS PER
SHARE
 
 In
accordance with FASB ASC Topic 260-1-50, “Earnings per Share”, and SEC Staff
Accounting Bulletin No. 98, basic net income or loss per common share is
computed by dividing net income or loss for the period by the weighted - average
number of common shares outstanding during the period.  Under
FASB ASC 260-10-50, diluted income or loss per share is computed by dividing net
income or loss for the period by the weighted - average number of common and
common equivalent shares, such as stock options, warrants and convertible
securities outstanding during the period.
  The
following table sets forth the computation of basic and diluted earnings per
share of common stock:
 three
      months ended March 31,2010
                              
                              
                              2009Basic
      earnings from continuing operations per share:Numerator:Income
      from operations  used in computing basic earnings per
      share
                              
                              $
                              (7,320,684
                              )
                              
                              $
                              2,181,497Income
      from operations applicable to common shareholders
                              
                              $
                              (7.320,684
                              )
                              
                              $
                              2,181,497Denominator:Weighted
      average common shares outstanding
                              
                              
                              21,286,789
                              
                              
                              
                              20,810,713Basic
      earnings per share from continuing operations
                              
                              $
                              (0.34
                              )
                              
                              $
                              0.10Diluted
      earnings (losses) per share from operations:Numerator:Income
      from operations used in computing diluted earnings per
    share
                              
                              $
                              (7,320,684
                              )
                              
                              $
                              2,181,497Income
      (loss) from operations applicable to common shareholders
                              
                              $
                              (7,320,684
                              )
                              
                              $
                              2,181,497Denominator:Weighted
      average common shares outstanding
                              
                              
                              21,286,789
                              
                              
                              
                              20.810,713Weighted
      average effect of dilutive securities:Stock
      options and warrants
                              
                              
                              47,953
                              
                              
                              
                              -Shares
      used in computing diluted net income per share
                              
                              
                              21,331,742
                              
                              
                              
                              20,810,713Diluted
      earnings per share from operations
                              
                              $
                              (0.34
                              )
                              
                              $
                              0.10
  Note 16 –STATUTORY
RESERVE
 
 In
accordance with the laws and regulations of the PRC, a wholly-owned Foreign
Invested Enterprises income, after the payment of the PRC income taxes, shall be
allocated to the statutory surplus reserves and statutory public welfare fund.
Prior to January 1, 2006 the proportion of allocation for reserve was 10 percent
of the profit after tax to the surplus reserve fund and additional 5-10 percent
to the public affair fund. The public welfare fund reserve was limited to 50
percent of the registered capital. Effective January 1, 2006, there is now only
one fund requirement. The reserve should be 10 percent of income after tax, not
to exceed 50 percent of registered capital. Statutory Reserve funds are
restricted for set off against losses, expansion of production and operation or
increase in register capital of the respective company. Statutory public welfare
fund is restricted to the capital expenditures for the collective welfare of
employees. Thesereserves are not transferable to the Company in the form of cash
dividends, loans or advances. These reserves are therefore not available for
distribution except in liquidation. As of March 31, 2010 and December 31, 2009,
the Company had allocated $1,076,488 and $1,051,089, to these non-distributable
reserve funds.
  F-18
  GRANTO,
INC
 NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
 MARCH
31, 2010
 (UNAUDITED)
 
 Note
17- OTHER
COMPREHENSIVE INCOME
 
 Balances
of related after-tax components comprising accumulated other comprehensive
income, included in stockholders’ equity, at March 31, 2010 and December 31,
2009, are as follows:
 
 Foreign
                        Currency
                        Translation
                        Adjustment
                      
                      
                      Accumulated
                        Other
                        Comprehensive
                        IncomeBalance
      at December 31, 2008
                      
                      $
                      861,166
                      
                      
                      $
                      861,166Change
      for 2009
                      
                      
                      5,533
                      
                      
                      
                      5,533Balance
      at December 31, 2009
                      
                      $
                      866,699
                      
                      
                      $
                      866,699Change
      for three months ended 3/31/2010
                      
                      
                      (3,451
                      )
                      
                      
                      (3,451
                      )Balance
      at March 31, 2010
                      
                      $
                      863,248
                      
                      
                      
                      863,248
 
 Note
18- SUBSEQUENT
EVERNTS
  For the
three months ended March 31, 2010, the Company has evaluated subsequent events
for potential recognition and disclosure through May 27, 2010, the date of the
financial statement issuance. Based upon this evaluation management has
concluded that none existed as of March 31, 2010.
  F-19




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




The
following discussion and analysis of the consolidated financial condition and
results of operations should be read in conjunction with the consolidated
financial statements and related notes of Granto, Inc.. appearing elsewhere in
this report. This discussion and analysis contains forward-looking statements
that involve risks, uncertainties and assumptions. Actual results may differ
materially from those anticipated in these forward-looking
statements.


Overview
 
 The
Company is engaged in commercial freshwater aquaculture in the PRC. It sells
fish and fish fry and also acts as a freshwater fish dealer (generating trading
profits from the purchase of fish from third party farmers and the immediate
sale of such fish to wholesalers).
 
 During
the fiscal year ended December 31, 2009 (“fiscal 2009”)  the Company
sold more than 27,000 tons of adult fish to frozen fish processors and
wholesalers in Guangdong Province and Hainan Province, PRC and sold
approximately 360 million fry to distributors, which in turn sold such fry to
other farmers to cultivate.
 
 Approximately
74.0% of the Company’s revenues for fiscal 2009 were from the sale of adult fish
farmed by the Company, approximately 13.7% of the Company’s 2009 revenues were
from the re-sale of fish purchased by the Company from farmers and approximately
12.3% of the Company’s 2009 revenues were generated from the sale of fish fry.
Approximately 67.9% of the Company’s net income for fiscal 2009 was from the
cultivation and sale of adult fish, approximately 30.3% of the Company’s
2009 net income were from the breeding, incubation and sale of fish fry and
approximately 1.8% of the Company’s 2009 net income was profit from the
Company’s trading of freshwater adult fish. According to China Agriculture
Magazine, the Company is currently the largest seller of tilapia fry in the PRC
and the Company believes that it is also one of the three largest sellers of
adult tilapia in the PRC.
 
 The
Company operates 13 adult fish breeding farms, covering a total area of 8,249 mu
Three of the Company’s farms are located in Hainan Province, two in the
town of Wenchang and one in Nanling. The other 10 farms are located in
Guangdong Province in the towns or villages of Nanhai, Qinyuan, Taishan,
Yangdong  and Gaoyao. 9 of the farms consist of a series of man-made
ponds. Each pond is outfitted with one or more oxygen aeration machines which
float on the surface and one or more feeding machines which provide food to the
fish twice per day. The aeration machines provide oxygen to the fish and enable
the natural removal of fish wastes so that the water does not become toxic for
the fish.
 
 4 of the
Company’s farms are each comprised of a single lake created by damming a river.
Oxygen aeration equipment is not needed since the lakes have a much larger area
than the ponds dug by the Company. The land on which the farms are located is
leased by the Company from the village under leases for terms of 4 to 30
years.
 
 4
 In
addition to its adult fish breeding farms, the Company operates a breeding farm
in Wenchang, Hainan Province in which tilapia fry are produced from brood
stock.
 
 At its
facilities in Nanhai (at which the Company’s fish clinic is also located) and
Wenchang, the Company also has constructed and maintains concrete tanks where
the Company incubates tilapia. The Company also incubates snakehead and crucian
carp fry in its tank in Nanhai. After the incubation period the Company sells
approximately 95% of the fry to distributors.
 
 Approximately
45.9% of the Company’s revenues from the sale of Company grown adult fish in
fiscal 2009 were from the sale of tilapia, approximately 21.2% was from the sale
of grass carp, approximately 9.6% was from the sale of snakehead, approximately
8.3% was from the sale of bighead and the balance of the Company’s revenues from
the sale of adult fish during fiscal 2009 were from sales of other varieties of
freshwater fish, including catfish, bream, black carp and crucian
carp.
 
 Approximately
77.6%, 15.9% and 6.5% of the Company’s revenues during fiscal 2009 from sales of
fish fry were from the sale of tilapia, snakehead and crucian carp fry,
respectively. The Company does not incubate fry of the other adult fish that it
cultivates. Rather it purchases the fry for such fish from
distributors.
 
 In
conjunction with Professor Sifa Li and his team from
Shanghai Fisheries University, during the period from 1994 to 2006 the
Company developed a strain of Nile tilapia called “New Jifu” which has received
the approval and recommendation the PRC Ministry of Agriculture. The Company
currently produces approximately 17,000 tons of tilapia per year, approximately
60% of which is of the New Jifu variety and 40% of which is oreochromis
tilapia.
 
 The
Company sells approximately 90% of its tilapia to the owners of 28 processing
plants in Guangdong and Hainan Provinces. The processors generally require
that the tilapia be of a standard weight of .75 kiligrams. (Because of such
weight requirement, the Company generally sells most of its tilapia in the
fourth quarter since the growing season of approximately 6 months commences
in March of each year.) The processors freeze the tilapia and sell the frozen
product for distribution domestically in China and internationally. The balance
of the Company’s tilapia, as well as all of the other fish the Company sells, is
sold under the Company’s Hengshen brand name to fish brokers located in
wholesale markets in Guangdong Province, Hainan Province, Fujian, Xinjiang
Province etc. which in turn market the fresh fish nationwide in China though
other wholesalers or at retail.
  
 5
 Comparison
of three months ended March 31, 2010 and March 31, 2009
 
 
 The
following table presents the Company’s consolidated net sales for its lines of
business for the three months ended March 31, 2010 and three months ended March
31, 2009, respectively:
 
 Three Months Ended
      March 31, 2010 and 2009
                
                
                
                
                
                
                
                
                
                %2010
                
                
                
                2009
                
                
                ChangeFarm
      growing
                
                $
                7,212,246
                
                
                $
                7,062,036
                
                
                2.1%Breeding
                
                $
                1,188,523
                
                
                $
                1,069,961
                
                
                11.1%Trading
                
                $
                1,522,758
                
                
                $
                1,274,431
                
                
                19.5%Consolidated
                
                $
                9,923,527
                
                
                $
                9,406,428
                
                
                5.5%
  Net sales
for the three months ended March 31, 2010 were $9,923,527, an increase of
$517,099 or 5.5%, when compared to the same period in 2009. Such increase was
mainly attributed to the increase in sales of adult fish purchased by farmers,
which increased $248,327, and the sales of adult fish, which increased $150,210
compared to the same period of 2009 .For the three months ended March
31, 2010, the sales of fish fry increased $118,562compared to the same period of
the prior year.  Cost of goods sold for the three months ended March 31,
2010 were $6,719,795, an increase of $453,050 or 7.2%, when compared to the same
sales period of the prior year, which consisted of an increase of $148,485 for
breeding adult fish, an increase of $218,498 for trading business, and an
increase of $86,067 for breeding fish fry.   Gross profit for the
three months ended March 31, 2010 was $3,203,732, an increase of $64,049 or 2%,
when compared to the same period in 2009. The increase in gross
profit  consisted of an increase of $1,726 for breeding adult fish, an
increase of $29,828 for the Company’s trading business, and an increase of
$32,495 for breeding fish fry. The reason for the increase of gross profit for
the three months ended March 31, 2010 was the increase of sales.
 
 Selling,
general and administrative expenses for the three months ended March 31, 2010
were $692,820, a decrease of $75,478 or 9.8%, when compared to the same period
in 2009, mainly attributed to the decrease of general and administrative
expenses of $256,227 for breeding adult fish and fish fry breeding
business.  This decrease in general and administrative expenses was
partially offset by an increase in selling expense.
 
 Income
from operations for the three months ended March 31, 2010 was $2,510,911, an
increase of $139,526 or 5.9%, when compared to the same period in 2009. The main
reason for the increase in income from operations was the increase in sales of
adult fish and fish fry.
 
 Interest
income for the three months ended March 31, 2010 was $2,762, a decrease of
$9,085 or 76.7%, when compared to the same period in 2009, primarily because the
Company used a part of its interest earning funds to pay dividends and income
tax of the fourth quarter in 2009, which decreased the Company’s interest income
as a consequence.  Interest expense for the three months ended March
31, 2010 was $17,394, an increase of $17,185 or 8,222.0% due to the increase in
the Company’s short term bank loans, when compared to the same period in
2009.
  6
  
 Income
taxes for the three months ended March 31, 2010 was $236,486, an increase of
$34,959, or 17.3%, when compared to the same period in 2009.  In 2010
more fry was sold and fry was tax exempt while farmed fish was subject to a
12.5% income tax. Trading revenue from grown fish was taxed at a rate of 25%. In
2010 more revenue was contributed by farming and trading and therefore the
income taxes was higher than that of 2009.
 
 The
Company recorded a loss on fair value of derivative liability of $4,562,248 for
the three months ended March 31, 2010.
 
 Net loss
for the three months ended March 31, 2010 was $2,302,454 as compared to net
income of $2,181,497 for the three months ended March 31, 2009. The $4,483,951
difference is attributable to the loss of $4,562,248 on fair value of derivative
liability in the three months ended March 31, 2010.
 
 During
three months ended March 31, 2010, total assets decreased by $1,293,631, or
11.1%, from $11,629,668 at December 31, 2009 to $10,336,037 at March 31,
2009.  The majority of the decrease was in cash anddue from shareholders,
which decreases were partially offset by an increase in
inventories.
 
 During
three months ended March 31, 2010, cash decreased by $1,600,214, or 50.1%, to
$1,594,034 as compared to $3,194,248 as of December 31, 2009. This is mainly
attributed to the payment of dividends to shareholders and income tax of the
fourth quarter in 2009.
 
 At March
31, 2010, the accounts receivable balance increased by $2,237,080, or 946.4.9%,
from the balance at December 31, 2009 because there was advance from clients in
the fish farming segment that reduced the accounts receivable for the
fiscal year ended December 31,2009,while there was no advance from
clients for the three months ended March 31, 2010.
 
 At March
31, 2010,due from
shareholders was 0, as compared to due from shareholder of $4,008,659 as of
December 31, 2009. This is attributed to the repayment from shareholders during
the first quarter of 2010.
 
 The
Company’s inventory as of March 31, 2010 was $5,159,849, an increase of
$2,180,096, or 73.1%, compared to inventory at December 31, 2009. Inventory
mainly consists of adult tilapia, snakehead, crucian carp and other varieties of
freshwater fish. The main reason of the increase of inventory is the Company
increased its breeding capacity in the three months ended March 31,
2010.
 
 At March
31, 2010 fixed assets was $377,201, mainly consisting of aerators, feeding
machine and other equipments used in fish farms, representing a decrease of
$27,946, or 6.9%, compared to fixed assets as of December 31, 2009.
 
 At March 31, 2010 biological assets was
$474,349, an increase of $41,541, or 9.6%, compared to biological assets as of
December 31, 2009. The increase in biological assets was due to the Company
purchasing certain breeding fish during the first quarter of
2010.  Biological assets consist of tilapia, snakehead, crucian carp,
yellow catfish and black
bass.
 
 7
 At March
31, 2010 construction in progress were $18,740, as compared to construction in
progress of $0 as of December 31, 2009. The increase was due to the fish
equipment built for fish fry breeding.
 
 At March
31, 2010 accounts payable were $4,832,916, as compared to accounts payable of $0
as of December 31, 2009. The increase in accounts payable was due to purchases
by the Company of fish food used in fish farm and fish fry
breeding.
 
 At March
31, 2010 other payables were $255,035, a decrease of $2,488,925, or 90.7%,
compared to other payables as of December 31, 2009. The main item included in
other payables is personal income tax payable, and the high personal income tax
payable was due to the dividend payable in the fiscal year ended
December 31, 2009, which was paid in the first quarter of 2010.
 
 At March
31, 2010 advance from clients was $0, as compared to the advance from clients of
$498,785 as of December 31, 2009. Because goods were distributed to clients in
the first quarter of 2010, there was no advance from clients as of March 31,
2010.
 
 At March
31, 2010 current portion of bank loan was $1,023,976, as compared to current
portion of bank loan of $380,273 as of December 31, 2009.  Since this loan
will be due within a year, the Company reclassified it as a short-term
laon from a long-term loan.
 
 At March
31, 2010 dividend payable was $1,023,976, as compared to a dividend payable of
$3,466,331 as of December 31, 2009 since the dividend was paid in the three
months ended March 31, 2010.
  At March
31, 2010 income tax payable was $236,483, a decrease of $758,830, or 76.2%,
compared to income tax payable as of December 31, 2009. This is mainly because
the fourth quarter is the peak season of sales normally, and therefore the
income tax for the three months ended March 31, 2010 is lower than the income
tax for the whole 2009 fiscal year.
  Liquidity
and Capital Resources
 
 The
Company has typically financed its operations and expansion from cash flows from
operations and loans from its shareholders and banks. The Company consummated a
reverse merger transaction and raised approximately $7.7 million in gross
proceeds in a private placement financing on March 29, 2010.
 
 Nanhai Ke
Da Heng Sheng has entered into two credit line agreements with Foshan Nanhai
Allied Rural Credit Union Danzhao Credit Association, one with a credit line of
RMB 5,000,000 and the other with a credit line of RMB 14,800,000. The credit
lines are secured by  real estate owned by the sister-in-law of Chen
Zhishen, our Chairman of the Board.  As of March 29, 2010, an
aggregate principal amount of RMB 9,400,000 of loans were outstanding under the
two credit lines. The outstanding loans are all due in January 2011. Outstanding
loans under the credit lines bear interest at a rate of  0.45% per
month. Interest is payable monthly
 
 8
 Critical
Accounting Policies and Estimates
 
 Management's
discussion and analysis of its financial condition and results of operations are
based upon our consolidated financial statements, which have been prepared in
accordance with accounting principles generally accepted in the United States.
Our financial statements reflect the selection and application of accounting
policies which require management to make significant estimates and judgments.
See note 3 to our consolidated financial statements, "Summary of Significant
Accounting Policies." Management bases its estimates on historical experience
and on various other assumptions that are believed to be reasonable under the
circumstances. Actual results may differ from these estimates under different
assumptions or conditions. We believe that the following reflect the more
critical accounting policies that currently affect our financial condition and
results of operations.
 
 Inventories
 
 Inventories
are valued at the lower of cost (determined on a weighted average basis) or
market, if lower.
 
 Income
Taxes
  The
Company utilizes the accounting guidance, “Accounting for Income Taxes,” which
requires the 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 income taxes are
recognized for the tax consequences in future years of differences between the
tax bases of assets and liabilities and their financial reporting amounts at
each period end based on enacted tax laws and statutory tax rates applicable to
the periods in which the differences are expected to affect taxable income.
Valuation allowances are established, when necessary, to reduce deferred tax
assets to the amount expected to be realized.
 
 It is the
Company’s intention to permanently reinvest earnings from activity with China
and thereby indefinitely postpone repatriation of these funds to the U.S.
Accordingly, no domestic deferred income tax provision has been made for U.S.
income tax which could result from paying dividends to the Company.
 
 Concentration of Credit
Risk
 
 Financial
instruments that potentially subject the Company to concentrations of credit
risk are cash, accounts receivable and other receivables arising from its normal
business activities. The Company places its cash in what it believes to be
credit-worthy financial institutions. The Company has a diversified customer
base, all are in China. The Company controls credit risk related to accounts
receivable through credit approvals, credit limits and monitoring procedures.
The Company routinely assesses the financial strength of its customers and,
based upon factors surrounding the credit risk, establishes an allowance, if
required, for uncollectible accounts and, as a consequence, believes that its
accounts receivable credit risk exposure beyond such allowance is
limited.
 
 9
 Revenue
Recognition
 
 The
Company’s revenue recognition policies are in compliance with the Revenue
Recognition Topic of the Codification. Sales revenue is recognized at the date
of shipment to customers when a formal arrangement exists, the price is fixed or
determinable, the delivery is completed, no other significant obligations of the
Company exist and collectability is reasonably assured. Payments received before
all of the relevant criteria for revenue recognition are satisfied are recorded
as unearned revenue.
 
 Off-Balance
Sheet Arrangements
 
 The
Company does not have any off-balance sheet arrangements.




10





Item
3. Quantitative and Qualitative Disclosure About Market Risk





Not
applicable.





Item
4. Controls and Procedures.




Disclosure
Controls and Procedures




The
Company’s management, with participation of the Company’s Chief Executive
Officer and Chief Financial Officer, has evaluated the effectiveness of the
Company’s 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, as amended
(the “Exchange Act”)) as of the end of the period covered by this report. The
term “disclosure controls and procedures” as defined in Rules 13a-15(e) and
15d-15(e) means controls and other procedures of the Company that are designed
to ensure that information required to be disclosed by a company in reports,
such as this report, that it files, or submits under the Exchange Act is
recorded, processed, summarized and reported, within the time periods specified
in the U.S. Securities and Exchange Commission’s (“SEC”) rules and forms.
Disclosure controls and procedures include, without limitation, controls and
procedures designed to ensure that information required to be disclosed by
a company in the reports that it files or submits under the Exchange Act is
accumulated and communicated to the company’s management, including its
principal executive and principal financial officers, as appropriate to allow
timely decisions regarding required disclosure. Management recognizes that any
controls and procedures, no matter how well designed and operated, can provide
only reasonable assurance of achieving their objectives and management
necessarily applies its judgment in evaluating the cost-benefit relationship of
possible controls and procedures. Based on that evaluation, management concluded
that, the Company’s disclosure controls and procedures were effective as of
March 31, 2010, to satisfy the objectives for which they are
intended.





Changes
in Internal Control over Financial Reporting





On March
29, 2010 the Company completed the acquisition of Rongfu Aquaculture, Inc.
(“Rongfu”) pursuant to a share exchange agreement. The acquisition was accounted
for as a recapitalization effected by a share exchange. Rongfu is considered the
acquirer for accounting and financial reporting purposes.  Prior to the
acquisition the Company was a shell company. Management is evaluating the
Company’s internal control over financial reporting in connection with the
transition of the Company to one with significant operations as a result of the
acquisition.




PART
II - OTHER INFORMATION




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





On March
29, 2010, we entered into a Share Exchange Agreement with Rongfu,, certain
stockholders and warrantholders of Rongfu (the “Rongfu Stockholders”) and Janet
Gargiulo, a stockholder of Granto, Inc (the “Share Exchange Agreement”). 
Pursuant to the Share Exchange Agreement, on March 29, 2010, 9 Rongfu
Stockholders transferred 100% of the outstanding shares of common stock and 100%
of the warrants to purchase common stock of Rongfu held by them, in exchange for
an aggregate of 18,623,889 newly issued shares of our Common Stock and warrants
to purchase an aggregate of 666,666 shares of our Common Stock. In connection
with the closing of the Share Exchange Agreement, Janet Gargiulo agreed to and
did cancel 1,150,000 of the 1,200,000 shares of Granto, Inc. Common Stock held
by her. In connection with the Share Exchange Agreement we also issued to three
persons an aggregate of 1,662,900 for services rendered in connection with the
Share Exchange Agreement. All of the shares of Common Stock referred to in this
paragraph were issued under exemptions from the registration provisions of the
Securities Act of 1933, as amended (the “Securities Act”), pursuant to Section
4(2) of the Securities Act or were not subject to the registration provisions of
the Securities Act pursuant to Regulation S promulgated under the Securities
Act.





On March
29, 2010 we entered into and consummated a Series A Preferred Stock Purchase
Agreement (the “Purchase Agreement”) with 18 investors pursuant to which the
investors agreed to and did purchase for an aggregate of $7.7 million an
aggregate of (a) 2,768,721 shares of our Series A Preferred Stock, (b) five year
warrants (“Series A Warrants”) to purchase an aggregate of 1,730,451 shares of
our Common Stock for $3.47 per share and (c) five year warrants (“Series B
Warrants”) to purchase an aggregate of 1,730,451 shares of our Common Stock for
$4.17 per share. All of the shares of Common Stock referred to in this paragraph
were issued under exemptions from the registration provisions of the Securities
Act pursuant to Section 4(2) of the Securities Act. The net proceeds of the sale
of the securities will be used by us for working capital.




Item
6. Exhibits





(a)
            Exhibits





31.1 -
Certification of Chief Executive Officer and Chief Financial Officer pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002.





32.1 -
Certification of Chief Executive Officer and Chief Financial Officer pursuant to
Section 906 of the Sarbanes-Oxley Act of 2002.


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SIGNATURES





Pursuant
to the requirements of the Securities Act of 1934, the Registrant has duly
caused this report to be signed on its behalf by the undersigned there unto duly
authorized.




GRANTO,
      INC.Date:
      May 28, 2010
                  BY:
                  /s/
      Kelvin ChanKelvin
      ChanChief
      Executive
Officer


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INDEX TO
EXHIBITS




EXHIBIT
              NUMBER
            
            DESCRIPTION31.1
            
            Certification
      of Chief Executive Officer and Chief Financial Officer pursuant to Section
      302 of the Sarbanes-Oxley Act of 2002.32.1
            
            Certification
      of Chief Executive Officer and Chief Financial Officer pursuant to Section
      906 of the Sarbanes-Oxley Act of
2002.


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