UNITED STATES


SECURITIES AND EXCHANGE COMMISSION


Washington, D.C. 20549




FORM 10–Q/ A


(AMENDMENT NO. 1)




(Mark One)




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




For the quarterly period ended June 30, 2010






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






For the transition period from ___________ to _____________




Commission File Number: 000-53208




SINO GREEN LAND CORPORATION


(Exact Name of Registrant as Specified in Its Charter)




Nevada
54-0484915(State or other jurisdiction of incorporation
(I.R.S. Employer Identification No.)or organization)




Suite 2711A, 27/F, Exchange Tower,


33 Wang Chiu Road, Kowloon Bay,


Kowloon, Hong Kong


People's Republic of China


(Address of principal executive offices, Zip Code)




+852-3104-0598


(Registrant's telephone number, including area code)




____________________________________________________


(Former name, former address and former fiscal year, if changed since last report)






Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 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 Data 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 filer o
Accelerated filer oNon-accelerated filer o
Smaller reporting company x(Do not check if a smaller reporting company)




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




Yes o         No x




The number of shares outstanding of each of the issuer's classes of common stock, as of September 30 , 2010 is as follows:




Class of Securities
Shares OutstandingCommon Stock, $0.001 par value
147,759,340










TABLE OF CONTENTS




PART IFINANCIAL INFORMATIONITEM 1.
FINANCIAL STATEMENTSConsolidated Balance Sheets as of June 30, 2010 (Unaudited) and December 31, 2009 (Restated)
1Consolidated Statements of Income and Other Comprehensive Income for the Three Months (Unaudited and Restated ) and Six Months (Unaudited and Restated) Ended June 30, 2010 and 2009 (Unaudited and Restated)
2Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2010 (Unaudited and Restated) and 2009 (Unaudited and Restated)
3Notes to Consolidated Financial Statements (Unaudited)
4-17ITEM 2.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
18ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.ITEM 4.
CONTROLS AND PROCEDURES
3030PART II

OTHER INFORMATIONITEM 6.
EXHIBITS.
31








EXPLANATORY NOTE





This quarterly report on Form 10-Q/A is being filed as Amendment to our quarterly report on Form 10-Q. We are amending this quarterly report to reflect the deemed preferred stock dividend during the six months ended June 30, 2010.  The financial statements for all other periods have not been revised from the original filing. Currently dated Exhibits 31.1, 31.2 and 32.1 are included in this filing.









SINO GREEN LAND CORPORATION AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS(UNAUDITED)JUNE 30, 2010


DECEMBER 31, 2009(Restated)ASSETSCurrent AssetsCash and cash equivalents

$
4,054,824


$
1,987,616Accounts receivable, net


252,933



171,143Due from related parties


-



1,006Inventories


4,230



9,934Advances-current portion


445,735



256,225Other current assets


135,585



343,169Total Current Assets


4,893,306



2,769,093-Property and Equipment, net


515,682



547,727Deposit


367,183



365,647Advances


7,706,002



4,355,829Long-term Prepayments


21,833,655



18,961,869Total Assets

$
35,315,828


$
27,000,165LIABILITIES AND SHAREHOLDERS' EQUITYCurrent LiabilitiesAccounts payable and accrued expenses

$
891,421


$
1,186,923Advances from customers


14,687



48,690Due to related parties


128,673



3,364Shares to be issued as stock compensation


591,821



-Derivative liability


4,852,185



5,206,567Total Current Liabilities


6,478,787



6,445,544Shareholders' EquityPreferred stock, par value $.001 per share,20,000,000 shares authorized, of which 2,000,000

shares are designated as series A convertiblepreferred stock, with 1,956,000 and 1,650,000

sharesoutstanding on June 30, 2010 and December 31,2009, respectively


956



650Common stock, $0.001 par value, 780,000,000shares authorized, 128,943,670 and 104,943,337

issued and outstanding as of June 30, 2010 andDecember 31, 2009, respectively


128,944



104,944Deferred compensation


(874,575
)


-Additional paid in capital


13,175,480



7,736,406Other comprehensive income


947,748



762,504


Retained earnings


15,458,488



11,950,117Total shareholders' equity


28,837,041



20,554,621Total Liabilities and Stockholders' Equity

$
35,315,828


$
27,000,165




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




1




SINO GREEN LAND CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF INCOMEFOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2010 AND 2009(UNAUDITED)




THREE MONTHS ENDED


SIX MONTHS ENDEDJUNE 30,


JUNE 30,2010


2009


2010


2009(Restated)


(Restated)


( Restated )


(Restated)Sales

$
29,771,125


$
21,775,636


$
63,326,928


$
40,306,199Cost of goods sold


26,928,570



19,563,887



56,560,136



36,146,317Gross profit


2,842,555



2,211,749



6,766,793



4,159,882Operating expensesSelling expenses


373,922



663,933



1,454,340



888,137General and administrative expenses


354,186



247,297



796,923



1,054,649Salary  and Wages


208,660



125,231



417,057



254,831Stock Compensation


588,196



-



591,821



-Total operating expenses


1,524,964



1,036,461



3,260,141



2,197,617Operating income


1,317,591



1,175,288



3,506,652



1,962,265Other income(expense)Interest expenses (income)


337



-



1,943



(22,500
)Change in derivative liability


2,626,863



64,271



354,382



25,471Others, net


(2,233
)


261,827



(4,603
)


72Total other income (expense)


2,624,967



326,098



351,722



3,043Net income


3,942,557



1,501,386



3,858,374



1,965,308Deemed preferred stock dividend










(350,000
)Net income applicable to common stockholders


3,942,557



1,501,386



3,508,374



1,965,308Comprehensive income:Net income


3,942,557



1,501,386



3,858,374



1,965,308Other comprehensive income (loss)Foreign currency

translation gain (loss)


188,973



(140,287
)


185,244



(167,228
)Comprehensive income

$
4,131,531


$
1,361,099


$
4,043,617


$
1,798,080


Net income per shareBasic

$
0.03


$
0.02


$
0.03


$
0.02Diluted

$
0.03


$
0.02


$
0.02


$
0.02Weighted average number of shares outstandingBasic


118,295,318



85,466,388



113,769,558



84,396,563Diluted


146,678,642



86,017,744



144,919,481



84,947,919




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




2





SINO GREEN LAND CORPORATION AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWSFOR THE SIX MONTHS ENDED JUNE 30, 2010 AND 2009(UNAUDITED)JUNE 30,2010


2009Cash flows from operating activities

(Restated)


(Restated)Net income

$
3,858,374


$
1,965,308Adjustments to reconcile net income to net cashprovided by operating activitiesDepreciation


41,138



42,088Amortization


510,549



423,991Change in derivative liability


(354,382
)


(25,471
)Stock compensation


591,821



-Decrease / (Increase) in current assetsAccounts receivable


(80,760
)


(25,338
)Inventories


5,723



1,410Other current assets


710,252



(275,851
)Advances


(4,019,243
)


11,658Long-term prepaid expense


(3,292,005
)


(3,074,581
)Increase (decrease) in current liabilitiesAccounts payable  and accrued expense


(108,658
)


(422,913
)Advances from customer


(34,075
)


(7,638
)Tax payables


589



1,031,302Other payables


(116,267
)


(29,234
)Net cash provided by operating activities


(2,286,944
)


(385,267
)Cash flows from investing activitiesAcquisition of plant, property, and equipment


(6,929
)


(2,336
)Net cash used in investing activities


(6,929
)


(2,336
)Cash flows from financing activities


Proceeds from sale of preferred stock, net ofoffering cost


350,000


-Proceeds from sale of common stock, net of offering cost


3,888,804



-Proceeds from loan from related parties


24,701



471,016Net cash provided by financing activities


4,263,505



471,016-Effect of exchange rate change on cash and cash equivalents


97,575



(668
)-Net increase in cash and cash equivalents


2,067,207



82,745Cash and cash equivalents, beginning balance


1,987,616



544,860Cash and cash equivalents, ending balance

$
4,054,824


$
627,605Supplement disclosure of cash flow informationInterest expense paid

$
-


$
-Income taxes paid

$
-


$
-Non-cash financing activities:Deemed dividend on preferred stock associated

with its beneficial conversion feature


350,000



-Conversion of preferred stock into common stock

$
44,000


$
-




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




3




SINO GREEN LAND CORPORATION AND SUBSIDIARIESNOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS




1. ORGANIZATION AND DESCRIPTION OF BUSINESS




Organization




Sino Green Land Corporation (the “Company”) was incorporated in Nevada in March 2008 under the name of Henry County Plywood Corporation, as the successor by merger to a Virginia corporation organized in May 1948 under the same name. On March 23, 2009, the Company’s corporate name was changed to Sino Green Land Corporation.




The Company, through its Chinese operating subsidiaries and a variable interest entity, is engaged in the wholesale distribution, marketing and sales of premium fruits through wholesale centers and to supermarkets in China.





On January 15, 2009, the Company entered into a share exchange agreement with Organic Region Group Limited (“Organic Region”), its stockholders and its wholly owned subsidiaries, Zhuhai Organic Region Modern Agriculture Ltd. (“Zhuhai Organic”), and Guangzhou Organic Region Agriculture Ltd. (“Guangzhou Organic”), Fuji Sunrise International Enterprises Limited (“Fuji Sunrise”), Southern International Develop Limited (“Southern International”) and HK Organic Region Limited (“HK Organic”). Pursuant to the share exchange agreement and a related agreement with the Company’s two former principal stockholders:




·
The Company issued to the former stockholders of Organic Region a total of 81,648,554 shares of common stock, constituting approximately 98% of our outstanding stock, in exchange for all of the capital stock of Organic Region; and




·
Our former majority stockholders sold to the Company 1,666,298 shares of common stock, representing 50% of the outstanding shares, for $500,000 non-interest bearing convertible promissory notes. The Company cancelled these shares. As of April 27, 2009, the Company had paid the principal and accrued interest on the notes in full and had no further obligations to the former majority stockholders.




Prior to the closing of these transactions, the Company, then known as Henry County Plywood Corporation, was not engaged in any business activity.




The Company is the sole stockholder of Organic Region, a British Virgin Islands corporation which was incorporated on January 30, 2003. Organic Region is the sole stockholders of five limited liability companies organized under the laws of the People’s Republic of China, each of which is a wholly foreign-owned entity, known as a WFOE: Zhuhai Organic, Guangzhou Organic, Fuji Sunrise, Southern International, HK Organic, and Guangzhou Metro Green Trading Ltd. Guangzhou Metro Green Trading Ltd, wholly owned by Southern International, was formed on March 31, 2010 and is engaged in the wholesale distribution, marketing and sales of grocery products, and real estate and consulting services in China.




Under generally accepted accounting principles, the acquisition by the Company of Organic Region is equivalent to the acquisition by Organic Region of the Company, then known as Henry County Plywood Corporation, with the issuance of stock by Organic Region for the net monetary assets of the Company. This transaction is reflected as a recapitalization, and is accounted for as a change in capital structure. Accordingly, the accounting for the acquisition is identical to that resulting from a reverse acquisition. Under reverse acquisition accounting, the comparative historical financial statements of the Company, as the legal acquirer, are those of the accounting acquirer, Organic Region. The accompanying financial statements reflect the recapitalization of the stockholders’ equity as if the transactions occurred as of the beginning of the first period presented. Thus, only the 81,648,554 shares of common stock issued to the former Organic Region stockholders are deemed to be outstanding for all periods reported prior to the date of the reverse acquisition. As a result of the reverse acquisition effected by the share exchange agreement, the Company’s business has become the business of the Organic Region. The 1,666,297 shares of common stock that were outstanding on January 15, 2009, net of the 1,666,298 shares that were purchased by the Company and cancelled, are treated as if they were issued on January 15, 2009, as part of a recapitalization.




4




The Company has an exclusive agreement with Xiong Luo, who is one of the Company’s senior executive officers and the owner and holder of the business license for Guangzhou Greenland Co. Ltd. (“Guangzhou Greenland”). Pursuant to this agreement, Organic Region provides consulting services, including business operations, human resources and research and development services, to Mr. Luo with respect to Guangzhou Greenland to enable Guangzhou Greenland to operate the fruit trading business in China. In exchange for such services, Mr. Luo agreed to pay a consulting services fee to Organic Region equal to all of the revenues obtained by Guangzhou Greenland. The agreement gave the Company the ability to substantially influence Guangzhou Greenland’s daily operations and financial affairs, appoint its senior executives and approve all matters requiring stockholder approval. Mr. Luo also irrevocably granted the Company an exclusive option to purchase, to the extent permitted under PRC law, all or part of the equity interests in Guangzhou Greenland and agreed to entrust all the rights to exercise voting power to the person appointed by the Company. Guangzhou Greenland is considered a variable interest entity under ASC 810 (Originally issued as FIN 46R), and its financial statements are included in our consolidated financial statements. Substantially all of the Company’s revenue is derived from the business of Guangzhou Greenland.




2. BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES




Unaudited Interim Financial Information




The accompanying unaudited financial statements ( see note 12 for a description of the restatement ) of the Company have been prepared in accordance with generally accepted accounting principles for interim financial information. Accordingly, they do not include all of the information required by generally accepted accounting principles for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. These statements should be read in conjunction with the Company's audited financial statements and notes thereto for the fiscal year ended December 31, 2009, as restated. See Note 12. The results of the six month period ended June 30, 2010 are not necessarily indicative of the results to be expected for the full year ending December 31, 2010.




Principles of consolidation




The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Zhuhai Organic and Guangzhou Organic, Fuji Sunrise, HK Organic, Southern International, and Guangzhou Metro Green Trading Ltd, together with its 100% Variable Interest Entity (VIE), Guangzhou Greenland. All significant inter-company accounts and transactions have been eliminated in consolidation.




In accordance with ASC 810, VIEs are generally entities that lack sufficient equity to finance their activities without additional financial support from other parties or whose equity holders lack adequate decision making ability. All VIEs with which the Company is involved must be evaluated to determine the primary beneficiary of the risks and rewards of the VIE. The primary beneficiary is required to consolidate the VIE for financial reporting purposes.




Use of estimates




The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America 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 consolidated financial statements and the amount of revenues and expenses during the reporting periods. Management makes these estimates using the best information available at the time the estimates are made. However, actual results could differ materially from those results.




Cash and cash equivalents




The Company considers all cash on hand and in banks, including accounts in book overdraft positions, certificates of deposit and other highly-liquid investments with maturities of three months or less, when purchased, to be cash and cash equivalents.




Accounts receivable




The Company’s policy is to maintain reserves for potential credit losses on accounts receivable. Management reviews the composition of accounts receivable and analyzes historical bad debts, customer concentrations, customer creditworthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these reserves. As of June 30, 2010 and December 31, 2009, the Company had accounts receivable, of $252,933 and $171,143, net of allowance for bad debts in the amount of $9,283 and $9,244, respectively.




5




Other current assets




Other current assets as of June 30, 2010 and December 31, 2009 were valued at $135,585 and $343,169 respectively. The other current assets mainly comprise of advances to employees and deposit to unrelated party in PRC. The unsecured loan amount of $292,517, which was included in other current assets in 2009, has been collected in first quarter of 2010.




Advances




As of June 30, 2010, advances of the Company amounted to $8,151,737 including current and non current portion, which represents $128,500 prepaid office decoration fee to unrelated party and the rest are advances made by the Company to an unrelated party in return for an 18 year lease commencing in 2010. The advances leases are required to be used to construct a multi level distribution center the Company intends to lease. The non current advances amounted to $7,706,002 and $4,355,829 as of June 30 2010 and December 31, 2009 respectively.




Deposit




As of June 30, 2010 and December 31, 2009, the Company had deposits in the amounts of $367,183 and $365,647, respectively with an unrelated third party in connection with the lease described above. The deposit is refundable after the expiration of the term of the lease.




Inventories




Inventories are valued at the lower of cost (determined on a weighted average basis) or market value. Management compares the cost of inventories with market value and an allowance is provided to reduce the value of inventories to their net market value. Inventories consisted of produce in the amount of $4,230 and $9,934 as of June 30, 2010 and December 31, 2009, respectively.




Property and equipment




Property and equipment are recorded at cost. Gains or losses on disposals are reflected as gain or loss in the year of disposal. The cost of improvements that extend the life of plant, property, and equipment are capitalized. These capitalized costs may include structural improvements, equipment, and fixtures. All ordinary repair and maintenance costs are expensed as incurred.




Depreciation for financial reporting purposes is provided using the straight-line method over the estimated useful lives of the assets: 5 to 10 years for manufacturing machinery, 5 years for office equipment, and 5 years for motor vehicles.




Impairment




The Company applies the provisions ASC 360-10 (Originally issued as FAS No. 144). ASC 360-10 requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable through the estimated undiscounted cash flows expected to result from the use and eventual disposition of the assets. Whenever any such impairment exists, an impairment loss will be recognized for the amount by which the carrying value exceeds the fair value.




The Company tests long-lived assets, including property, plant and equipment, for recoverability at least annually or more frequently upon the occurrence of an event or when circumstances indicate that the net carrying amount is greater than its fair value. Assets are grouped and evaluated at the lowest level for their identifiable cash flows that are largely independent of the cash flows of other groups of assets. The Company considers historical performance and future estimated results in its evaluation of potential impairment and then compares the carrying amount of the asset to the future estimated cash flows expected to result from the use of the asset. If the carrying amount of the asset exceeds estimated expected undiscounted future cash flows, the Company measures the amount of impairment by comparing the carrying amount of the asset to its fair value. The estimation of fair value is generally measured by discounting expected future cash flows as the rate the Company utilizes to evaluate potential investments. The Company estimates fair value based on the information available in making whatever estimates, judgments and projections are considered necessary. There was no impairment of long-lived assets for the year ended December 31, 2009, or the period ended June 30, 2010.




Derivative liability




The derivative liability represents the value of warrants to purchase common stock that were issued in connection with certain debt and preferred stock offerings in 2008 and 2009. The warrants are reported at fair value using the Black-Scholes model with changes in value reflected in earnings for the period.




6




Stock based compensation




The Company accounts for share-based compensation awards to employees in accordance with FASB ASC Topic 718, “Compensation – Stock Compensation”, which requires that share-based payment transactions with employees be measured based on the grant-date fair value of the equity instrument issued and recognized as compensation expense over the vesting period.




Deferred Compensation




Pursuant to certain share grant agreements, the Company has awarded shares of common stock that vest over four-quarter term. Vested but unpaid shares are accrued as a liability through compensation expense, whereas unvested shares are reflected as a component of equity, and are amortized over the vesting term through compensation expense. The changes in fair value of any accrued liabilities associated with vested but unpaid awards is reported in operations for the period outstanding.




Preferred Stock




On May 14, 2010, the certificate of designation relating to the series A preferred stock was amended and restated to increase the number of authorized shares of series A preferred stock from 1,000,000 to 2,000,000 shares. The financial statements give retroactive effect to this amendment.




Deemed Preferred Stock Dividend




The Company records a deemed preferred stock dividend for the amortization of any discount arising from beneficial conversion features associated with its preferred shares. Upon issuance, this discount is offset by a credit to additional paid-in capital, and is generally amortized over its earliest conversion period. Due to the perpetual nature of the preferred shares and the immediate conversion rights, the full discount is reflected as a deemed preferred stock dividend upon issuance.




Revenue recognition




The Company’s revenue recognition policies are in compliance with ASC 605 (Originally issued as Staff Accounting Bulletin (SAB) 104). 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. Discounts provided to customers by the Company at the time of sale are recognized as a reduction in sales as the products are sold. Sales taxes are not recorded as a component of sales.




Cost of Goods Sold




The “Cost of Goods Sold” line item of the Consolidated Statements of Income includes product costs and the amortization of the long-term leases on which the produce is grown and for which the full payment was made at the commencement of the lease. Discounts provided to the Company by vendors at the time of purchase are recognized as a reduction in inventory cost as the products are delivered.




All other costs, including warehousing costs, transportation costs, salaries, rent expense and depreciation expense, are shown separately in Selling Expense or General and Administrative Expense in the Consolidated Statements of Income.




Income taxes





The Company utilizes ASC 740 (Originally issued as SFAS No. 109, “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 basis 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.




7




The Company accounts for income taxes using an asset and liability approach which allows for the recognition and measurement of deferred tax assets based upon the likelihood of realization of tax benefits in future years. Under the asset and liability approach, deferred taxes are provided for the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A valuation allowance is provided for deferred tax assets if it is more likely than not these items will either expire before the Company is able to realize their benefits, or that future deductibility is uncertain.




The Company records a valuation allowance for deferred tax assets, if any, based on its estimates of its future taxable income as well as its tax planning strategies when it is more likely than not that a portion or all of its deferred tax assets will not be realized. If the Company is able to utilize more of its deferred tax assets than the net amount previously recorded when unanticipated events occur, an adjustment to deferred tax assets would increase the Company net income when those events occur. The Company does not have any significant deferred tax asset or liabilities in the PRC tax jurisdiction.




Earnings per share




Earnings per share is calculated in accordance with the ASC 260 (Originally issued as Statement of Financial Accounting standards No. 128, “Earnings per share”), which superseded Accounting Principles Board Opinion No.15 (APB 15). Basic earnings per share is based upon the weighted average number of common shares outstanding. Diluted earnings per share is based on the assumption that all dilutive convertible shares and stock options and warrants were converted or exercised. Dilution is computed by applying the treasury stock method. Under this method, options and warrants are assumed to be exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase common stock at the average market price during the period.




Basic earnings per share is computed by dividing net income by the weighted average number of shares of common stock outstanding during the period. Diluted earnings per share is computed by dividing net income by the weighted average number of shares of common stock, common stock equivalents and potentially dilutive securities outstanding during each period. Potentially dilutive common shares consist of common stock issuable upon the conversion of the outstanding shares of Series A preferred stock (using the if-converted method) and common stock warrants (using the treasury stock method). The following table presents a reconciliation of basic and diluted earnings per share (in thousands, except per share amounts):




Six month period EndedJune 30,2010


2009Net Income

$
3,858


$
1,965Less : Deemed Preferred Stock Dividend


350



-Net income available to common shareholders

$
3,508


$
1,965Weighted average shares of common stock outstanding


113,770



84,397Diluted effect of warrants, options, and preferred stock


31,149



551Weighted average shares of common stock – diluted


144,919



84,948Earnings per share – basic

$
0.03


$
0.02Earnings per share -- diluted

$
0.02


$
0.02






Three month period EndedJune 30,2010


2009Net Income

$
3,943


$
1,501


Less : Deemed Preferred Stock Dividend


-



-Net income available to common shareholders

$
3,943


$
1,501Weighted average shares of common stock outstanding


118, 295



85,466Diluted effect of warrants, options, and preferred stock


28,384



551Weighted average shares of common stock – diluted


146,679



86,018Earnings per share – basic

$
0.03


$
0.02Earnings per share -- diluted

$
0 .03


$
0.02




8




The warrants that were issued by Organic Region in April 2008 were assumed by the Company in connection with the reverse acquisition, and are reflected in the number of diluted shares 3,320,004 for the six month period ended June 30, 2010.




Pursuant to a common stock offering, effective August 3, 2009, the Company issued warrants to purchase 13,612,120 shares of the Company’s common stock, of which 10,145,454 and 3,466,666 have an exercise price of $0.11 and $0.15 per share, respectively, and are exercisable through August 3, 2011. The average stock price for the six month period ended June 30, 2010 was $0.28 per share. The warrants with $0.11 exercise price and $0.15 exercise price had a dilutive effect of 6,138,823 and 1,599,777 shares for the six month period ended June 30, 2010, respectively.




Pursuant to a $1,000,000 preferred stock offering on August 7, 2009, the Company (i) issued of an aggregate of 1,000,000 shares of Series A Preferred Stock, (ii) issued five-year warrants to purchase 10,000,000 shares of common stock at an exercise price of $0.14 per share and 10,000,000 shares of common stock at an exercise price of $0.25 per share, and (iii) granted the investors an option to purchase up to 1,000,000 additional shares of Series A Preferred Stock at a purchase price of $1.00 per share of Series A Preferred Stock.




The preferred stock had a dilutive effect of 22,220,160 shares for the six month period ended June 30, 2010. The warrants with $0.14 exercise price and $0.25 exercise price had a dilutive effect of 4,973,760 shares and 1,024,571 shares respectively for the six month period ended June 30, 2010. The preferred stock option had no dilutive effect, for the outstanding options to purchase 350,000 shares of Series A Preferred Stock at an exercise price of $1.00 per share of Series A Preferred Stock were exercised on January 5, 2010, for the six month period ended June 30, 2010.




On January 15, 2010, pursuant to an option granted in August 2009, we issued for $280,000, (a) 2,333,333 shares of common stock and (b) warrants to purchase 1,866,667 shares of common stock at an exercise price of $0.15 per share. Such issuance had a dilutive effect of 861,419shares for the six months period ended June 30, 2010.





At June 30, 2010, there remained outstanding from the August 2009 financing an option to purchase, for $500,000, (a) 4,166,667 shares of common stock and (b) a warrant to purchase 3,333,333 shares of common stock at an exercise price of $0.15 per share.  This option has a dilutive effect of 2,371,581shares of common stock for the six months ended June 30, 2010.




Foreign currency translation




The Company uses the United States dollar for financial reporting purposes. The Company’s subsidiaries maintain their books and records in their functional currency - Chinese Yuan Renminbi ( RMB), being the primary currency of the economic environment in which their operations are conducted. Such financial statements were translated into United States dollars in accordance with ASC 830 (Originally issued as Statement of Financial Accounts Standards (“SFAS”) No. 52, “Foreign Currency Translation”). According to the Statement, all assets and liabilities are translated at the current exchange rate, stockholder’s equity are translated at the historical rates and income statement and statement of cash flows items are translated at the average exchange rate for the period. As a result, amounts related to assets and liabilities reported on the statement of cash flows may not necessarily agree with changes in the corresponding balances on the balance sheet. The resulting translation adjustments are reported under other comprehensive income in accordance with ASC 220 (Originally issued as SFAS No. 130, “Reporting Comprehensive Income”) as a component of shareholders’ equity.




Fair values of financial instruments




ASC 825 (Originally issued as Statement of Financial Accounting Standard No. 107, “Disclosures about Fair Value of Financial Instruments”) requires that the Company disclose estimated fair values of financial instruments. The carrying amounts reported in the statements of financial position for assets and liabilities qualifying as financial instruments are a reasonable estimate of fair value.




The Company’s financial instruments primarily consist of cash and cash equivalents, accounts receivable, other receivables, advances to suppliers, accounts payable and other payables.




As of the balance sheet dates, the estimated fair values of the financial instruments were not materially different from their carrying values as presented on the balance sheet. This is attributed to the short maturities of the instruments and that interest rates on the borrowings approximate those that would have been available for loans of similar remaining maturity and risk profile at respective balance sheet dates.




9




Segment reporting




ASC 280 (Originally issued as Statement of Financial Accounting Standards No. 131, “SFAS 131”), “Disclosure about Segments of an Enterprise and Related Information” requires use of the “management approach” model for segment reporting. The management approach model is based on the way a company’s management organizes segments within the company for making operating decisions and assessing performance. Reportable segments are based on products and services, geography, legal structure, management structure, or any other manner in which management disaggregates a company.




ASC 280 (Originally issued as SFAS No. 131) has no effect on the Company’s consolidated financial statements as the Company operates in one reportable business segment.




Statement of cash flows




In accordance with ASC 230 (Originally issued as SFAS No. 95), "Statement of Cash Flows," cash flows from the Company's operations is calculated based upon the local currencies. As a result, amounts related to assets and liabilities reported on the statement of cash flows may not necessarily agree with changes in the corresponding balances on the balance sheet.




Recent Accounting Pronouncements




In June 2009, the FASB issued ASC 105 (previously SFAS No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles ("GAAP") - a replacement of FASB Statement No. 162), which has become the source of authoritative accounting principles generally accepted in the United States recognized by the FASB to be applied to nongovernmental entities.




In June 2009, the FASB issued ASC 860 (previously SFAS No. 166, “Accounting for Transfers of Financial Assets”) , which requires additional information regarding transfers of financial assets, including securitization transactions, and where companies have continuing exposure to the risks related to transferred financial assets. SFAS 166 eliminates the concept of a “qualifying special-purpose entity,” changes the requirements for derecognizing financial assets, and requires additional disclosures. SFAS 166 is effective for fiscal years beginning after November 15, 2009. The Company does not believe this pronouncement will impact its financial statements.




In June 2009, the FASB issued ASC 810 (previously SFAS No. 167) for determining whether to consolidate a variable interest entity. These amended standards eliminate a mandatory quantitative approach to determine whether a variable interest gives the entity a controlling financial interest in a variable interest entity in favor of a qualitatively focused analysis, and require an ongoing reassessment of whether an entity is the primary beneficiary. These amended standards were effective for us beginning in the first quarter of fiscal year 2010, and have had no impact on our consolidated financial statements.




In August 2009, the FASB issued Accounting Standards Update (“ASU”) 2009-05, which amends ASC Topic 820, Measuring Liabilities at Fair Value, which provides additional guidance on the measurement of liabilities at fair value. These amended standards clarify that in circumstances in which a quoted price in an active market for the identical liability is not available, we are required to use the quoted price of the identical liability when traded as an asset, quoted prices for similar liabilities, or quoted prices for similar liabilities when traded as assets. If these quoted prices are not available, we are required to use another valuation technique, such as an income approach or a market approach. These amended standards were effective for us beginning in the fourth quarter of fiscal year 2009 and are not expected to have a significant impact on our consolidated financial statements.




In October 2009, the FASB issued Accounting Standards Update ("ASU") No. 2009-13, "Revenue Recognition (Topic 605): Multiple-Deliverable Revenue Arrangements (a consensus of the FASB Emerging Issues Task Force)" which amends ASC 605-25, "Revenue Recognition: Multiple-Element Arrangements." ASU No. 2009-13 addresses how to determine whether an arrangement involving multiple deliverables contains more than one unit of accounting and how to allocate consideration to each unit of accounting in the arrangement. This ASU replaces all references to fair value as the measurement criteria with the term selling price and establishes a hierarchy for determining the selling price of a deliverable. ASU No. 2009-13 also eliminates the use of the residual value method for determining the allocation of arrangement consideration. Additionally, ASU No. 2009-13 requires expanded disclosures. This ASU will become effective for us for revenue arrangements entered into or materially modified on or after April 1, 2011. Earlier application is permitted with required transition disclosures based on the period of adoption. The Company is currently evaluating the application date and the impact of this standard on its financial statements.




10




In February 2010, FASB issued ASU No. 2010-9 –"Subsequent events (Topic 855)" Amendments to Certain Recognition and Disclosure Requirements. This update addresses certain implementation issues related to an entity’s requirement to perform and disclose subsequent-events procedures, removes the requirement that public companies disclose the date of their financial statements in both issued and revised financial statements. According to the FASB, the revised statements include those that have been changed to correct an error or conform to a retrospective application of U.S. GAAP. The amendments were effective upon issuance of the update, except for the use of the issued date for conduit debt obligors. That amendment is effective for interim or annual periods ending after June 15, 2010. The Company does not expect the adoption of this ASU to have a material impact on the Company’s consolidated financial statements.




Reclassifications




Certain prior year amounts have been reclassified to conform with the current year's presentation, none of which had an impact on total assets, stockholders' equity, net income, or net earnings per share.




3. PROPERTY AND EQUIPMENT, NET




Property and equipment consist of the following as of June 30, 2010 and December 31, 2009:




June 30,


December 31,2010


2009Manufacturing machinery

$
407,812


$
403,822Office equipment


42,526



40,591Motor vehicle


24,382



24,143Leasehold Improvement


489,638



484,848Total


964,358



953,044Less: Accumulated Depreciation


(448,676
)


(405,677
)Property  and Equipment, net

$
515,682


$
547,727




Depreciation expenses for the three month period ended June 30, 2010 and 2009 were $20,500 and $21,078, respectively. Depreciation expenses for the six month period ended June 30, 2010 and 2009 were $41,138 and $42,088, respectively.




4. DUE FROM/(TO) RELATED PARTIES




Amounts due from related parties amounted to $0 and $1,006 as of June 30, 2010 and December 31, 2009, respectively. The amount due is interest free, unsecured and due on demand. The Company has collected such amounts as of June 30, 2010.




Amounts due to related parties amounted to $128,673 and $3,364 as of June 30, 2010 and December 31, 2009, respectively. The Company has a balance due to one shareholder and director of the Company amounting to $128,673 as of June 30, 2010. The amount due is interest free, unsecured and due on demand.




On January 15, 2009, in connection with the reverse acquisition described in Note 1, the Company entered into a redemption agreement with Michael Friess and Sanford Schwartz, who were the Company’s majority stockholders, whereby these stockholders surrendered an aggregate of 1,666,298 shares of common stock for redemption in exchange for the issuance of non-interest bearing convertible promissory notes in the aggregate principal amount of $500,000. The principal and accrued interest of the Notes were payable on March 31, 2009. On March 31, 2009, the Company entered into an oral agreement with these stockholders, pursuant to which the Company paid them $250,000 and agreed to pay them the remaining $250,000 on or before April 30, 2009, without penalty. The Company paid the remaining $250,000 on April 27, 2009.




5. LONG-TERM PREPAYMENTS




There is no private ownership of land in the PRC. All land is owned by the government, which grants land use rights for a specified period of time. Guangzhou Greenland has entered into fourteen land lease and developing agreements with a number of farming cooperatives since 2005. The farming cooperatives are authorized to manage and plant the lands by Guangzhou Greenland who, during the term of the lease, has the priority right to purchase the agricultural products at fair market price. The agreements have terms of 25 years with various due dates. The payments for the entire 25-year term are payable, and were paid, in full at the inception of the agreements.




11





The Company acquired one new land lease, for which our long term prepayments totaled $3,292,005 during the six months ended June 30, 2010 by paying $3,292,005.




Guangzhou Greenland uses the straight-line method to amortize the long-term prepayments over the life of the contracts. As of June 30, 2010 and December 31, 2009, the Company has long-term prepayments (net) in the amount of $21,833,655 and $18,961,869, respectively.




The details of long-term prepayments are listed below as of June 30, 2010 and December 31, 2009:




June 30,


December2010



31, 2009Long-term prepayment –cost

$
24,378,715


$
20,996,380Accumulated amortization


(2,545,060
)


(2,034,511
)Net

$
21,833,655


$
18,961,869




Amortization expenses for the three month period ended June 30, 2010 and 2009 were $288,237 and $174,858. Amortization expenses for the six month period ended June 30, 2010 and 2009 were $510,549 and $349,719.




Amortization expenses for the next five years after June 30, 2010 are approximately as follows:




Remainder of 2010

$
510,5492011


1,021,0972012


1,021,0972013


1,021,0972014


1,021,097Thereafter

$
17,238,718Total


21,833,655




6. ACCOUNTS PAYABLE AND ACCRUED EXPENSES




Accounts payable and accrued expenses comprised the following as of June 30, 2010 and December 31, 2009:




June 30,


December2010



31, 2009Accounts payable

$
401,022


$
385,726Accrued payroll


104,275



130,542Accrued expenses


381,195



465,895Advance subscription


-



180,526Other payable


9,266



24,234$
895,758


$
1,186, 923




7. EQUITY TRANSACTIONS




Pursuant to an agreement with an independent director, the Company agreed to pay the director 12,500 shares of common stock every fiscal quarter. As of June 30, 2010, the Company accrued the value of 70,833 shares, reflecting the shares that were due to such director for the fiscal quarter ended June 30, 2010. The shares have not been issued through June 30, 2010. For the six months ended June 30, 2010, $7,250 was recorded as an expense for 25,000 shares to be issued to the director which are part of shares to be issued in the accompanying balance sheet.




Sales of Securities




On May 27, 2010, the Company sold 17,000,000 shares of common stock for $3,400,000 at a price per share of $0.20. The offering cost was $291,237 as of June 30. 2010, and is reflected as a reduction of equity. In case of the investors in the United States (to whom 3,375,000 shares were issued for proceeds of $675,000), there was a price adjustment clause stating that ‘from the date hereof until such time as no Purchaser holds any of the Securities, the Company closes on the sale of a note or notes, shares of Common Stock, or shares of any class of Preferred Stock at a price per share of Common Stock, or with a conversion right to acquire Common Stock at a price per share of Common Stock, that is less than the Purchase Price per share (as adjusted to the capitalization per share as of the Closing Date, following any stock splits, stock dividends, or the like), the Company shall issue additional shares of common stock to the Investors to make it equal to such lower price per share.’




12




On June 21, 2010, the Company issued an aggregate of 7,195,000 shares of its common stock to several of the Company's employees and advisors in exchange for services provided to the Company by the Grantees. Of the shares that were issued, the rights to 2,882,500 shares vested on June 21, 2010, and the rights to the remaining 4,312,500 shares will vest in equal installment three, six and nine months from the date of grant. The stock compensation expense for the quarter ended June 30, 2010 was $584,571, and is reflected as a liability in the accompanying financial statements which will be adjusted to its current value at each reporting date through the income statement.




Warrants




Weighted


AverageAverage


RemainingWarrants


Warrants


Exercise


ContractualOutstanding


Exercisable


Price


LifeOutstanding, December 31, 2007


-



-



-



-Granted


5,115,090



5,115,090



0.098



4.11Forfeited


-



-



-



-Exercised


-



-



-



-Outstanding, December 31, 2008


5,115,090



5,115,090



0.098



4.11Granted


33,612,120



33,612,120



0.16



2.85Forfeited


-



-



-



-Exercised


-



-



-



-Outstanding, December 31, 2009


38,727,210



38,727,210



0.15



3.01Granted


1,866,667



1,866,667



0.15



1.51ForfeitedExercisedOutstanding, June 30, 2010


40,593,877



40,593,877



0.15



2.95




Stock options




The preferred stock option activity was as follows:




WeightedAverage


AggregateOptions


Exercise


Intrinsicoutstanding


Price


ValueOutstanding, December 31, 2008


-



-



-Granted


1,000,000


$
1.00


$
909,091Forfeited


-



-



-Exercised


650,000



1.00



590,909Outstanding, December 31, 2009


350,000


$
1.00


$
318,182Granted


-



-



-Forfeited


-



-



-Exercised


350,000



1.00



318,182Outstanding, June 30, 2010


-



-



-




The exercise of the option to purchase the series A preferred stock was made, and the exercise price was received, subject to an amendment to the certificate of amendment to the certificate of designation for the series A convertible preferred stock, which was filed on May 14, 2010.




Fair Value of Warrants




ASC Topic 820, Fair Value Measurement and Disclosures, defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. This topic also establishes a fair value hierarchy which requires classification based on observable and unobservable inputs when measuring fair value. The fair value hierarchy distinguishes between assumptions based on market data (observable inputs) and an entity’s own assumptions (unobservable inputs). The hierarchy consists of three levels:




13




o
Level one — Quoted market prices in active markets for identical assets or liabilities;o
Level two — Inputs other than level one inputs that are either directly or indirectly observable; ando
Level three — Unobservable inputs developed using estimates and assumptions, which are developed by the reporting entity and reflect those assumptions that a market participant would use.




Determining which category an asset or liability falls within the hierarchy requires significant judgment. The Company evaluates its hierarchy disclosures each quarter.




Assets and liabilities measured at fair value on a recurring basis are summarized as follows:





Fair value measurement using inputs


Carrying amount atFinancial instruments

Level 1


Level 2


Level 3


6/30/2010Liabilities:Derivative instruments - Warrants

$
—


$
4,852,185


$
—


$
4,852,185Total

$
—


$
4,852,185


$
—


$
4,852,185




The fair value of warrants associated with the April 2008 debt issuance (Organic Region Warrants) and the August 2009 preferred share financing (Series A Warrants) that are reported as a liability was developed using the Black Scholes model using the following significant assumptions:




Organic Region Warrants


Series A Warrants $0.14


Series A Warrants  $0.25June 30,


December 31,


June 30,


December 31,


June 30,


December 31,2010


2009


2010


2009


2010


2009Market price of common stock:

$
0.25


$
0.25


$
0.25


$
0.25


$
0.25


$
0.25Exercise price:

$
0.098


$
0.098



0.14


$
0.14



0.25


$
0.25Expected term (years):


4.11



4.60



4.11



4.60



4.11



4.60Dividend yield:


–



–



-



-



-



-Expected volatility:


104.19
%


120.82
%


104.19
%


120.82
%


104.19
%


120.82
%Risk-free interest rate:


1.50
%


1.50
%


1.75
%


1.75
%


1.75
%


1.75
%




As of August 24, 2010, none of the warrants had been exercised.




The risk-free rate of return reflects the interest rate for United States Treasury Note with similar time-to-maturity to that of the warrants.




None of the other warrants are treated as derivatives.




8. INCOME TAXES




The Company’s operations are conducted solely in the PRC. It does not conduct any operations in the United States or The British Virgin Islands and is not subject to income tax in either jurisdiction. For certain entities in PRC, the Company has incurred net accumulated operating losses. The Company has net operating losses amounted of $34,119 and $7,686, respectively, as of June 30, 2010 and 2009 for these entities. The Company believes that it is more likely than not that these net accumulated operating losses generated in these entities will not be utilized in the future. Therefore, the Company has provided full valuation allowance for the deferred tax assets arising from the losses at these locations as of June 30, 2010 and 2009. Accordingly, the Company has no net deferred tax assets.




Under the current PRC enterprise income tax law, which became effective January 1, 2008, there is a standard enterprise income tax rate of 25%. The tax holidays that were granted under the former tax law, will continue in effect until they expire. Guangzhou Organic has a two year income tax exemption in 2008 and 2009 and will have a 50% tax reduction from 2010 to 2012. For the six months ended June 30, 2010, Guangzhou Organic had a net loss. Guangzhou Greenland in PRC which had net income from operations for the six months ended June 30, 2010 is exempted from income tax according to tax law of PRC. The other two subsidiaries got net losses from business operation. Therefore, the Company does not have a provision for income tax. The following is a reconciliation of the provision for income taxes at the tax rates of BVI and PRC to the income taxes reflected in the Statement of Operations for the six months ended June 30, 2010 and 2009.




14




2010


2009U.S. statutory rate
35 %


35 %Foreign income not recognized in U.S.
(35)%


(35)%PRC income tax
25 %


25 %


Exempt from income tax
(12.5)%


(25)%Less : Valuation Allowance
(12.5)%


0 %Tax expense at actual rate
0 %


0 %




Sino Green Land, Inc. was incorporated in the United States and has incurred estimated accumulated net operating losses of $3,625 as of June 30, 2010 for the tax purposes. The estimated net operating loss carry forwards for United States income taxes amounted to $3,625 which may be available to reduce future years’ taxable income. These carry forwards will expire, if not utilized, from 2030. Management believes that the realization of the benefits from these losses appears uncertain due to the Company’s limited operating history and continuing losses for United States income tax purposes. Accordingly, the Company has provided a 100% valuation allowance on the deferred tax benefit to reduce the asset to zero. The net change in the valuation allowance for the period ended June 30, 2010 was $3,625 and the valuation allowance as of June 30, 2010 amounted to $3,625.




The Company has cumulative undistributed earnings of foreign subsidiaries of approximately $15,458,488 as of June 30, 2010, is included in consolidated retained earnings and will continue to be indefinitely reinvested in international operations. Accordingly, no provision has been made for U.S. deferred taxes related to future repatriation of these earnings, nor is it practicable to estimate the amount of income taxes that would have to be provided if the Company concluded that such earnings will be remitted in the future.




9. CURRENT VULNERABILITY DUE TO CERTAIN CONCENTRATIONS




The Company’s operations are conducted exclusively 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, and by the general state of the PRC’s economy.




Operations of the Company in the PRC are subject to specific considerations and significant risks. These include risks associated with, among others, the political, economic and legal environments and foreign currency exchange. Results of operations of the company may be adversely affected 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.




Since a significant amount of the company future revenues will be denominated in Renminbi, the existing and any future restrictions on currency exchange may limit the company’s ability to utilize revenues generated in Renminbi to fund any business activities outside China or fund expenditures denominated in foreign currencies.




Almost all of the Company’s products are sold at the Guangdong Yun Cheng Wholesale Market and the Beijing Xin Fadi Agricultural Products Wholesale Market, two major markets for the sale of agricultural products in their respective areas where the Company leases space to sell its produce.




No customers accounted for more than 10% of the total net revenue for the six months ended June 30, 2010 and 2009.




The Company has long-term arrangements to purchase its produce from a limited number of farming cooperatives. If the Company is not able to purchase the produce from these farmers, in the event of a product shortage, and it is necessary for the Company to purchase from other suppliers, the costs may be greater due to this kind of short-term nature of arrangements.




Three vendors provided 83.9%, 10.3% and 5.5%of the goods to the Company during the six months ended June 30, 2010. Accounts payable to these vendors amounted $0 as of June 30, 2010. Three vendors provided 84.8%, 7.8% and 6.5% of the goods to the Company during the six month periods ended June 30, 2009. Accounts payable to these vendors amounted $0 on June 30, 2009.




The Company extends credit to its customers based upon its assessment of their credit worthiness and generally does not require collateral. Credit losses have not been significant.




15




10. COMMITMENT




Operating Leases




The Company leases various office facilities under operating leases that terminate on various dates.




The Company incurred rent expenses of $33,169and $25,820 for the three months ended June 30, 2010 and 2009. The Company incurred rent expenses of $70,213and $56,624 for the six months ended June 30, 2010 and 2009.




The rent expenses for the five years after June 30, 2010 are as follows:




1 year after

$
94,9352 year after


158,3203 year after


163,4514 year after


166,3265 year after


167,097Thereafter


363,004$
1,107,913




11. SUBSEQUENTS EVENTS




On July 1, 2010, in connection with the election of two new board members, we entered into director agreements pursuant to which we will issue to each of the new directors 25,000 shares of common stock for every three month period of their directorship.




On July 28, 2010, two investors exercised their option to acquire 4,166,667 shares of common stock at $0.12 per share. Pursuant to the option agreement, upon such exercise, the Company issued a warrant to purchase 3,333,333 shares of common stock at an exercise price of $0.15. The exercise price of the option was $500,000.




On August 4, 2010, one investor converted 396,127 shares of series A preferred shares to 4,500,003 shares of common stock.




12. RESTATEMENT OF FINANCIAL STATEMENTS





On August 23, 2010, we concluded, after a review of the pertinent facts, that the previously issued financial statements contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2009, and Quarterly Reports on Form 10-Q for the quarters ended March 31, 2010, September 30, June 30 and March 31, 2009, respectively, should not be relied upon due to the following:





The Company improperly allocated, for financial statement purposes, the proceeds received in connection with the April 2008 debt financing transaction and the August and December 2009 and January 2010 preferred stock financing transactions (collectively, “the financings”). The restated financial statements include the effects of properly allocating the financing proceeds between (1) the debt or preferred stock, as applicable, (2) any derivative liabilities associated with warrants for the purchase of common stock, and (3) any beneficial conversion features (“BCF”), as a component of additional paid-in capital, which allow the debt and preferred shareholders to convert their investment into the Company’s common stock on favorable terms.





·
Due to the improper allocation of proceeds on the April 2008 debt financing which resulted in an incorrect basis for the debt, the Company improperly reported the loss on debt extinguishment upon its settlement in August 2009. The debt settlement is appropriately reported in the restated annual financial statements for 2009. The settlement occurred in August 2009, and therefore does not affect the income statements presented. However, the accompanying balance sheets appropriately reflect the impact of settlement.





·
Certain warrants containing variable exercise terms associated with the financings were reported as a component of paid-in capital instead of properly reflecting them as a derivative liability at fair value, with changes in fair value reported in the income statement each period. The restated financial statements include the effects of reporting the derivative liabilities and their associated changes in value correctly.




16




·
A BCF was inappropriately recorded as a debt discount on the April 2008 financing in addition to being amortized over the subsequent 12 months with a charge to expense. Furthermore, separate BCFs associated with the December 2009 and January 2010 preferred stock financings were erroneously omitted due to a misallocation of proceeds for financial statement purposes. The restated financial statements include the effects of allocating financing proceeds to the applicable BCFs by recording a preferred stock discount with a credit to additional paid-in capital. The discounts were then charged immediately to retained earnings as deemed preferred stock dividends pursuant to the terms of the agreement which provide immediate conversion rights.





·
Earnings per share has been restated to include the effects of the restated financial statements





The Company’s management has determined that as a result of such accounting matters, its reported net income was overstated by 3,529,126 for the year ended December 31, 2009 and understated by $112,650 for the year ended December 31, 2008.





Set forth below is a comparative presentation of the balance sheet and income statement as of and for the three and six months ended June 30 , 2009 as restated and as initially reported in the Company’s Reports on Form 10- Q previously filed with the Securities and Exchange Commission. These financial statements include the restated balance sheet as of December 31, 2009.





For the three months ended June 30, 2010


As Reported


As Restated6/30/2010


6/30/2010INCOME STATEMENT:Weighted average shares outstandingBasic


118,365,892



118,295,318Diluted


153,944,387



146,678,642


For the six months ended June 30, 2010


As Reported


As Restated6/30/2010


6/30/2010INCOME STATEMENT:Net income

$
3,858,374


$
3,858,374Deemed preferred stock dividend






(350,000
)Net income applicable to common stockholders


3,858,374



3,508,374Comprehensive income:Net income


3,858,374



3,858,374Other comprehensive income (loss)Foreign currency translation gain (loss)


185,244



185,244Comprehensive income

$
4,043,617


$
4,043,617Weighted average shares outstandingBasic


108,551,381



113,769,558Diluted


146,896,474



144,919,481




For the three and six months ended June 30, 2009




Three months ended June 30, 2009


Six months ended June 30, 2009As Reported


As Restated


As Reported


As RestatedINCOME STATEMENT:Sales

$
21,775,636


$
21,775,636


$
40,306,199


$
40,306,199Cost of goods sold


19,389,024



19,563,887



35,796,603



36,146,317Gross profit


2,386,612



2,211,749



4,509,596



4,159,882Operating expense:Selling expenses


838,796



663,933



1,237,851



888,137General and administrative expenses


372,528



372,528



1,309,480



1,309,480Total operating expenses


1,211,324



1,036,461



2,547,331



2,197,617Operating income


1,175,288



1,175,288



1,962,265



1,962,265Other income/(expense):Other income (expense), net


284,320



261,827



72



72Interest expense










(22,500
)


(22,500
)Beneficial conversion feature expense


125,000



-







-Change in derivative liability






64,271







25,471Total other income/(expense)


409,320



326,098



(22,428
)


3,043Net income


1,584,608



1,501,386



1,939,837



1,965,308Other comprehensive loss:Foreign currency translation gain/(loss)


(140,287
)


(140,287
)


(167,228
)


(167,228
)Comprehensive income (loss)

$
1,444,322


$
1,361,099


$
1,772,609


$
1,798,080Net income (loss) per share:Basic

$
0.02


$
0.02


$
0.02


$
0.02Diluted

$
0.02


$
0.02


$
0.02


$
0.02Weighted average number of shares outstandingBasic


85,466,388



85,466,388



84,396,563



84,396,563Diluted


86,017,744



86,017,744



84,947,919



84,947,919




As of December 31 , 2009




As Reported


As Restated12/31/2009


12/31/2009BALANCE SHEET:Derivative liability




$
5,206,567Preferred stock

$
1,650



650Additional Paid-in Capital


10,119,540



7,735,406Retained earnings

$
14,772,550


$
11,950,117





17




ITEM 2 MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS




The following discussion of the results of our operations and financial condition should be read in conjunction with our financial statements and the related notes, which appear elsewhere in this quarterly report. The following discussion includes forward-looking statements.





Statements in this quarterly report include “forward-looking statements.” Forward-looking statements include, but are not limited to, statements that express our intentions, beliefs, expectations, strategies, predictions or any other statements relating to our future activities or other future events or conditions. These statements are based on current expectations, estimates and projections about our business based, in part, on assumptions made by management. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Therefore, actual outcomes and results may, and are likely to, differ materially from what is expressed or forecasted in the forward-looking statements due to numerous factors, including those described above and those risks discussed from time to time in this quarterly report, including the risks described under “Risk Factors,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our annual report on Form 10-K/A for the year ended December 31, 2009, which includes restated financial statements for the years ended December 31, 2009 and 2008. In addition, such statements could be affected by risks and uncertainties related to the effects of our restatement of our financial statements, weather and natural disasters, our ability to conduct business in the PRC, product demand, including the demand for fruit and vegetable products, our ability to develop and maintain good relations with local cooperative suppliers, our ability to raise any financing which we may require for our operations, including financing for our green produce hub, competition, government regulations and requirements, pricing and development difficulties, our ability to make acquisitions and successfully integrate those acquisitions with our business, as well as general industry and market conditions and growth rates, and general economic conditions. Any forward-looking statements speak only as of the date on which they are made, and we do not undertake any obligation to update any forward-looking statement to reflect events or circumstances after the date of this quarterly report.




Overview




We are engaged in the wholesale distribution, marketing and sales of premium fruits in China. Our main products include Fuji apples, emperor bananas and tangerine oranges. We purchase our products directly from farming cooperative groups to whom we provide varying degrees of farming, harvesting and marketing services. Almost all of our products are sold by us at the Guangdong Yun Cheng wholesale market and the Beijing Xin Fadi agricultural products wholesale market, two major markets for the sale of agricultural products in their respective areas, where we lease space to sell our produce. We sell to trading agents who sell our products to customers in and around the provinces in which the produce is grown.




We have recently introduced a line of vegetable products, which we process and distribute to end users. However, our revenue from vegetables has been nominal through June 30 , 2010.




Fruits, such as apples, bananas and oranges, as well as vegetables are considered staples in the Chinese diet, similar to rice and meat, and historically, demand for these products has not fluctuated with the ups and downs of the general economy. As a result, we have not yet seen a significant decline in our business from the recent economic downturn and the global credit crisis. However, if economic conditions further deteriorate, including business layoffs, downsizing, industry slowdowns and other similar factors that affect our distributors, customers, suppliers, farmers and creditors, we could see a reduction in the demand for our products which could have a material adverse effect on our business operations. Since we promote our products as premium foods, in troubled economic times, consumers may purchase cheaper fruits and vegetables rather than our products, which could affect both our revenue and our gross margin.




18




All fruits and vegetables are perishable, and are subject to spoilage if they are not delivered to market in a timely manner. Our ability to both purchase and sell produce is dependent upon a number of factors which are not under our control. Severe weather conditions and natural disasters, such as floods, droughts, frosts, earthquakes or pestilence, may affect our ability both to purchase products and to sell our products at the wholesale markets. Under these conditions, we may incur a higher cost of cold storage with no assurance that, even in the best conditions, spoilage cannot be avoided.




Since weather conditions are not uniform throughout China, our competitive position may be impaired if our competitors are able to deliver produce to market at a time when we are not able to make deliveries, either because we are unable to purchase the produce or because we are unable to bring the produce to market.




Agricultural products generally are subject to disease, blight and infestation by insects. Our revenue during 2009 was affected by a fruit insect disease which affected sales of our tangerine oranges. Any disease, blight or infestation that affects our produce could materially impair our ability to generate revenue from the affected fruit.




We only have long-term arrangements to purchase produce from five farming cooperatives. If we are not able to purchase our produce from these farmers, whether because of a shortage, because of government regulations or otherwise, we may be unable to purchase produce from other co-ops or farmers, and if we are able to purchase produce, our costs may be greater, which could impair our gross margins.




Substantially all of our produce is grown by farming cooperatives on land which we lease pursuant to 25-year lease and development agreements which we entered into during the period from 2005 to 2010. All of these leases were entered into with the farmers who held the land use rights from the government. The farming cooperatives consist of many farmers who held the land use rights. Pursuant to these agreements, as of June 30, 2010, we had paid a total of $24.4 million to the holders of the land use rights, who are not affiliated with us, and the farmers agreed to manage the land and plant the crops and we received a priority right to purchase the crops at fair market price. The farming cooperatives do not pay us rent for the land. We amortize our payments over the life of the leases. The amortization of our lease payments is included in cost of goods sold.




Commencing in the first quarter of 2010, we began to export food products, with our initial export sales being made to Australia. To date, revenue from exports has not constituted more than a nominal portion of our revenue.




We are in the process of constructing a new hub for the sale of green foods in the Guangdong wholesale market.  We believe that our hub will be the first hub in the PRC to provide wholesale and retail customers with the ability to purchase a wide variety of green foods in one location.  We intend to purchase green foods from members of the China Green Food Association, who sell more than 17,000 food items, and sell the foods in our green foods hub.  As of  September 30, 2010 , we had paid approximately $ 9 . 0 million in connection with the construction of this hub from cash generated by our operations and from funds which we raised in 2009 and early 2010.  We anticipate that we will be able to complete the construction of the hub and begin the operations of our new green foods product line in 2011.   We anticipate that the total investment to launch this business will be $ 18 million, which includes construction costs of approximately $ 12 million, with approximately $4 million auxiliary facilities, such as refrigerated cold-storage trucking capabilities and air conditioning, and $2 million for initial inventory of new green foods products.  On an ongoing basis, we believe that we will need to maintain inventory in the range of $4 million.




As part of our green foods distribution hub business, we may market our green foods directly to supermarkets and other retail stores. We anticipate that some of the retail markets will purchase our green food products at our distribution hub while others will require us to deliver the foods to them. In order to develop this business, we will need to expand our marketing effort and establish a delivery system for the retail food.




We will require significant additional funding for our green foods distribution hub business. We have no commitments for the funding and our failure to obtain funding will impair our ability to develop this business. If we are not able to operate the green foods hub, we may not be able to recover our costs, in which event we would include a charge equal to the amount of the unrecovered costs.




19




While we currently generate sufficient operating cash flows to support our operations, our capital requirements and the cash flow provided by future operating activities, if any, will vary greatly from quarter to quarter, depending on the volume of business during the period and payment terms with our customers. A significant portion of our revenue growth has resulted from increased land use rights which we lease under long-term leases that require us to pay the rental for the entire lease term at the inception of the lease. During 2009, we expended approximately $3.4 million to purchase additional leases and in the six months ended June 30, 2010, we expended an additional $3.3 million to purchase an additional lease. If we are to expand our business, we will continue to lease additional farm land on which our produce can be grown, which will require significant additional capital. To the extent that we devote resources to our proposed green foods hub, we may have to reduce the amount we spend for additional farmland, which could adversely affect the growth of our produce business.




We have commenced construction of our green foods distribution hub in the Guangdong wholesale market at an estimated cost of approximately $18 million, of which we paid approximately $9 million as of September 30, 2010 toward the construction of the hub. These funds were generated from our operations and the sale of our equity securities. We have no commitment from any party to provide funding for the balance of our estimated cost. Our failure to raise the necessary funds for this project could impair our ability to complete the project and we may lose the money we have invested to date.




We presently sell our produce in the wholesale markets, where our customers are wholesale distributors. In connection with, and as part of, our green foods distribution hub, we may seek to market to supermarkets and other retail outlets. To the extent that we develop this business, we would incur additional marketing, shipping and other expenses.




The current uncertainty arising out of domestic and global economic conditions, including the disruption in credit markets, may affect our ability to obtain either debt or equity financing which we may require in order to expand our business. Although our products are considered staples in Chinese consumers’ daily life, and, historically, demand for such staples has not fluctuated with the ups and downs of the general economy, if the current economic situation continues to deteriorate, we could see a more drastic reduction in the demand for our products. Since we are marketing our products as premium produce, consumers, in a time of economic difficulties, could purchase non-premium produce, which could have a material adverse effect on our business.




Seasonality




Our fresh fruit business is highly seasonal. Fuji apples are harvested mainly from late August until early November and are sold throughout the year. Tangerine oranges are harvested in late September through late November with the result that we have limited sales of tangerine oranges in the third quarter of the year. Emperor bananas are harvested throughout the year. They grow in an eight-month cycle, and are cultivated and harvested all year long. As harvested fruits cannot be stored at room temperature for a long time, they must be processed for sale as soon as they are harvested or stored at a cold temperature. As a result, the sales volume for our produce occurs during the harvesting season and for the months following the harvesting season.




We generally experience higher sales in the second half of the year. Sales in second half of 2009 accounted for approximately 63% of our revenue for 2009, and sales in the second half of 2008 accounted for approximately 59% of our revenue for 2008. If sales in the second half of the year are lower than expected, our operating results would be adversely affected, and it would have a disproportionately large impact on our annual operating results. Sales of tangerine oranges were nominal during the third quarter of 2009.




Because of the large number of green foods products which we plan to distribute through at our green foods distribution hub, there will be many different seasons for the different products we operate. We cannot predict at this time how the seasonality of the various products we propose to sell will affect our overall profitability.




Taxation




The PRC Enterprise Income Tax Law ( EIT ) and Implementing Rules impose a unified EIT rate of 25% on all domestic-invested enterprises and foreign-invested enterprises, or FIEs, unless they qualify under certain limited exceptions. The law gives the FIEs established before March 16, 2007, such as our subsidiaries Zhuhai Organic and Guangzhou Organic, a five-year grandfather period during which they can continue to enjoy their existing preferential tax treatment. During this five-year grandfather period, the old FIEs which enjoyed tax rates lower than 25% under the original EIT law shall gradually increase their EIT rate by 2% per year until the tax rate reaches 25%. In addition, the FIEs that are eligible for a full exemption and 50% reduction under the original law are allowed to retain their preferential treatment until these holidays expire.




20




Under the current income tax laws and the related implementing rules, FIEs engaging in agriculture businesses, such as Guangzhou Organic, are entitled to a two-year tax exemption from PRC enterprise income tax, subject to approval from local taxation authorities. Guangzhou Organic is tax exempt for 2008 to 2009 and is entitled to a 50% tax reduction for the three years thereafter. Due to the absence of significant business in 2008, Zhuhai Organic was entitled to tax exemption in 2007, and will be entitled to a one-year tax exemption after the business resumes. However, Zhuhai Organic did not constitute a significant source of revenue or income in 2009 or 2008. Currently, pursuant to income tax law, the income tax rate for foreign-capitalized enterprises is 25% and the value-added tax rate is 13%.




Accounting Treatment of Financing Instruments




In April 2008, Organic Region, which was then a privately-owned company, issued, for $500,000, its one-year 18% convertible notes in the principal amount of $500,000 and warrants to purchase common stock after Organic Region effects a going public transaction, which includes a reverse acquisition with a publicly traded shell corporation.   These warrants entitle the holders to purchase such number of shares of common stock to be determined by a formula based on a future financing after the reverse acquisition.  The warrants provide that the exercise price is equal to 115% of the lowest cash price paid in a financing, which is defined as the consummation of one or more equity financings by the Company with aggregate proceeds of at least $3,000,000.  As of December 31, 2009, the Company had raised $3,000,000 in financings.  The lowest price paid in these financings was $0.085 per share.  As a result, these warrants entitled the holders to purchase 5,115,090 shares of common stock at an exercise price of $0.09775 per share.  The notes also gave the holders the right to convert the notes into Organic Region’s equity securities if Organic Region did not complete a going public transaction by the maturity date.   Due to variability in the terms of the warrants’ exercise price for which accounting rules preclude them from being considered as indexed to our common stock, the warrants are recorded at fair value, with changes in value reported in the income statement each period. Although the debt was paid off in 2009, the warrants remain outstanding.





The 1,000,000 shares of series A preferred stock issued in August 2009 were issued together with were issued with warrants and a conversion feature and the 1,000,000 shares of series A preferred stock that was issued in December 2009 and January 2010 were issued with a conversion feature.  As a result , the proceeds received on the transaction were allocated to each applicable component. Any resulting warrant liabilities are recorded at fair value, with changes in value recorded in the income statement each period. Any proceeds allocated to beneficial conversion features on the preferred shares are recorded as a discount on such shares, with a credit to additional paid-in capital. The discounts are then charged immediately to retained earnings as deemed preferred stock dividends pursuant to the terms of the agreement which provide immediate conversion rights.





Restatement of Financial Statements





On August 23, 2010, we concluded, after a review of the pertinent facts, that the previously issued financial statements contained in our annual report on Form 10-K for the year ended December 31, 2009 and our quarterly reports on Form 10-Q for the quarters ended March 31, 2010, September 30, 2009, June 30, 2009 and March 31, 2009 should not be relied upon for reasons set forth in Note 12 of Notes to Consolidated Financial Statements. This quarterly report reflects restated financial statements for the three and six months ended June 30, 2009 because of our failure to account properly for the treatment of securities issued in financings during 2009 and 2008, restated financial statements for the three and six months ended June 30, 2010 due to an error in the calculation of weighted average shares outstanding, and restated financial statements for the six months ended June 30, 2010 because of our failure to reflect the deemed preferred stock dividend resulting from the issuance of shares of series A preferred stock in January 2010.




Results of Operations




The following table sets forth information relating to our products for the six months ended June 30, 2010 and the years ended December 31, 2009 and 2008 (dollars in thousands):




Period
Product

Sales


Percentage


Cost of Sales


Gross ProfitSix Months Ended
Fuji Apples

$
53,067



83.8
%

$
47,582


$
5,486June 30, 2010
Emperor Bananas


6,690



10.6
%


5,833



856Tangerine Oranges


3,502



5.5
%


3,090



412Vegetables


69



0.1
%


56



13Total

$
63,327






$
56,560


$
6,767Year Ended December 31, 2009
Fuji Apples

$
92,027



85.2
%

$
82,258


$
9,769Emperor Bananas


9,872



9.1
%


8,618



1,255Tangerine Oranges


5,575



5.2
%


4,937



638Vegetables


572



0.5
%


496



76Total

$
108,045






$
96,308


$
11,737Year Ended December 31, 2008
Fuji Apples

$
63,682



86.6
%

$
57,130



6,552Emperor Bananas


5,199



7.1
%


4,533



666Tangerine Oranges


4,289



5.8
%


3,767



522Vegetables


392



0.5
%


395



(3
)Total

$
73,563






$
65,825


$
7,737




* Percentages may not total 100% because of rounding.




21




Three Months Ended June 30, 2010 and June 30, 2009




The following table sets forth the key components of our results of operations for the three months ended June 30, 2010 and 2009, in thousands of U.S. dollars and as a percentage of sales:




Change from ThreeThree Months Ended June 30,


Months Ended June 30,2010


2009


2009 to June 30, 2010Amount


Percent


Amount


Percent


Amount


PercentSales

$
29,771



100.0
%

$
21,776



100.0
%

$
7,995



36.7
%Cost of sales


26,929



90.5
%


19,564



89.8
%


7,365



37.6
%Gross profit


2,843



9.6
%


2,212



10.2
%


631



28.5
%Operating expenses:Selling expenses


374



1.3
%


664



3.1
%


(290
)


(43.7
)%General and administrative expense


354



1.2
%


247



1.1
%


107



43.2
%Salary and wages


212



0.7
%


125



0.6
%


87



69.5
%Stock compensation


585



2.0
%










585




2Total operating expenses


1,525




%


1,036




%


489



47.1
%Income from operations


1,318



4.4
%


1,175



5.4
%


142



12.1
%Other income (expenses)Interest (expense) income, netChange in derivative liability


2,627



8.8
%


64



0.3
%


2,563



3,987.2
%Other, net


(2
)


(0.0
)%


262



1.2



(264
)


(100.9
)%Total other income (expense)


2,625



8.8
%


326



1.5
%


2,299



705.0
%Net income1


3,943



13.2
%


1,501



6.9
%


2,441



162.6
%Deemed preferred stock dividend



)



)%















2Net income available to common shareholders


3,943



13.2
%


1,501



6.9
%


2,441



162.6
%Comprehensive income:Net income1


3,943



13.2
%


1,501



6.9
%


2,441



162.6
%Foreign currency translation gain (loss)


189



0.6
%


(140
)


(0.6
)%


329



(234.7
)%Comprehensive income


4,132



13.9
%


1,361



6.3
%


2,770



203.5
%




1
Pursuant to the tax laws of the PRC, no income tax was due with respect to the three months ended June 30, 2010 or 2009.  If income tax were payable at the statutory rate, the net income available to common shareholders would have been $3.0 million for the three months ended June 30, 2010 and $1.1 million for the three months ended June 30, 2009.




2
The percentages were not included since they do not provide meaningful information.


Sales. Sales increased approximately $8 million, or 36.7%, to approximately $29.8 million in the three months ended June 30, 2010 from approximately $21.8 million in the three months ended June 30, 2009.




Sales of our Fuji apples increased by 31.4% in the three months ended June 30, 2010 as compared to the three months ended June 30, 2009. Of this increase, 56.9% is attributable to increased sales volume and 43.1% of this increase is attributable to increases in the average sales price because our apples were of a higher quality which resulted in an increased sales price. Sales of our emperor bananas increased by 92.4% in the three months ended June 30, 2010 as compared to the three months ended June 30, 2009 as a result of additional 833 acres new banana farmland leases, and higher demand of banana in 2010. Sales of our tangerine oranges increased by 92.4% in the three months ended June 30, 2010 as compared to the three months ended June 30, 2009. During the three months ended June 30, 2009 our sales had decreased significantly due to a fruit insect disease which affected sales of our tangerine oranges during the period. This disease did not affect our tangerine oranges during the three months ended June 30, 2010.




Our sales volume increased by an aggregate of 6,257 tons in the three months ended June 30, 2010 as compared to the three months ended June 30, 2009 because we leased an additional 3,222 acres of land from the farming cooperative that supplies us with Fuji apples, and 833 acres of land from the farming cooperative that supplies us with emperor bananas during the second half of 2009 and the first quarter of 2010.




22




Cost of Sales. Our cost of sales is primarily comprised of the cost of purchasing produce from the farming cooperatives plus amortization of land use rights, Our cost of sales increased approximately $7.4 million, or 37.6%, to approximately $26.9 million in the three months ended June 30, 2010 from approximately $19.6 million in the three months ended June 30, 2009, reflecting increased purchases of produce and higher levels of amortization reflecting additional land leases, in the second quarter of 2010.




Gross Profit and Gross Margin.Our gross profit increased 28.5%, from $2.2 million in the quarter ended June 30, 2009 to $2.8 million for the quarter ended June 30, 2010. Our gross margin decreased from 10.16% in the three months ended June 30, 2009 to 9.55% in the three months ended June 30, 2010 due to higher increased amortization of land use rights than the increased volume and prices for our fruits.




Selling Expenses. Our selling expenses are comprised of marketing expense, the salaries of our marketing staff, bonus, rent, trading expense, and depreciation. These expenses decreased to approximately $0.29 million, or 43.7%, from approximately $0.37 million in the three months ended June 30, 2010 from approximately $0.66 million in the three months ended June 30, 2009. As a percentage of sales, selling expenses decreased to 1.26% in the three months ended June 30, 2010 from 3.05% in the three months ended June 30, 2009 because in 2010 we paid sales bonuses for the second quarter only while in 2009 we paid sales bonuses for the first half of the year.




General and Administrative Expenses. Our general and administrative expenses are comprised of trip expense, office expense, research and development expense, market research expense, exhibition expense, audit expense, advisory expense and other expenses associated with our status as a public company. These expenses increased by approximately $0.11 million, or 43.3%, to approximately $0.35 million in the three months ended June 30, 2010 from approximately $0.25 million in the three months ended June 30, 2009. As a percentage of sales, administrative expenses increased to 1.19% in the three months ended June 30, 2010 as compared to 1.13% in the three months ended June 30, 2009 due to increased advisor fees and technical training fees.




Salary and Wages. Our salary and wages expenses increased by approximately $0.09 million, or 69.5%, to approximately $0.21 million in the three months ended June 30, 2010 from approximately $0.12 million in the three months ended June 30, 2009. As a percentage of sales, salary  and wages expenses increased to 0.71% in the three months ended June 30, 2010 as compared to 0.57% in the three months ended June 30, 2009 due to increased salary.




Stock Compensation. Stock compensation represents the shares of common stock issued to employees and consultants. We did not incur any stock compensation for the three months ended June 30, 2009. The $0.59 million stock compensation for the three months ended June 30, 2010 represents the fair value of the shares that were issued in the quarter and which vested during the quarter. The value of the unvested shares is reflected as deferred compensation on our balance sheet and it will be reflected in income as the shares vest. The remaining shares vest in equal installments in the quarters ending September 30, 2010, December 31, 2010 and March 31, 2011.




Interest Expense. The interest income was $377 in the three months ended June 30, 2010 and there was no interest income ( expense ) in the same period of 2009 .





Change in derivative liability. Change of derivative liability reflects a change in the value of derivative securities that were outstanding during the period.  Our only derivative security during these periods are warrants which include a provision for a change in the exercise price of the warrant if we sell common stock at a price which is less than the exercise price of the warrants.  We generated income from the change in derivative liability of $2,626,863 in the three months ended June 30, 2010 period compared to income of $64,271 for the comparable period of 2009.  The change in fair value, as computed using the Black-Scholes option pricing model, primarily reflected the change in our stock price, which was $0.35 per share at March 31, 2010 and $0.25 per share at June 30, 2010 .




Tax. Since our operating subsidiaries benefited from a tax exemption for agriculture products for 2009 and 2010, we did not incur any income tax liability in 2009 or 2010.




Net Income. As a result of the factors described above, our net income increased approximately $ 2.4 million, or 163% to approximately $ 3.9 million or $0.03 per share (basic and diluted) in the three months ended June 30, 2010 from $1 .5 million , or $0.02 per share (basic and diluted) for the in the same period of 2009.




23




Six Months Ended June 30, 2010 and June 30, 2009




The following table sets forth the key components of our results of operations for the six months ended June 30, 2010 and 2009, in thousands of U.S. dollars and as a percentage of sales:




Change from SixSix Months Ended June 30,


Months Ended June 30,2010


2009


2009 to June 30, 2010Amount


Percent


Amount


Percent


Amount


PercentSales

$
63,327



100.0
%

$
40,306



100.0
%

$
23,021



57.1
%Cost of sales


56,560



89.3
%


36,146



89.7
%


20,414



56.5
%Gross profit


6,767



10.7
%


4,160



10.3
%


2,607



62.7
%Operating expenses:Selling expenses


1,454



2.3
%


888



2.2
%


566



63.8
%General and administrative expense


797



1.3
%


1,055



2.6
%


(258
)


(24.4
)%Salary and wages


421



0.7
%


255



0.6
%


166



65.1
%Stock compensation


588



1.0
%


-



-



588




2Total operating expenses


3,260



5.1
%


2,198



5.5
%


1,062



48.3
%Income from operations


3,507



5.5
%


1,962



4.9
%


1,544



78.7
%Other income (expenses)Interest (expense) income, net


2



0.0
%


(23
)


(0.1
)%


24



(108.6
)%Change in derivative liability


354



0.6
%


25



0.1
%


329



1,291.3
%Other, net


(5
)


(0.0
)%










(5
)


(6,493.1
)%Total other income (expense)


352



0.6
%


3



0.0
%


349



11,458.4
%Net income1


3,858



6.1
%


1,965



4.9
%


1,893



96.3
%Deemed preferred stock dividend


(350
)


(0.6
)%


--



--



(350
)



2Net income available to common shareholders


3,508



5.5
%


1,965



4.9
%


1,543



78.5
%Comprehensive income:Net income1


3,858



6.1
%


1,965



4.9
%


1,893



96.3
%Foreign currency translation gain (loss)


185



0.3
%


(167)



0.4
%


353



(210.8
)%Comprehensive income


4,044



6.4
%


1,798



4.5
%


2,245



124.9
%


1
Pursuant to the tax laws of the PRC, no income tax was due with respect to the six months ended June 30, 2010 or 2009.  If income tax were payable at the statutory rate, the net income available to common shareholders would have been $2.5 million for the six months ended June 30, 2010 and $1.5 million for the six months ended June 30, 2009.




2
The percentages were not included since they do not provide meaningful information.
  Sales. Sales increased $ 23.0 million, or 57.1%, to $ 63.3 million in the six months ended June 30, 2010 ( the “ June 2010 period”) from $40.3 million in the six months ended June 30, 2009 (the “June 2009 period”). This increase was mainly due to our expanded plantation bases and supply sources during 2009, as we increased the land which we leased by approximately 8,700 acres during 2009.  The increase primarily reflects increased sales of our Fuji apples, which represented 83.8% of our sales in the June 2010 Period.  Fuji apple sales increased by 55.5% in the June 2010 period as compared to the June 2009 period, with 79% of this increase being attributable to increased sales volume and 21% to increases in the average sales price Sales of our emperor bananas increased by 105.5% in the June 2010 period as compared to the June 2009 period as a result of additional 833 acres new banana farmland leases, and higher demand for bananas in 2010. Sales of our tangerine oranges increased by 30.6% in the six months ended June 30, 2010 as compared to the six months ended June 30, 2009. During the June 2009 period, our sales had decreased significantly due to a fruit insect disease which affected sales of our tangerine oranges during the period. This disease did not affect our tangerine oranges during the June 2010 period.





In addition , our sales volume increased by 20,344 tons in the June 2010 period as compared to the June 2009 period because we leased an additional 3,222 acres of land from the farming cooperative that supplies us with Fuji apples, and 833 acres of land from the farming cooperative that supplies us with emperor bananas during the second half of 2009 and the first quarter of 2010.





Cost of Sales. Our cost of sales is primarily comprised of the costs of our produce from our farming cooperatives and, to a significantly lesser extent, the amortization of our long-term lease prepayments relating to the land used by the farming cooperatives. Our cost of sales increased approximately $20.41 million, or 56.5%, to approximately $56.6 million in the June 2010 period from approximately $36.1 million in the June 2009 period , reflecting increased purchases of produce and higher levels of amortization reflecting additional land leases, in the first half of 2010.





24




Gross Profit and Gross Margin. Our gross profit increased approximately $2.61 million to approximately $6.77 million in the six months ended June 30, 2010 from approximately $4.16 million in the same period last year. Gross margin was 10.69% and 10.32% for the six months ended June 30, 2010 and 2009, respectively. Our gross margin was relatively stable since it is largely determinate by the margin of the wholesale prices we buy from our suppliers and the reseller price we sell at distribution centers, both of which have remained relatively stable during the six months ended June 30, 2010 and 2009.





Selling Expenses. Our selling expenses are comprised of marketing expense, the salaries of our marketing staff, bonus, rent, trading expense and depreciation. Our selling expenses increased approximately $0.57 million, or 63.7%, to approximately $1.45 million in the six months ended June 30, 2010 from approximately $0.89 million in the same period last year. As a percentage of sales, selling expenses increased to 2.3% in the June 2010 period from 2.2% in the June 2009 period . Selling expenses increased due to increased salary expenses, promotion expenses and bonuses related to increased sales.





General and Administrative Expenses . Our administrative expenses decreased approximately $0.26 million, or 24.4%, to approximately $0.79 million in the June 2010 period from approximately $1.05 million in the June 2009 period. As a percentage of sales, administrative expenses decreased to 1.26% in the June 2010 period, as compared to 2.62% in the June 2009 period. During the first quarter of 2009, we incurred significant expenses relating to the reverse acquisition transaction in January 2009. The decrease in expenses relating to the reverse acquisition was partially offset by increased expenses resulting from our status as a public company.




Salary and Wages. Our expenses for salary and wages increased by approximately $0.17 million, or 65.1%, to approximately $0.42 million in the June 2010 period from approximately $0.25 million in the June 2009 period. As a percentage of sales, salary and wages expenses increased to 0.66% in the June 2010 period as compared to 0.63% in the June 2009 period due to increased salary.




Stock Compensation. Stock compensation represents the shares of common stock issued to employees and consultants. We did not incur any stock compensation in the June 2009 period . The $0.59 million stock compensation for the June 2010 period represents the fair value of those shares that were issued in the second quarter and which vested during that quarter. The value of the unvested shares is reflected as deferred compensation on our balance sheet and it will be reflected in income as the shares vest. The remaining shares vest in equal installments in the quarters ending September 30, 2010, December 31, 2010 and March 31, 2011, subject to accelerated vesting under certain condition, including, with respect to shares issued to our officers, the death of the officer.




Interest Income (Expense).Interest income was $1,943 in the June 2010 period, compared to interest expense of $22,500 in the June 2009 period.  The interest expense in 2009 reflected the interest expense relating to the $500,000 convertible debentures we issued in April 2008.In April 2008, we issued our 18% convertible notes in the principal amount of $500,000 and warrants to purchase a number of shares to be determined based on certain future financings. These notes were paid during 2009.




Change in Derivative Liability.Change of derivative liability reflects a change in the value of derivative securities that were outstanding during the period.  Our only derivative security during these periods are warrants which include a provision for a change in the exercise price of the warrant if we sell common stock at a price which is less than the exercise price of the warrants.  We generated income from the change in derivative liability of $354,382 in the June 2010 period compared to income of $25,471 in the June 2009 period.   The change in fair value, as computed using the Black-Scholes option pricing model, primarily reflected the absence of change in our stock price, which was $0.25 per share at both December 31, 2009 and June 30, 2010. Our stock price was $0.09 at December 31, 2008 and $0.08 at June 30, 2009.





Income before Income Taxes . Based on the factors described above, our income before income taxes increased approximately $ 1.89 million to approximately $3.86 million in the June 2010 period , from approximately $ 1.97 million in June 2009 period . Income before income taxes as a percentage of sales increased to 6.09% in the June 2010 period , from 4.88% in the June 2009 period.





Income Tax.  Because of the income tax holiday, we did not incur any income tax expense in the June 2010 or June 2009 periods.  If the tax holiday were not in effect and we paid taxes at the statutory rate, our income tax expense would have been $1.0 million for the June 2010 period and $0.5 million for the June 2009 period, and the net effect on earnings per share should have be $0.01 per share for basic and $0.00 per share for diluted for the June 2010 period and $0.00 per share (basic and diluted) for the June 2009 period.  Almost all of our income is generated by a variable interest entity owed by Mr. Xiong Luo, our chief executive officer and president, whose financial statements are consolidated with our pursuant to FIN 46R.




25




Deemed Preferred Stock Dividend.As a result of the terms of the series A preferred stock that we issued in the June 2010 period, we generated a $350,000 deemed preferred stock dividend, reflecting the amount by which the market price of the underlying common stock on the date of exercise and the purchase price of the common stock issuable upon conversion of the series A preferred stock on an “as if converted” basis.  We did not have any comparable item in the June 2009 quarter.





Net Income Available to Common Shareholders . As a result of the deemed preferred stock dividend , our net income applicable to common stockholders was $3.51 million, or $0.03 per share (basic) and $0.02 per share (diluted) for the June 2010 period , as compared with $ 1.97 million, or $0.02 per share (basic and diluted) for the same period of 2009.




Liquidity and Capital Resources




At June 30, 2010, we had a working capital deficiency of approximately $1.6 million, as compared with a working capital deficiency of approximately $3.7 million at December 31, 2009.  Our working capital reflects our investment in long-term lease prepayments of $3.3 million, advances relating to construction of our green foods hub of $9.0 million and equity financings which generated $4.2 million and cash flow used in operations of $2.3 million. The following table sets forth information as to the principal changes in the components of our working capital (dollars in thousands).





Category







December 31, 2009 to

June 30, 2010June 30,

2010


December 31,

2009

Change


Percent

ChangeCurrent Assets:Cash and cash equivalents

$
4,055


$
1,987



2,067



104.0%Accounts receivable, net


253



171



82



47.8%Due from related parties






1



(1
)


(100%
)Inventories


4



10



(6
)


(57.4%
)Advances – current portion


446



256



190


74.0%Other current assets


136



343



(208
)


(60.5%
)Total current assets


4,893



2,769



2,124



76.7%Current Liabilities:Accounts payable and accrued expenses


891



1,186



(295
)


(24.9%
)Advances from customers


15



49



(34
)


(69.8%
)Due to related parties


129



3



125



3,725.0%Shares to be issued as stock compensation


592



-



592



NMDerivative liability


4,852



5,207



(354
)


(6.8%
)Total current liabilities


6,479



6,446



33



0.5%Net working capital deficiency


(1,585
)


(3,677
)


2,092



(56.9%
)





In the June 2010 period, we used $2.3 million in operations as compared with the June 2009 period in which we used $0.4 million in operations.   Our cash flow from operations reflects $4.0 million in construction advances relation to our green foods hub.  For the June 2010 period, we made $3.3 million of long-term prepayments on our lease obligations, as compared with $3.1 in the June 2009 period.  These expenditures for long-term lease obligations which are payable at the commencement of the lease are reflected in cash flow from operating activities.  During the June 2010 period, we received net proceeds of $4.2 million from financing activities from the sale of our equity securities.  In the June 2009 period, we received $0.5 million as a loan from related parties.





Our primary source of funds, other than operations, was the sale of our equity securities, from which we received $3.4 million in 2009, an additional $1.1 million in the first quarter and $3.4 million in the second quarter of 2010.





In June and July 2009, we borrowed $1.43 million from a group of investors.  Effective August 3, 2009, we entered into two agreements with the note holders and with another investor who invested $200,000.  Pursuant to these agreements, the notes were cancelled and we issued common stock and warrants as follows:





Pursuant to one agreement, we issued 13,129,410 shares of common stock at a purchase price of $0.085 per share and two-year warrants to purchase 10,145,454 shares of common stock at an exercise price of $0.11 per share.





Pursuant to the second agreement, we issued 4,333,334 shares of common stock at a purchase price of $0.12 per share, granted the investors an option to purchase acquire up to 6,500,000 shares of common stock at a purchase price of $0.12 per share and issued two-year warrants to purchase 3,466,666 shares of common stock at an exercise price of $0.15 per share.  The option provided that, upon exercise of the option to purchase 6,500,000 shares of common stock, we would issue two-year warrants to purchase up to 5,200,000 shares of common stock at an exercise price of $0.15 per share. In January and July 2010, these options were exercised, and we issued 6,500,000 shares of common stock and warrants to purchase 5,300,000 shares of common stock at $0.15 per share.





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On August 7, 2009, we entered into a series A convertible preferred stock and warrant purchase agreement with three accredited investors, who are the selling shareholders, to whom we sold, for $1,000,000, an aggregate of 1,000,000 shares of the series A convertible preferred stock and five-year warrants to purchase 10,000,000 shares of common stock at $0.14 per share and 10,000,000 shares of common stock at $0.25 per share. The investors had the option to acquire an additional 1,000,000 shares of preferred stock at $1.00 per share, and, in December 2009 and January 2010, they exercised this option and we issued 1,000,000 shares of series A preferred stock for $1,000,000. We paid an aggregate of $50,000 of broker fees in connection with this transaction and an additional $50,000 upon the exercise of the option.  We also reimbursed the investors for $45,000 of due diligence expenses.





In February 2010, we sold to two of the investors in the August 7, 2009 financing and their affiliates, 4,167,000 shares of common stock for $0.12 per share, for a total of $500,000.





In May 2010, we raised $3.4 million from the sale of 17,000,000 shares of common stock at $0.20 per share.





In September 2010, we sold 5,000,000 shares of common stock for $0.20 per share, for total gross proceeds of $1,000,000.





We believe that our cash flow from operations will provide us with sufficient funds to enable us to continue our basic operations, including the purchase of additional land use rights for growing our produce. In the past, we have leased farmland for periods of 25 years on terms which required us to make all of the lease payments at the inception of the lease, which has required us to make significant cash outlays in the past. These payments were approximately $3.3 million in the June 2010 period, $3.4 million in the 2009 and $7.2 million for 2008 and the funding for these leases was generated from our operations.





As of September 30, 2010, we had advanced approximately $9.0 million in the construction of our proposed green foods distribution hub.  Upon completion of the construction, the construction cost advances will be reflected as leasehold improvements and amortized over the 18 year term of the lease.  We estimate our total initial costs of this operation to be approximately $18 million, which includes construction costs of approximately $12 million, with approximately $4 million for auxiliary facilities, such as a cold storage facility as part of the distribution hub and refrigerated trucking capabilities, and $2 million for initial inventory of new green foods products.  On an ongoing basis, we believe that we will need to maintain inventory in the range of $4 million.





We will need to raise a substantial amount of capital from equity or debt markets, or to borrow funds from local banks, in order to complete the construction of our hub, launch and operate our new green foods business and maintain inventory .  However, there is no assurance that, if required, we will be able to raise additional capital or reduce discretionary spending to provide the required capital.  Currently, the capital markets for small capitalization companies are difficult and banking institutions have become stringent in their lending requirements.   Accordingly, we cannot be sure of the availability or terms of any third party financing, and any financing that may be available may be on terms which are not favorable to us and our shareholders and may result in significant dilution to our shareholders.  In addition, if our outstanding warrants are not exercised, the presence of such a large number of warrants combined by the lack of an active trading market in our stock may impair our ability to raise capital in the equity markets.  Although we are seeking equity and debt financings to provide us with the funds we require to construct and operate our green foods distribution hub, as of the date of this prospectus, we do not have any formal or informal agreement or understanding with respect to any transaction which would provide us with the necessary cash.  The failure to obtain funding when required could significantly impair our ability to develop this business.





To the extent that we can generate funds from the sale of our equity and debt securities, our first priority is the completion and operation of the green foods distribution hubs.  To the extent that we develop operations directed to sales to retail operations, these operations will be included as a phase of the green foods distribution hub.  We do not currently plan to develop independent operations directed to the retail market.  To the extent that we are not able to generate funds from the sale of debt or equity securities, we will limit the expansion of our fruit business to land which we can purchase from our cash flow from operations.





Critical Accounting Policies and Estimates




The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires our management to make assumptions, estimates and judgments that affect the amounts reported, including the notes thereto, and related disclosures of commitments and contingencies, if any. We have identified certain accounting policies that are significant to the preparation of our financial statements. These accounting policies are important for an understanding of our financial condition and results of operation. Critical accounting policies are those that are most important to the portrayal of our financial conditions and results of operations and require management’s difficult, subjective, or complex judgment, often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequent periods. Certain accounting estimates are particularly sensitive because of their significance to financial statements and because of the possibility that future events affecting the estimate may differ significantly from management’s current judgments.




27




We believe the following critical accounting policies involve the most significant estimates and judgments used in the preparation of our financial statements.




Accounts Receivable– Our policy is to maintain reserves for potential credit losses on accounts receivable. Management reviews the composition of accounts receivable and analyzes historical bad debts, customer concentrations, customer creditworthiness, current economic trends and changes in customer payment patterns to evaluate the adequacy of these reserves.




Inventories– Inventories are valued at the lower of cost (determined on a weighted average basis) or market value. Management compares the cost of inventories with market value and an allowance is provided to reduce the value of inventories to their net market value.




Impairment– We apply the provisions of ASC 360-10 (Originally issued as FAS No. 144).. ASC 360-10 requires that long-lived assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable through the estimated undiscounted cash flows expected to result from the use and eventual disposition of the assets. Whenever any such impairment exists, an impairment loss will be recognized for the amount by which the carrying value exceeds the fair value. We test long-lived assets, including property, plant and equipment and intangible assets subject to periodic amortization, for recoverability at least annually or more frequently upon the occurrence of an event or when circumstances indicate that the net carrying amount is greater than its fair value. Assets are grouped and evaluated at the lowest level for their identifiable cash flows that are largely independent of the cash flows of other groups of assets. We consider historical performance and future estimated results in our evaluation of potential impairment, and then we compare the carrying amount of the asset to the future estimated cash flows expected to result from the use of the asset. If the carrying amount of the asset exceeds estimated expected undiscounted future cash flows, we measure the amount of impairment by comparing the carrying amount of the asset to its fair value. The estimation of fair value is generally measured by discounting expected future cash flows as the rate we utilize to evaluate potential investments. We estimate fair value based on the information available in making whatever estimates, judgments and projections are considered necessary.




Revenue Recognition– Our revenue recognition policies are in compliance with ASC 605 (Originally issued as Staff Accounting Bulletin (SAB) 104). 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 exist and collectability is reasonably assured. Payments received before all of the relevant criteria for revenue recognition are satisfied are recorded as unearned revenue. Revenues from the sale of products are recognized at the point of sale of our products. Discounts provided to customers by us at the time of sale are recognized as a reduction in sales as the products are sold. Discounts provided by vendors are not recognized as a reduction in sales provided the coupons are redeemable at any retailer that accepts coupons. Sales taxes are not recorded as a component of sales. The “Cost of Goods Sold” line item of the Consolidated Statements of Income includes product costs, net of discounts and allowances. Discounts provided to us by vendors at the time of purchase are recognized as a reduction in inventory cost as the products are delivered. All other costs, including warehousing costs, transportation costs; salaries, rent expense and depreciation expense, are shown separately in selling expenses or general and administrative expense in our consolidated statements of income.




Fair Value Measurements And Financial Instruments




We determine the fair value of financial instruments in accordance with standards pertaining to fair value measurements. Such standards define fair value and establish a framework for measuring fair value in GAAP. Fair value involves significant estimates impacts the financials in many areas such as derivatives, stock comp and deferred compensation. These estimates can have significant impact on our financial statements based on the assumptions we use. See Note 7 to the consolidated financial statements for further information regarding our derivative and stock option positions.




Foreign Currency Translation– We use United States dollars for financial reporting purposes, and it is our functional currency. Our subsidiaries maintain their books and records in their functional currency -RMB, which is currency of China, where all of our operations are conducted. Such financial statements were translated into United States dollars in accordance with ASC 830 (Originally issued as Statement of Financial Accounts Standards (“SFAS”) No. 52, “Foreign Currency Translation”). According to the Statement, all assets and liabilities are translated at the current exchange rate on the balance sheet date, shareholder’s 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 ASC 220 (Originally issued as SFAS No. 130, “Reporting Comprehensive Income”) as a component of shareholders’ equity.




28




Recent Accounting Pronouncements




In June 2009, the FASB issued ASC 105 (previously SFAS No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles ("GAAP") - a replacement of FASB Statement No. 162), which has become the source of authoritative accounting principles generally accepted in the United States recognized by the FASB to be applied to nongovernmental entities.




In June 2009, the FASB issued ASC 860 (previously SFAS No. 166, “Accounting for Transfers of Financial Assets”) , which requires additional information regarding transfers of financial assets, including securitization transactions, and where companies have continuing exposure to the risks related to transferred financial assets. SFAS 166 eliminates the concept of a “qualifying special-purpose entity,” changes the requirements for derecognizing financial assets, and requires additional disclosures. SFAS 166 is effective for fiscal years beginning after November 15, 2009. The Company does not believe this pronouncement will impact its financial statements.




In June 2009, the FASB issued ASC 810 (previously SFAS No. 167) for determining whether to consolidate a variable interest entity. These amended standards eliminate a mandatory quantitative approach to determine whether a variable interest gives the entity a controlling financial interest in a variable interest entity in favor of a qualitatively focused analysis, and require an ongoing reassessment of whether an entity is the primary beneficiary. These amended standards were effective for us beginning in the first quarter of fiscal year 2010, and have had no impact on our consolidated financial statements.




In August 2009, the FASB issued Accounting Standards Update (“ASU”) 2009-05, which amends ASC Topic 820, Measuring Liabilities at Fair Value, which provides additional guidance on the measurement of liabilities at fair value. These amended standards clarify that in circumstances in which a quoted price in an active market for the identical liability is not available, we are required to use the quoted price of the identical liability when traded as an asset, quoted prices for similar liabilities, or quoted prices for similar liabilities when traded as assets. If these quoted prices are not available, we are required to use another valuation technique, such as an income approach or a market approach. These amended standards were effective for us beginning in the fourth quarter of fiscal year 2009 and are not expected to have a significant impact on our consolidated financial statements.




In October 2009, the FASB issued Accounting Standards Update ("ASU") No. 2009-13, "Revenue Recognition (Topic 605): Multiple-Deliverable Revenue Arrangements (a consensus of the FASB Emerging Issues Task Force)" which amends ASC 605-25, "Revenue Recognition: Multiple-Element Arrangements." ASU No. 2009-13 addresses how to determine whether an arrangement involving multiple deliverables contains more than one unit of accounting and how to allocate consideration to each unit of accounting in the arrangement. This ASU replaces all references to fair value as the measurement criteria with the term selling price and establishes a hierarchy for determining the selling price of a deliverable. ASU No. 2009-13 also eliminates the use of the residual value method for determining the allocation of arrangement consideration. Additionally, ASU No. 2009-13 requires expanded disclosures. This ASU will become effective for us for revenue arrangements entered into or materially modified on or after April 1, 2011. Earlier application is permitted with required transition disclosures based on the period of adoption. The Company is currently evaluating the application date and the impact of this standard on its financial statements.




In February 2010, FASB issued ASU No. 2010-9 –"Subsequent events (Topic 855)" Amendments to Certain Recognition and Disclosure Requirements. This update addresses certain implementation issues related to an entity’s requirement to perform and disclose subsequent-events procedures, removes the requirement that public companies disclose the date of their financial statements in both issued and revised financial statements. According to the FASB, the revised statements include those that have been changed to correct an error or conform to a retrospective application of U.S. GAAP. The amendments were effective upon issuance of the update, except for the use of the issued date for conduit debt obligors. That amendment is effective for interim or annual periods ending after June 15, 2010. The Company does not expect the adoption of this ASU to have a material impact on the Company’s consolidated financial statements.




Off Balance Sheet Arrangements




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




29




ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.




Not Applicable.




ITEM 4.
CONTROLS AND PROCEDURES.




Evaluation of Disclosure Controls and Procedures.




The Company maintains disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act) that are designed to ensure that information required to be disclosed in Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including to our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.




As required by Rule 13a-15 and Rule 15d-15 under the Exchange Act, our management, including Mr. Xiong Luo, our chief executive officer and Ms. Huasong Sheena Shen, our chief financial officer, evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2010. For the reasons set forth in the following paragraphs, our management, under the direction of Mr. Luo and Ms. Shen concluded that as of June 30, 2010, our disclosure controls and procedures were not effective.




At December 31, 2008, we were a privately-owned company, and, accordingly, we did not make a determination as to the effectiveness of our internal controls over financial reporting.  For the reasons set forth below, our internal controls over financial reporting were not effective at December 31, 2009 or June 30, 2010.





On August 23, 2010, we concluded, after a review of the pertinent facts, that the previously issued financial statements contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2009, and Quarterly Reports on Form 10-Q for the quarters ended March 31, 2010, September 30, June 30 and March 31, 2009, respectively, should not be relied upon due to the following:





The Company improperly allocated, for financial statement purposes, the proceeds received in connection with the April 2008 debt financing transaction and the August and December 2009 and January 2010 preferred stock financing transactions (collectively, “the financings”). The restated financial statements include the effects of properly allocating the financing proceeds between (1) the debt or preferred stock, as applicable, (2) any derivative liabilities associated with warrants for the purchase of common stock, and (3) any beneficial conversion features (“BCF”), as a component of additional paid-in capital, which allow the debt and preferred shareholders to convert their investment into the Company’s common stock on favorable terms.





·
Due to the improper allocation of proceeds on the April 2008 debt financing which resulted in an incorrect basis for the debt, the Company improperly reported the loss on debt extinguishment upon its settlement in August 2009. The debt settlement is appropriately reported in the restated annual financial statements for 2009. The settlement occurred in August 2009, and therefore does not affect the income statements presented. However, the accompanying balance sheets appropriately reflect the impact of settlement.





·
Certain warrants containing variable exercise terms associated with the financings were reported as a component of paid-in capital instead of properly reflecting them as a derivative liability at fair value, with changes in fair value reported in the income statement each period. The restated financial statements include the effects of reporting the derivative liabilities and their associated changes in value correctly.





·
A BCF was inappropriately recorded as a debt discount on the April 2008 financing in addition to being amortized over the subsequent 12 months with a charge to expense. Furthermore, separate BCFs associated with the December 2009 and January 2010 preferred stock financings were erroneously omitted due to a misallocation of proceeds for financial statement purposes. The restated financial statements include the effects of allocating financing proceeds to the applicable BCFs by recording a preferred stock discount with a credit to additional paid-in capital. The discounts were then charged immediately to retained earnings as deemed preferred stock dividends pursuant to the terms of the agreement which provide immediate conversion rights.





·
Earnings per share has been restated to include the effects of the restated financial statements




We have restated our income statement and statements of cash flows for the quarter ended June 30, 2009 in this Form 10-Q. We also restated our financial statements for the years ended December 31, 2009 and 2008 and the quarters ended March 31, 2010, September 30, June 30 and March 31, 2009, and September 30 and June 30, 2008, respectively.




We intends to take such steps as are necessary, including the engagement of accounting personnel with experience in US GAAP, in order that our financial controls and disclosure controls are effective.




Changes in Internal Control Over Financial Reporting.




During the quarter ended June 30, 2010, other than as reflected in this Item 4and our restated financial statements , there were no changes in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.




30




PART II






OTHER INFORMATION




ITEM 6.
EXHIBITS.31.1
Certification of Principal Executive Officer filed pursuant to Section 302 of the Sarbanes- Oxley Act of 2002.31.2
Certification of Principal Financial Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
Certification of Principal Executive Officer and Principal Financial Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.





31






SIGNATURES






Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.




SINO GREEN LAND CORPORATIONDate: November 24 , 2010
By: /s/ Xiong LuoXiong Luo, Chief Executive Officer(Principal Executive Officer)Date: November 24 , 2010
By: /s/ Huasong Sheena ShenHuasong Sheena Shen , Chief Financial Officer(Principal Financial Officer and Principal Accounting

Officer)