**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


Washington,
      D.C. 20549


**FORM
      10−Q**


(Mark
      One)


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


For
      the
      quarterly period ended: September 30, 2008





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


For
      the
      transition period from ____________ to _____________


Commission
      File Number:   333-83125





**YUHE
      INTERNATIONAL, INC.**


(Exact
      name of Registrant as Specified in its Charter)





Nevada
            
            33-0215298(State
                or other jurisdiction of
            
            (I.R.S.
                Employer Identification. No.)incorporation
                or organization)





**301
      Hailong Street**


**Hanting
      District, Weifang, Shandong Province**


**The
      People’s Republic of China**


(Address
      of principal executive offices)




**86
      536 736 3688**


(Registrant’s Telephone Number)





Indicate
      by check mark whether the registrant (1) has filed all reports required to
      be
      filed by Section 13 or 15(d) of the Exchange Act during the past 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  ̈




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
      definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of
      the Exchange Act. (Check one)


Large
      accelerated filer  ̈ Accelerated filer  ̈ Non-accelerated filer  ̈


Smaller
      reporting company x





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


Yes  ̈ No  x





The
      number of shares outstanding of each of the issuer’s classes of common equity,
      as of September 30, 2008 is as follows:


Class
                of Securities
            
            Shares
                OutstandingCommon
                Stock, $0.001 par value
            
            15,543,330
                (on a post split basis)









**TABLE
      OF CONTENTS**





**Page****PART
                I FINANCIAL INFORMATION**Item
                1.
            Condensed
                Financial Statements
            
            3Item
                2.
            Management’s
                Discussion and Analysis of Financial Condition and Results of
                Operations
            
            4Item
                3.
            Quantitative
                and Qualitative Disclosures About Market Risk
            
            14Item
                4.
            Controls
                and Procedures
            
            15**PART
                II OTHER INFORMATION**Item
                1.
            Legal
                Proceedings
            
            16Item
                1A.
            Risk
                Factors
            
            16Item
                2.
            Unregistered
                Sales of Equity Securities and Use of Proceeds.
            
            16Item
                3.
            Defaults
                Upon Senior Securities
            
            17Item
                4.
            Submission
                of Matters to a Vote of Securities Holders
            
            17Item
                5.
            Other
                Information
            
            17Item
                6.
            Index
                to Exhibits
            
            17Signatures
            
            
            18Certifications




2





**PART
      I**


**FINANCIAL
      INFORMATION**




**ITEM
      1. CONDENSED FINANCIAL STATEMENTS.**






**Index
          to Financial Statements**
  **Financial
                    Statements**
                
                
                **Page**Condensed
                    Consolidated Financial Statements for the Period from January
                    1, 2008 to
                    January 31, 2008 for Weifang Yuhe Poultry Co., Ltd.
                
                
                F-1
                    - F-23Condensed
                    Consolidated Financial Statements for the Three and Nine Months
                    Ended
                    September 30, 2008 and 2007 for Yuhe International, Inc.
                
                
                F-24
                    - F-55Financial
                    Statements for the Nine Months Ended September 30, 2007 and 2006
                    for
                    Weifang Yuhe Poultry Co., Ltd.
                
                
                F-56
                    - F-79Unaudited
                    Pro Forma Consolidated Financial Statements for Yuhe International,
                    Inc.
                
                
                F-80
                    - F-83


3




**WEIFANG
        YUHE POULTRY CO., LTD**
 **CONDENSED
        CONSOLIDATED FINANCIAL STATEMENTS**
 
 **FOR
        THE PERIOD FROM JANUARY 1, 2008 TO JANUARY 31, 2008**
 **(Stated
        in US dollars)**




F-1




**WEIFANG
      YUHE POULTRY CO., LTD**


**CONDENSED
        CONSOLIDATED FINANCIAL STATEMENTS**
  **FOR
        THE PERIOD FROM JANUARY 1, 2008 TO JANUARY 31, 2008**
 **(Stated
        in US dollars)**


PageCondensed
                Consolidated Balance Sheet - unaudited
            
            F-3
                to F-4Condensed
                Consolidated Statements of Operations and Comprehensive Income (Loss)
                -
                unaudited
            
            F-5Condensed
                Consolidated Statements of Changes in Stockholders’ Equity -
                unaudited
            
            F-6Condensed
                Consolidated Statements of Cash Flows - unaudited
            
            F-7
                to F-8Notes
                to Condensed Consolidated Financial Statements - unaudited
            
            F-9
                to F-23




F-2




**WEIFANG
      YUHE POULTRY CO., LTD**





**CONDENSED
      CONSOLIDATED BALANCE SHEET - unaudited**


**AS
      AT JANUARY 31, 2008**


**(Stated
      in US Dollars)**





ASSETSCurrent
                assetsCash
                and cash equivalents
            
            $
            1,051,106Accounts
                receivable
            
            
            1,475Inventories
            
            
            4,624,425Advances
                to suppliers
            
            
            305,013Total
                current assets
            
            $
            5,982,019Deposits
                paid
            
            
            1,084,265Other
                receivables, net
            
            
            3,001,699Unlisted
                investments
            
            
            279,738Plant
                and equipment, net
            
            
            15,323,245Intangible
                assets, net
            
            
            2,832,869Due
                from related companies
            
            
            3,775,469Due
                from directors
            
            
            233,037Deferred
                expenses
            
            
            602,918Total
                assets
            
            $
            33,115,259LIABILITIES
                AND STOCKHOLDERS’ EQUITYCurrent
                liabilitiesAccounts
                payable
            
            $
            4,800,664Current
                portion of long-term loans
            
            
            4,383,951Loans
                payable
            
            
            1,770,862Payroll
                and payroll related liabilities
            
            
            545,565Accrued
                expenses
            
            
            473,020Advances
                from customers
            
            
            209,694Tax
                payables
            
            
            125,645Due
                to related companies
            
            
            320,913Total
                current liabilities
            
            $
            12,630,315




See
      accompanying notes to condensed consolidated financial statements




F-3





**WEIFANG
        YUHE POULTRY CO., LTD**
 
 **CONDENSED
        CONSOLIDATED BALANCE SHEET –
unaudited (Continued)**
 **AS
        AT JANUARY 31, 2008**
 **(Stated
        in US Dollars)**
 
 Long-term
                  liabilitiesLong-term
                  loans
              
              $
              6,165,365Total
                  liabilities
              
              $
              18,795,680Commitments
                  and contingencies
              
              $
              -Minority
                  interests
              
              $
              278,766STOCKHOLDERS’
                  EQUITYRegistered
                  capital
              
              $
              3,019,003Additional
                  paid-in capital
              
              
              7,009,523Retained
                  earnings
              
              
              3,058,878Accumulated
                  other comprehensive income
              
              
              953,409$
              14,040,813Total
                  liabilities and stockholders’ equity
              
              $
              33,115,259
 
 See
        accompanying notes to condensed consolidated financial statements
  F-4
  **WEIFANG
        YUHE POULTRY CO., LTD**
 
 **CONDENSED
        CONSOLIDATED STATEMENTS OF OPERATIONS AND**
 **COMPREHENSIVE
        INCOME (LOSS) – unaudited**
 **FOR
        THE PERIOD FROM JANUARY 1, 2008 TO JANUARY 31, 2008**
 **(Stated
        in US Dollars)**
 
 Net
                  revenues
              
              $
              1,491,329Cost
                  of revenues
              
              
              (1,337,438
              )Gross
                  profit
              
              $
              153,891Operating
                  expenses:Selling
                  expenses
              
              
              (28,997
              )General
                  and administrative expenses
              
              
              (122,695
              )Bad
                  debts recovery
              
              
              219,893Total
                  operating income
              
              
              68,201Income
                  from operations
              
              $
              222,092Other
                  income
              
              
              5,604Interest
                  income
              
              
              5Interest
                  expenses
              
              
              (86,167
              )Income
                  before income taxes
              
              $
              (80,558
              )Income
                  taxes
              
              
              -Net
                  income before minority interests
              
              $
              141,534Minority
                  interests (earnings)
              
              
              (73,398
              )Net
                  income
              
              $
              68,136Other
                  comprehensive income
              
              
              -Foreign
                  currency translation adjustment
              
              
              201,390Comprehensive
                  income
              
              $
              269,526
  See
        accompanying notes to condensed consolidated financial statements
  F-5


**WEIFANG
        YUHE POULTRY CO., LTD**
 
 **CONDENSED
        CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY –
unaudited**
 **FOR
        THE PERIOD FROM JANUARY 1, 2008 TO JANUARY 31, 2008**
 **(Stated
        in US Dollars)**
 
 AccumulatedAdditional
              
              
              
              OtherRegistered
              
              paid-in
              
              Retained
              
              Comprehensivecapital
              
              capital
              
              earnings
              
              Income
              
              TotalBalance,
                  January 1, 2008
              
              $
              482,713
              
              $
              7,009,523
              
              $
              2,990,742
              
              $
              752,019
              
              $
              11,243,997Net
                  income
              
              
              -
              
              
              -
              
              
              68,136
              
              
              -
              
              
              68,136Injection
                  of additional capital from Bright Stand (Note
                  12)
              
              
              2,536,290
              
              
              -
              
              
              -
              
              
              -
              
              
              2,536,290Foreign
                  currency translation adjustment
              
              
              -
              
              
              -
              
              
              -
              
              
              201,390
              
              
              201,390Balance,
                  January 31, 2008
              
              $
              3,019,003
              
              $
              7,009,523
              
              $
              3,058,878
              
              $
              953,409
              
              $
              14,040,813
 
 See
        accompanying notes to condensed consolidated financial statements
  F-6
 
 **WEIFANG
        YUHE POULTRY CO., LTD**
 
 **CONDENSED
        CONSOLIDATED STATEMENTS OF CASH FLOWS**
 **FOR
        THE PERIOD FROM JANUARY 1, 2008 TO JANUARY 31, 2008 –
unaudited**
 **(Stated
        in US Dollars)**
 
 Cash
                  flows from operating activitiesNet
                  income
              
              $
              68,136Adjustments
                  to reconcile net income to net cash used in operating
                  activitiesDepreciation
              
              
              121,213Amortization
              
              
              5,200Minority
                  interests
              
              
              73,398Change
                  in assets and liabilitiesAdvances
                  to suppliers
              
              
              212,910Prepaid
                  expenses
              
              
              64,556Deposits
                  paid
              
              
              111,147Inventories
              
              
              (607,144
              )Deferred
                  expenses
              
              
              (41,232
              )Accounts
                  payable
              
              
              (768,683
              )Payroll
                  and payroll related liabilities
              
              
              (304,784
              )Accrued
                  expenses
              
              
              104,606Advances
                  from customers
              
              
              15,465Other
                  tax payables
              
              
              (9,266
              )Net
                  cash used in operating activities
              
              $
              (954,478
              )Cash
                  flows from investing activitiesDeposits
                  paid and acquisition of property, plant & equipment
              
              $
              (206,700
              )Decrease
                  in other receivables
              
              
              (238,310
              )Advances
                  from related parties receivables
              
              
              2,321,943Net
                  cash provided by investing activities
              
              $
              1,876,933
  F-7
 
 **WEIFANG
        YUHE POULTRY CO., LTD**
 
 **CONDENSED
        CONSOLIDATED STATEMENTS OF CASH FLOWS – unaudited
        (Continued)**
 **FOR
        THE PERIOD FROM JANUARY 1, 2008 TO JANUARY 31, 2008**
 **(Stated
        in US Dollars)**
 
 Cash
                  flows from financing activitiesRepayments
                  of loan payables
              
              $
              (1,555,807
              )Proceeds
                  from capital contributions
              
              
              2,536,290Repayment
                  to related parties
              
              
              (900,140
              )Net
                  cash provided by financing activities
              
              $
              80,343Effect
                  of foreign currency translation on cash and cash
                  equivalents
              
              
              853Increase
                  in cash and cash equivalents
              
              
              1,003,651Cash
                  and cash equivalents-beginning of period
              
              
              47,455Cash
                  and cash equivalents-end of period
              
              $
              1,051,106Supplementary
                  cash flow information:Interest
                  paid in cash
              
              $
              180
 
 See
        accompanying notes to condensed consolidated financial statements
  F-8
  **WEIFANG
        YUHE POULTRY CO., LTD**
 **NOTES
        TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **(Stated
        in US Dollars)**
 
 **1.**
              **Organization
                  and principal activities**
 
 Weifang
        Yuhe Poultry Co., Ltd, “the Company”, was established in Weifang, Shandong of
        the People’s Republic of China, the PRC, as a limited company on March 8, 1996.
        The Company currently operates through itself and one subsidiary located
        in
        Mainland China: Weifang Taihong Feed Co., Ltd., “Taihong”.
 
 Taihong
        was established in Weifang, Shandong of the People’s Republic of China, the PRC,
        as a limited company on May 26, 2003. Pursuant to a group reorganization
        on
        September 14, 2007, the Company became the holding company of
        Taihong.
 
 The
        Company and its subsidiary (hereinafter, collectively referred to as “the
        Group”) are engaged in the business of chick and feed production.
 
 **2.**
              **Summary
                  of significant accounting
                  policies**
 
 (a)
              Method
                  of Accounting
 
 The
        accompanying consolidated financial statements have been prepared in conformity
        with accounting principles generally accepted in the United States of America.
        The Company's functional currency is the Chinese Renminbi; however the
        accompanying consolidated financial statements have been translated and
        presented in United States Dollars ($).
 
 (b)
              Principles
                  of consolidation
 
 The
        consolidated financial statements are presented in US Dollars and include
        the
        accounts of the Company, Taihong, a subsidiary which the company has a 56.25%
        ownership. All significant inter-company balances and transactions are
        eliminated in consolidation.
 
 The
        Company acquired its subsidiary on September 14, 2007 through a reorganization
        between entities under common control. Accordingly, the transaction was
        accounted for similar to a pooling of interests in accordance with SFAS 141
        “Business Combination” Appendix D and is presented as if it had occurred at the
        beginning of the first period presented. The following table depicts the
        identity of the subsidiary:
 
 ***Name of Company***
                
                ***Place & date of***
                  ***Incorporation***
                
                ***Attributable Equity***
                  ***Interest %***
                
                ***Registered***
                  ***Capital***Weifang
                    Taihong Feed Co., Ltd.
                
                PRC/
                  May
                    26 2003
                
                
                56.25
                
                $
                965,379
                
                
                (RMB8,000,000
                )
 
 (c)
              Use
                  of estimates
 
 The
        preparation of the financial statements in conformity with generally accepted
        accounting principles 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 financial statements and the reported amounts 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 estimates.
  F-9
 
 **WEIFANG
        YUHE POULTRY CO., LTD**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **(Stated
        in US Dollars)**
 
 **2.**
              **Summary
                  of significant accounting policies
                  (Continued)**
 
 (d)
              Economic
                  and political risks
 
 The
        Company’s operations are conducted in the PRC. Accordingly, the Company’s
        business, financial condition and results of operations may be influenced
        by the
        political, economic and legal environment in the PRC, and by the general
        state
        of the PRC economy.
  The
        Company’s operations in the PRC are subject to special considerations and
        significant risks not typically associated with companies in North America
        and
        Western Europe. These include risks associated with, among others, the
        political, economic and legal environment and foreign currency exchange.
        The
        Company’s results may be adversely affected by changes in the political and
        social conditions in the PRC, and by changes in governmental policies with
        respect to laws and regulations, anti-inflationary measures, currency
        conversion, remittances abroad, and rates and methods of taxation, among
        other
        things.
 
 (e)
              Plant
                  and equipment
 
 Plant
        and
        equipment are carried at cost less accumulated depreciation. Depreciation
        is
        provided over their estimated useful lives, using the straight-line method.
        Estimated useful lives of the plant and equipment are as follows:
  Buildings
              20
                  yearsMachinery
              10
                  yearsVehicle
              5
                  yearsFurniture
                  and equipment
              3
                  years
 
 The
        cost
        and related accumulated depreciation of assets sold or otherwise retired
        are
        eliminated from the accounts and any gain or loss is included in the statement
        of income. The cost of maintenance and repairs is charged to income as incurred,
        whereas significant renewals and betterments are capitalized.
 
 (f)
              Intangible
                  assets
 
 Intangible
        assets represent land use rights in the PRC. Land use rights are carried
        at cost
        and amortized on a straight-line basis over the period of rights of 50 years
        commencing from the date of acquisition of equitable interest. According
        to the
        laws of the PRC, the government owns all of the land in the PRC. Companies
        or
        individual are authorized to possess and use the land only through land usage
        rights approved by the PRC government.
  F-10
 
 **WEIFANG
        YUHE POULTRY CO., LTD**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **(Stated
        in US Dollars)**
 
 **2.**
              **Summary
                  of significant accounting policies
                  (Continued)**
 
 (g)
              Guarantee
                  Expense
  The
        Company accounts for its liability for product guaranteed in accordance with
        FASB Interpretation No. 45 (FIN 45), “Guarantor’s Accounting and Disclosure
        Requirements for Guarantees, Including Indirect Guarantees of Indebtedness
        of
        Others.” Under FIN 45, the aggregate changes in the liability for accruals
        related to product warranties issued during the reporting period must be
        charged
        to expense as incurred.
 
 The
        Company guarantees a 98% survival rate of its product by delivering additional
        2% of the product. The guarantee expires seven days after delivery. If the
        survival rate falls below 96%, the Company provides additional guarantee
        compensation to customers. Based on historical experience, the likelihood
        that
        survival rate falls below 96% is remote and therefore no accrued guarantee
        liability was recorded at period end. The Company records guarantee expense
        as
        incurred. There was no guarantee expense for the period from January 1, 2008
        to
        January 31, 2008.
 
 (h)
              Accounting
                  for the impairment of long-lived
                  assets
  The
        long-lived assets held and used by the Company are reviewed for impairment
        whenever events or changes in circumstances indicate that the carrying amount
        of
        assets may not be recoverable. It is reasonably possible that these assets
        could
        become impaired as a result of technology or other industry changes.
        Determination of recoverability of assets to be held and used is done by
        comparing the carrying amount of an asset to future net undiscounted cash
        flows
        to be generated by the assets.
 
 If
        such
        assets are considered to be impaired, the impairment to be recognized is
        measured as the amount by which the carrying amount of the assets exceeds
        the
        fair value of the assets. Assets to be disposed of are reported at the lower
        of
        the carrying amount or fair value less costs to sell. During the reporting
        periods, there was no impairment loss.
  (i)
              Inventories
 
 Inventories
        consisting of raw materials, work in progress and finished goods are stated
        at
        lower of cost or net realizable value. The cost of inventories is determined
        using weighted average cost method, and includes expenditure incurred in
        acquiring the inventories and bringing them to their existing location and
        condition. Net realizable value is the estimated selling price in the ordinary
        course of business less any applicable selling expenses. Finished goods are
        comprised of direct materials, direct labor and an appropriate proportion
        of
        overhead. At each balance sheet date, inventories that are worth less than
        cost
        are written down to their net realizable value, and the difference is charged
        to
        the cost of revenues of that period.
 
 (j)
              Trade
                  receivables
  Trade
        receivables are recognized and carried at the original invoice amount less
        allowance for any uncollectible amounts. An estimate for doubtful accounts
        is
        made when collection of the full amount is no longer probable. Management
        adopted an allowance policy which provides an allowance equivalent to 30%
        gross
        amount of accounts receivables due over 6 months and 60% of gross amount
        of
        accounts receivables due over 1 year. Full provision will be made for accounts
        receivables due over 2 years. Bad debts are written off as incurred. It is
        a
        common industry practice in the PRC that customers pay in advance before
        delivery of the products. As a result, the Company maintains a low level
        of
        trade receivables.
  F-11
  **WEIFANG
        YUHE POULTRY CO., LTD**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **(Stated
        in US Dollars)**
 
 **2.**
              **Summary
                  of significant accounting policies
                  (Continued)**
  (k)
              Cash
                  and cash equivalents
  The
        Company considers all highly liquid investments purchased with original
        maturities of three months or less to be cash equivalents. The Company maintains
        bank accounts only in the PRC. The Company does not maintain any bank accounts
        in the United States of America. Cash deposits in PRC banks are not insured
        by
        any government agency or entity.
 
 (l)
              Revenue
                  recognition
 
 Revenue
        from sales of the Company's products is recognized when the significant risks
        and rewards of ownership have been transferred to the third-party distributor
        and larger producers at the time when the products are delivered to and accepted
        by them, the sales price is fixed or determinable as stated in the sales
        contract, and collection is reasonably assured.
 
 (m)
              Cost
                  of revenues
 
 Cost
        of
        revenues consists primarily of material costs, employee compensation,
        depreciation and related expenses, which are directly attributable to the
        production of products. Write-down of inventory to lower of cost or market
        is
        also recorded in cost of revenues.
 
 (n)
              Advertising
 
 The
        Group
        expensed all advertising costs as incurred. There was no advertising expenses
        for the period from January 1, 2008 to January 31, 2008.
 
 (o)
              Retirement
                  benefit plans
 
 The
        employees of the Group are members of a state-managed retirement benefit
        plan
        operated by the government of the PRC. The Group is required to contribute
        a
        specified percentage of payroll costs to the retirement benefit scheme to
        fund
        the benefits. The only obligation of the Group with respect to the retirement
        benefit plan is to make the specified contributions.
 
 Retirement
        benefits in the form of contributions under defined contribution retirement
        plans to the relevant authorities are charged to the statements of income
        as
        incurred. The retirement benefit expenses for the period from January 1,
        2008 to
        January 31, 2008 were $5,843.
  F-12
 
 **WEIFANG
        YUHE POULTRY CO., LTD**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **(Stated
        in US Dollars)**
 
 **2.**
              **Summary
                  of significant accounting policies
                  (Continued)**
 
 (p)
              Income
                  tax
 
 The
        Company accounts for income taxes using an asset and liability approach and
        allows for recognition of deferred 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 realization is uncertain.
 
 The
        Company is operating in the PRC, and in accordance with the relevant tax
        laws
        and regulations of PRC, the corporation income tax rate is 25%. However,
        the
        Company is a poultry company, and in accordance with the relevant regulations
        regarding the favorable tax treatment for an outstanding poultry company,
        the
        Company is entitled to a tax free treatment until January 31, 2008.
 
 The
        corporate income tax for the subsidiary, Weifang Taihong Feed Co., Ltd is
        25%.
 
 (q)
              Shipping
                  and handling fees
 
 Shipping
        and handling fees are expensed when incurred. Shipping and handling charges
        included in the selling expenses for the period from January 1, 2008 to January
        31, 2008 was $5,330.
 
 (r)
              Minority
                  interests
 
 Minority
        interests refer to the 43.75% investment by third parties in the equity of
        Taihong and are not held by the Company.
 
 (s)
              Foreign
                  currency translation
 
 The
        accompanying financial statements are presented in United States dollars.
        The
        functional currency of the Company is the Renminbi (RMB). The financial
        statements are translated into United States dollars from RMB at year-end
        exchange rates as to assets and liabilities and average exchange rates as
        to
        revenues and expenses. Capital accounts are translated at their historical
        exchange rates when the capital transactions occurred.
  January
                  31, 2008Balance
                  sheet
              
              
              RMB 
                  7.20180 to US$1.00Statement
                  of income and comprehensive income
              
              
              RMB 
                  7.25883 to US$1.00
 
 The
        RMB
        is not freely convertible into foreign currency and all foreign exchange
        transactions must take place through authorized institutions. No representation
        is made that the RMB amounts could have been, or could be, converted into
        US$ at
        the rates used in translation.
  F-13
  **WEIFANG
        YUHE POULTRY CO., LTD**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **(Stated
        in US Dollars)**
 
 **2.**
              **Summary
                  of significant accounting policies
                  (Continued)**
  (t)
              Comprehensive
                  income
 
 Comprehensive
        income is defined to include all changes in equity except those resulting
        from
        investments by owners and distributions to owners. Among other disclosures,
        all
        items that are required to be recognized under current accounting standards
        as
        components of comprehensive income are required to be reported in a financial
        statement that is presented with the same prominence as other financial
        statements. The Company’s current component of comprehensive income is the
        foreign currency translation adjustment.
 
 (u)
              Fair
                  value of financial instruments
  SFAS
        No.
        107, “Disclosures about Fair Value of Financial Instruments” (“SFAS 107”)
        requires entities to disclose the fair values of financial instruments except
        when it is not practicable to do so. Under SFAS No. 107, it is not practicable
        to make this disclosure when the costs of formulating the estimated values
        exceed the benefit when considering how meaningful the information would
        be to
        financial statement users.
 
 The
        fair
        values of all assets and liabilities do not differ materially from their
        carrying amounts. None of the financial instruments held are derivative
        financial instruments and none were acquired or held for trading purposes
        during
        the period for January 1, 2008 to January 31, 2008.
 
 (v)
              Recent
                  accounting pronouncements
 
 In
        December 2007, the FASB issued SFAS No. 141R, “Business Combinations” (“SFAS No.
        141R”). SFAS No. 141R amends SFAS 141 and provides revised guidance for
        recognizing and measuring identifiable assets and goodwill acquired, liabilities
        assumed, and any noncontrolling interest in the acquiree. It also provides
        disclosure requirements to enable users of the financial statements to evaluate
        the nature and financial effects of the business combination. It is effective
        for fiscal years beginning on or after December 15, 2008 and will be applied
        prospectively. We are currently evaluating the impact of adopting SFAS No.
        141R
        on our consolidated financial statements.
 
 In
        December 2007, the Financial Accounting Standards Board (“FASB”) issued SFAS No.
        160, “Noncontrolling Interests in Consolidated Financial Statements — an
        amendment of ARB No. 51” (“SFAS No. 160”). SFAS No. 160 requires that ownership
        interests in subsidiaries held by parties other than the parent, and the
        amount
        of consolidated net income, be clearly identified, labeled, and presented
        in the
        consolidated financial statements. It also requires once a subsidiary is
        deconsolidated, any retained noncontrolling equity investment in the former
        subsidiary be initially measured at fair value. Sufficient disclosures are
        required to clearly identify and distinguish between the interests of the
        parent
        and the interests of the noncontrolling owners. It is effective for fiscal
        years
        beginning on or after December 15, 2008 and requires retroactive adoption
        of the
        presentation and disclosure requirements for existing minority interests.
        All
        other requirements shall be applied prospectively. We are currently evaluating
        the impact of adopting SFAS No. 160 on our consolidated financial
        statements.
  F-14
  **WEIFANG
        YUHE POULTRY CO., LTD**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **(Stated
        in US Dollars)**
 
 **3.**
              **Inventories**
 
 Inventories
        consist of the following:
 
 Raw
                  materials
              
              $
              706,405Work
                  in progress
              
              
              3,870,136Finished
                  goods
              
              
              47,884$
              4,624,425
  **4.**
              **Other
                  receivables, net**
 
 Other
        receivables, net consist of the following:
 
 Loan
                  receivables
              
              $
              3,234,413Other
                  receivables
              
              
              230,459Less:
                  Allowances
              
              
              (436,173
              )$
              3,001,699
 
 Other
        receivables are unsecured, interest free and have no fixed repayment
        date.
 
 Recovery
        of bad debts of other receivable for the period ended January 31 2008 included
        in other income $61,368.
 
 Allowance
        is made when collection of the full amount is no longer probable. Management
        reviews and adjusts this allowance periodically based on historical experience,
        current economic climate as well as its evaluation of the collectibility
        of
        outstanding accounts. The Group evaluates the credit risks of its customers
        utilizing historical data and estimates of future performance.
  F-15
 
 **WEIFANG
        YUHE POULTRY CO., LTD**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **(Stated
        in US Dollars)**
 
 **5.**
              **Unlisted
                  investments**
 
 Unlisted
        investments at January 31, 2008 are the 3% investments in Hanting Rural Credit
        Cooperative, “Hanting”. It is stated at cost because the Group does not have
        significant influence or control over this investment. The management of
        the
        Company has reviewed the investment in Hanting for any impairment and determined
        there is no indication that the carrying amount of Hanting may not be
        recoverable.
 
 **6.**
              **Plant
                  and equipments, net**
 
 Plant
        and
        equipment consists of the following:
 
 At
                  costBuildings
              
              $
              9,849,070Machinery
              
              
              5,408,153Motor
                  vehicles
              
              
              432,291Furniture
                  and equipment
              
              
              276,570$
              15,966,084Less:
                  accumulated depreciation
              
              
              (5,063,219
              )Construction
                  in progress
              
              
              4,420,380$
              15,323,245
 
 Depreciation
        expenses included in the cost of sales during the period from January 1,
        2008 to
        January 31, 2008 was $83,448, and included in the general and administrative
        expenses for the period ended January 31, 2008 was $37,765.
 
 As
        of
        January 31, 2008, buildings and machinery of the Group were pledged as
        collateral under certain loan arrangements.
 
 There
        was
        no interest capitalized for the construction in progress during the period
        from
        January 1, 2008 to January 31, 2008.
  F-16
  **WEIFANG
        YUHE POULTRY CO., LTD**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **(Stated
        in US Dollars)**
 
 **7.**
              **Intangible
                  assets, net**
 
 Intangible
        assets consist of the following:
 
 Land
                  use rights, at cost
              
              $
              3,117,798Less:
                  accumulated amortization
              
              
              284,929$
              2,832,869
 
 As
        of
        January 31, 2008, land use rights of the Group were pledged as collateral
        under
        certain loan arrangements.
 
 Amortization
        expense included in the cost of revenues during the period from January 1,
        2008
        to January 31, 2008 was $5,200.
 
 **8.**
              **Due
                  from related companies**
 
 Hefeng
                  Green Agriculture Co., Ltd, “Hefeng Green” -
                  Mr.
                  Gao Zhentao, a director of the Company is also a director of
                  Hefeng Green
              
              $
              72,263Shandong
                  Yuhe Food Group Co., Ltd, “Yuhe Group” - Mr. Gao Zhentao, a
                  director of the Company is also a directorof Yuhe
                  Group
              
              
              3,653,930Shandong
                  Yuhe New Agriculture Academy of Sciences, “Shandong Yuhe” - Mr. Gao
                  Zhentao, a director of the Company is also a director of
                  Shandong Yuhe
              
              
              49,251Weifang
                  Jiaweike Food Co., Ltd, “Weifang Jiaweike” - Mr. Gao Zhentao, a
                  director of the Company is also a director of Weifang
                  Jiaweike
              
              
              25$
              3,775,469
 
 The
        amounts due from related companies are unsecured, interest free and have
        no
        fixed repayment date.
  F-17
  **WEIFANG
        YUHE POULTRY CO., LTD**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **(Stated
        in US Dollars)**
 
 **9.**
              **Due
                  from directors**
 
 Details
        of due from directors are as follows:
 
 Mr.
                  Tan Yi
              
              $
              79,491Mr.
                  Gao Zhenbo
              
              
              78,091Mr.
                  Gao Zhentao
              
              
              75,455$
              233,037
 
 The
        amounts due from directors are unsecured, interest free and have no fixed
        repayment date.
 
 **10.**
              **Loan
                  payable**
 
 Loans
        payable are loans from unrelated companies for temporary fund for operation
        purposes. They are unsecured, interest free and have no fixed repayment
        date.
 
 **11.**
              **Due
                  to related companies**
  Weifang
                  Hexing Breeding Co., Ltd, "Weifang Hexing" - Mr. Gao Zhentao, a
                  director of the Company is also a director of Weifang
                  Hexing
              
              $
              301,965Shandong
                  Yuhe Food Group Co., Ltd, "Yuhe Group" - Mr. Gao
                  Zhentao, a director of the Company is also a director Yuhe
                  Group
              
              
              18,948$
              320,913
 
 The
        amounts due to related companies are unsecured, interest free and have no
        fixed
        repayment date. These loans are used for working capital purposes.
  Bright
        Stand is the legal and accounting acquirer of the Group. Bright Stand becomes
        the sole shareholder of the company after January 31, 2008 business
        combination.
  F-18
 
 **WEIFANG
        YUHE POULTRY CO., LTD**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **(Stated
        in US Dollars)**
 
 **12.**
              **Registered
                  capital**
 
 As
        of
        January 31, 2008, capital contributions paid-up amounted to $3,019,003 (RMB
        22,224,004).
 
 Prior
        to
        the effective closing date of the acquisition transaction as discussed in
        Note
        19, Bright Stand International Limited contributed $2,536,290 additional
        capital
        to the Company for working capital purposes.
  **13.**
              **Long-term
                  liabilities**
  The
        long-term liabilities are denominated in Chinese Renminbi and are presented
        in
        US dollars as follows:
  Loans
                  from Nansun Rural Credit, interest rate at 9.22% to 10.51% per
                  annum, due from Nov 28, 08 to May 17, 10
              
              $
              8,350,383Loans
                  from Shuangyang Rural Credit, interest rate at 9.33% per annum, due
                  on Oct 12, 08
              
              
              904,625Loans
                  from Hanting Kaiyuan Rural Credit Cooperative, interest rate at 9.22%
                  to 13.31% per annum, due from Nov 28, 08 to Jan 10,
                  09
              
              
              1,015,963Loans
                  from Hanting Rural Credit
                  Cooperative, interest rate at 8.19% per annum, due from Nov 8,
                  09
              
              
              278,34510,549,316Less:
                  current portion of long-term  liabilities
              
              
              (4,383,951
              )6,165,365
 
 Future
        maturities of long-term loans as at January 31, 2008 are as
        follows:
 
 Remainder
                  of 2008
              
              $
              4,383,9512009
              
              
              2,686,0402010
              
              
              3,479,326$
              10,549,317
  F-19
 
 **WEIFANG
        YUHE POULTRY CO., LTD**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **(Stated
        in US Dollars)**
 
 **14.**
              **Income
                  tax**
 
 The
        Company is operating in the PRC, and in accordance with the relevant tax
        laws
        and regulations of PRC, the corporation income tax rate is 25%. However,
        the
        Company is an agricultural company, and in accordance with the relevant
        regulations regarding the tax exemption, the Company is tax-exempt as long
        as it
        is registered as an agricultural entity.
 
 Taihong
        is operating in the PRC, and in accordance with the relevant tax laws and
        regulations of PRC, the corporation income tax rate is 25%.
  The
        Group
        uses the asset and liability method, where deferred tax assets and liabilities
        are determined based on the expected future tax consequences of temporary
        differences between the carrying amounts of assets and liabilities for financial
        and income tax reporting purposes. There are no material timing differences
        and
        therefore no deferred tax asset or liability at January 31, 2008
 
 The
        provision for income taxes consists of the following:
 
 Current
                  taxPRC
              
              $
              -Deferral
                  tax provision
              
              
              -$
              -
 
 All
        of
        the Group’s income (loss) before income taxes is from PRC sources. Actual income
        tax expenses reported in the consolidated statements of income and comprehensive
        income differ from the amounts computed by applying the PRC statutory income
        tax
        rate of 25% to income (loss) before income taxes during the period from January
        1, 2008 to January 31, 2008 for the following reasons:
 
 Income
                  before income taxes
              
              $
              141,534Computed
                  “expected” income tax expense at 25%
              
              $
              35,384Tax
                  effect on net taxable temporary differences
              
              
              (41,942
              )Effect
                  of cumulative tax losses and tax holiday
              
              
              6,558$
              -
  F-20
  **WEIFANG
        YUHE POULTRY CO., LTD**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **(Stated
        in US Dollars)**
 
 **15.**
              **Related
                  parties transactions**
 
 The
        following material transactions with related parties during the years were
        in
        the opinion of the directors, carried out in the ordinary course of business
        and
        on normal commercial terms:
  Sales
                  of goods to a related company
              
              $
              695,851
 
 Sales
        to
        Weifang Hexing Breeding Co., Ltd, a related company, during the period from
        January 1, 2008 to January 31, 2008.
 
 During
        2008, Weifang Jiaweike Food Co., Ltd. was disposed of to the Weifang Hexing
        Breeding Co., Ltd, a related company where Mr. Gao Zhentao, a director of
        the Company is also the director. (note 5)
 
 **16.**
              **Significant
                  concentrations and risk**
 
 (a)
          Customer Concentrations
 
 The
        Group
        has the following concentrations of business with each customer constituting
        greater than 10% of the Company’s gross sales:
 
 Wang
                  Jianbo
              
              
              24.89
              %Wei
                  Yunchao
              
              
              22.10
              %Li
                  Yubo
              
              
              18.03
              %
  The
        Group
        has not experienced any significant difficulty in collecting its accounts
        receivable in the past and is not aware of any financial difficulties being
        experienced by its major customers.
 
 The
        Group
        has the following concentrations of business with each supplier constituting
        greater than 10% of the Company’s gross purchases:
 
 Ma
                  Suping
              
              
              15.94
              %Lu
                  Xingzhong
              
              
              10.20
              %
 
 (b)
          Credit Risk
 
 Financial
        instruments that potentially subject the Group to significant concentration
        of
        credit risk consist primarily of cash and cash equivalents. As of January
        31,
        2008, substantially all of the Group’s cash and cash equivalents were held by
        major financial institutions located in the PRC, which management believes
        are
        of high credit quality.
  F-21
  **WEIFANG
        YUHE POULTRY CO., LTD**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **(Stated
        in US Dollars)**
 
 **16.**
              **Significant
                  concentrations and risk
                  (Continued)**
 
 (c)
          Group’s operations are in China
 
 All
        of
        the Group’s products are produced in China. The Group’s operations are subject
        to various political, economic, and other risks and uncertainties inherent
        in
        China. Among other risks, the Group’s operations are subject to the risks of
        transfer of funds; domestic and international customs and tariffs; changing
        taxation policies; foreign exchange restrictions; and political conditions
        and
        governmental regulations.
 
 **17.**
              **Business
                  and geographical segments**
 
 The
        Company’s operations are classified into two principal reportable segments that
        provide different products or services.  Weifang is engaged in the business
        of chick while Taihong is engaged in the business of feed production, in
        which
        most of the product were used internally.  Separate management of each
        segment is required because each business unit is subject to different
        production and technology strategies.
 
 **Reportable
        Segments**
 
 Production
                of chick
              
              Production
                of feeds
              
              TotalExternal
                  revenue
              
              
              1,443,425
              
              
              47,904
              
              
              1,491,329Intersegment
                  revenue
              
              
              
              
              
              737,602
              
              
              737,602Interest
                  income
              
              
              5
              
              
              -
              
              
              5Interest
                  expense
              
              
              (34,819
              )
              
              (51,348
              )
              
              (86,167
              )Depreciation
                  and amortization
              
              
              116,071
              
              
              10,342
              
              
              126,413Net
                  profit (loss) after tax
              
              
              (26,232
              )
              
              167,766
              
              
              141,534AssetsExpenditures
                  for long-lived assets
              
              
              206,176
              
              
              524
              
              
              206,700
 
 Note:
        Intersegment revenue of $737,602 was eliminated in consolidation.
  F-22
 
 **WEIFANG
        YUHE POULTRY CO., LTD**
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **(Stated
        in US Dollars)**
 
 **18.**
              **Commitments
                  and contingencies**
 
 Operating
        Leases - In the normal course of business, the Company leases the land
        for hen house under operating lease agreements. The Company rents land,
        primarily for the feeding of the chickens. The operating lease agreements
        generally contain renewal options that may be exercised at the Company's
        discretion after the completion of the base rental terms. The Company was
        obligated under operating leases requiring minimum rentals as
        follows:
 
 Up
                  to January 31,2008
              
              $
              134,3192009
              
              
              146,5302010
              
              
              135,0492011
              
              
              77,6482012
              
              
              77,648Thereafter
              
              
              1,444,031Total
                  minimum lease payments
              
              $
              2,015,225
  During
        the period for January 1, 2008 to January 31, 2008, rent expenses amounted
        to
        $22,432 was recorded as cost of sales.
 
 **19.**
              **Subsequent
                  Events**
 
 In
        January 31, 2008, Bright Stand International Limited, Bright Stand, a company
        incorporated in the British Virgin Islands, acquired 100% equity ownership
        of the Company and 43.75% equity ownership of Taihong for cash
        consideration equal to the appraised fair market value of the Company in
        the
        amount of $11,306,522, or RMB 81,450,000, and $312,530, or RMB 2,244,000.
        As a result, the Company and Taihong became wholly-owned subsidiaries
        of Bright Stand.
  F-23
  **YUHE
        INTERNATIONAL, INC.**
 **(Formerly
        known as First Growth Investors Inc.)**
 
 **CONDENSED
        CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
        THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2008 AND
        2007**
  F-24
  **YUHE
        INTERNATIONAL, INC.**
 **(Formerly
        known as First Growth Investors Inc.)**
 
 **CONDENSED
        CONSOLIDATED FINANCIAL STATEMENTS**
 **FOR
        THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2008 AND
        2007**
 
 Index
        to
        condensed consolidated financial statements
 
 PageCondensed
                  Consolidated Balance Sheets - unaudited
              
              F-26Condensed
                  Consolidated Statements of Income and Comprehensive Income-
                  unaudited
              
              F-27Condensed
                  Consolidated Statements of Changes in Stockholders’ Equity -
                  unaudited
              
              F-28Condensed
                  Consolidated Statements of Cash Flows - unaudited
              
              F-29
                  to F-30Notes
                  to unaudited Condensed Consolidated Financial Statements
              
              F-31
                  to F-55
  F-25
  **YUHE
        INTERNATIONAL, INC.**
 **(Formerly
        known as First Growth Investors Inc.)**
 
 **CONDENSED
        CONSOLIDATED BALANCE SHEETS**
 **(Stated
        in US Dollars)**
  September
                  30,
                2008
              
              December
                  31, 2007(unaudited)ASSETSCurrent
                  assets:Cash
                  and cash equivalents
              
              $
              6,419,671
              
              $
              1,050,168Accounts
                  receivables
              
              
              903
              
              
              -Inventories
              
              
              9,002,360
              
              
              -Advances
                  to suppliers
              
              
              1,577,812
              
              
              -Total
                  current assets
              
              
              17,000,746
              
              
              1,050,168Plant
                  and equipment, net
              
              
              16,947,288
              
              
              -Deposits
                  paid for acquisition of long term assets
              
              
              10,311,734
              
              
              -Note
                  receivables, net
              
              
              25,140
              
              
              -Other
                  receivables, net
              
              
              854,004
              
              
              -Unlisted
                  investments
              
              
              299,388
              
              
              -Intangible
                  assets, net
              
              
              2,925,721
              
              
              -Due
                  from related companies
              
              
              3,899,142
              
              
              1,000,000Due
                  from a shareholder
              
              
              15,000
              
              
              -Deferred
                  expenses
              
              
              621,070
              
              
              -Total
                  assets
              
              $
              52,899,233
              
              $
              2,050,168LIABILITIES
                  AND STOCKHOLDERS’ EQUITYCurrent
                  liabilities:Accounts
                  payable
              
              $
              4,682,087
              
              $
              -Current
                  portion of long term loans
              
              
              6,827,034
              
              
              -Other
                  payable
              
              
              1,289,929
              
              
              -Payroll
                  and payroll related liabilities
              
              
              823,165
              
              
              -Accrued
                  expenses
              
              
              753,673
              
              
              70Advances
                  from customers
              
              
              39,412
              
              
              -Other
                  tax payables
              
              
              141,522
              
              
              -Loan
                  from director
              
              
              291,754
              
              
              -Other
                  long term liabilities
              
              
              143,573
              
              
              -Due
                  to related companies
              
              
              228,788
              
              
              2,210Total
                  current liabilities
              
              
              15,220,937
              
              
              2,280Non-current
                  liabilitiesLong-term
                  loans
              
              
              3,938,673
              
              
              -Total
                  liabilities
              
              
              19,159,610
              
              
              2,280Stockholders'
                  EquityPreferred
                  stock, $.001 par value, 1,000,000 shares authorized,
                no
                  shares issued and outstanding
              
              
              -
              
              
              -Common
                  stock at $.001 par value; authorized 500,000,000 shares authorized,
                  15,543,330 and 8,626,318 equivalent shares issued and
                  outstanding
              
              
              15,543
              
              
              8,626Additional
                  paid-in capital
              
              
              29,760,489
              
              
              2,041,474Retained
                  earnings
              
              
              2,821,237
              
              
              (2,212
              )Accumulated
                  other comprehensive income
              
              
              1,142,354
              
              
              -Total
                  stockholders’ equity
              
              
              33,739,623
              
              
              2,047,888Total
                  liabilities and stockholders’ equity
              
              $
              52,899,233
              
              $
              2,050,168
 See
        accompanying notes to condensed consolidated financial statements
  F-26
  **YUHE
        INTERNATIONAL, INC.**
 **(Formerly
        known as First Growth Investors Inc.)**
 
 **CONDENSED
        CONSOLIDATED STATEMENTS OF** **INCOME
        AND COMPREHENSIVE INCOME- (UNAUDITED)**
  **(Stated
        in US Dollars)**
  For
                  The Nine Months Ended
              
              For
                  The Three Months EndedSeptember
                  30
              
              September
                  302008
              
              2007
              
              2008
              
              2007Net
                  revenues
              
              $
              16,318,263
              
              $
              -
              
              $
              9,609,781
              
              $
              -Cost
                  of revenue
              
              
              (11,732,602
              )
              
              -
              
              
              (7,089,355
              )
              
              -Gross
                  profit
              
              
              4,585,661
              
              
              -
              
              
              2,520,426
              
              
              -Operating
                  ExpensesSelling
                  expenses
              
              
              (280,489
              )
              
              -
              
              
              (135,658
              )
              
              -General
                  and administrative expenses
              
              
              (1,500,458
              )
              
              -
              
              
              (781,247
              )
              
              -Bad
                  debts recovery
              
              
              641,103
              
              
              -
              
              
              554,188
              
              
              -Total
                  operating expenses
              
              
              (1,139,844
              )
              
              -
              
              
              (362,717
              )
              
              -Income
                  from operations
              
              
              3,445,817
              
              
              -
              
              
              2,157,709
              
              
              -Non-operating
                  income (expenses)Interest
                  income
              
              
              4,518
              
              
              -
              
              
              63
              
              
              -Other
                  income
              
              
              98,962
              
              
              -
              
              
              93,062
              
              
              -Gain
                  on disposal of fixed assets
              
              
              87,588
              
              
              -
              
              
              -
              
              
              -Investment
                  income
              
              
              6,074
              
              
              -
              
              
              -
              
              
              -Interest
                  expenses
              
              
              (763,168
              )
              
              -
              
              
              (320,048
              )
              
              -Other
                  expenses
              
              
              (56,342
              )
              
              -
              
              
              -
              
              
              -Total
                  other expenses
              
              
              (622,368
              )
              
              -
              
              
              (226,923
              )
              
              -Net
                  income before income taxes
              
              
              2,823,449
              
              
              -
              
              
              1,930,786
              
              
              -Income
                  taxes
              
              
              -
              
              
              -
              
              
              -
              
              
              -Net
                  income
              
              $
              2,823,449
              
              $
              -
              
              $
              1,930,786
              
              $
              -Other
                  comprehensive incomeForeign
                  currency translation
              
              
              1,142,354
              
              
              -
              
              
              73,604
              
              
              -Comprehensive
                  income
              
              $
              3,965,803
              
              $
              -
              
              $
              2,004,390
              
              $
              -Earnings
                  per shareBasic
              
              $
              0.21
              
              $
              -
              
              $
              0.12
              
              $
              -Diluted
              
              $
              0.20
              
              $
              -
              
              $
              0.12
              
              $
              -Weighted
                  average shares outstandingBasic
              
              
              13,750,966
              
              
              -
              
              
              15,543,330
              
              
              -Diluted
              
              
              13,985,255
              
              
              -
              
              
              15,989,256
              
              
              -
  See
        accompanying notes to condensed consolidated financial statements
  F-27
  **YUHE
        INTERNATIONAL, INC.**
 **(Formerly
        known as First Growth Investors Inc.)**
 
 **CONDENSED
        CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY –
(UNAUDITED)**
  **(Stated
        in US Dollars)**
 **Common stock****Accumulated other**
                
                **Total****Shares**
                
                
                
                **Additional paid-**
                
                **Retained**
                
                **comprehensive**
                
                **Shareholders’****outstanding**
                
                **Amount**
                
                **in capital**
                
                **Earnings**
                
                **income**
                
                **Equity**Balance at December 31, 2007
                
                
                8,626,318
                
                $
                8,626
                
                $
                2,041,474
                
                $
                -2,212
                
                $
                
                
                $
                2,047,888Additional
                    capital contribution
                
                
                
                
                
                
                
                
                12,149,750
                
                
                
                
                
                
                
                
                12,149,750Recapitalization
                
                
                1,087,994
                
                
                1,088
                
                
                -2,082
                
                
                
                
                
                
                
                
                -994Share
                    issued in placement agent at $3.088 per share
                
                
                5,829,018
                
                
                5,829
                
                
                17,994,171
                
                
                
                
                
                
                
                
                18,000,000Cost
                    of raising capital
                
                
                
                
                
                
                
                
                -2,640,477
                
                
                
                
                
                
                
                
                -2,640,477Warrants
                    issued in connection with private placement
                
                
                
                
                
                
                
                
                2,398,975
                
                
                
                
                
                
                
                
                2,398,975Cost
                    of raising capital - issuance of warrants
                
                
                
                
                
                
                
                
                -2,398,975
                
                
                
                
                
                
                
                
                -2,398,975Stock
                    based compensation
                
                
                
                
                
                
                
                
                217,653
                
                
                
                
                
                
                
                
                217,653Net
                    income for the period
                
                
                
                
                
                
                
                
                
                
                
                2,823,449
                
                
                
                
                
                2,823,449Foreign
                    currency translation difference
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                1,142,354
                
                
                1,142,354Balance
                    at September 30, 2008
                
                
                15,543,330
                
                $
                15,543
                
                $
                29,760,489
                
                $
                2,821,237
                
                $
                1,142,354
                
                $
                33,739,623
  See
        accompanying notes to condensed consolidated financial statements
  F-28
  **YUHE
        INTERNATIONAL, INC.**
 **(Formerly
        known as First Growth Investors Inc.)**
 
 **CONDENSED
        CONSOLIDATED STATEMENTS OF CASH FLOWS** **- (UNAUDITED)**
 **(Stated
        in US Dollars)**
  For
                  The Nine Months EndedSeptember
                  302008
              
              2007Cash
                  flows from operating activitiesNet
                  income
              
              $
              2,823,449
              
              $
              -Adjustments
                  to reconcile net income to net cash used in operating
                  activities:Stock
                  based compensation
              
              
              217,653
              
              
              -Depreciation
              
              
              996,126
              
              
              -Amortization
              
              
              42,853
              
              
              -Bad
                  debts recovery
              
              
              (641,103
              )
              
              -Gain
                  on disposal of fixed assets
              
              
              (87,588
              )
              
              -Income
                  from unlisted investment
              
              
              (6,074
              )
              
              -Changes
                  in operating assets and liabilities:Accounts
                  receivable
              
              
              (25
              )
              
              -Advances
                  to suppliers
              
              
              (1,067,073
              )
              
              -Inventories
              
              
              (4,011,259
              )
              
              -Deferred
                  expenses
              
              
              (17,183
              )
              
              -Accounts
                  payable
              
              
              (331,343
              )
              
              -Other
                  payable
              
              
              (386,548
              )
              
              -Payroll
                  and payroll related liabilities
              
              
              52,590
              
              
              -Accrued
                  expenses
              
              
              (433,797
              )
              
              -Advances
                  from customers
              
              
              (178,218
              )
              
              -Other
                  tax payables
              
              
              9,386
              
              
              -Net
                  cash used in operating activities
              
              
              (3,018,154
              )
              
              -Cash
                  flows from investing activitiesDeposit
                  paid and acquisition of property, plant and equipment
              
              
              (11,053,497
              )
              
              -Proceeds
                  from disposal of fixed assets
              
              
              118,216
              
              
              -Acquisition
                  of subsidiaries
              
              
              (10,567,946
              )
              
              -Proceeds
                  from notes receivables
              
              
              4,329,857
              
              
              -Advance
                  to notes receivable
              
              
              (3,432,603
              )
              
              -Proceeds
                  from related parties receivables
              
              
              67,216
              
              
              -Net
                  cash used in investing activities
              
              
              (20,538,757
              )
              
              -
  F-29
  **YUHE
        INTERNATIONAL, INC.**
 **(Formerly
        known as First Growth Investors Inc.)**
 
 **CONDENSED
        CONSOLIDATED STATEMENTS OF CASH FLOWS** **- (UNAUDITED)**
 **(Stated
        in US Dollars)**
 
 Cash
                  flows from financing activitiesProceeds
                  from loan payable
              
              
              1,300,726
              
              
              -Repayment
                  of loan payable
              
              
              (1,099,842
              )
              
              -Proceeds
                  from related party borrowing
              
              
              1,106,240
              
              
              -Repayment
                  of related party borrowing
              
              
              (30,311
              )
              
              -Capital
                  contribution by shareholder
              
              
              12,149,750
              
              
              -Proceeds
                  from issuance of common stock
              
              
              15,359,523
              
              
              -Net
                  cash flows provided by financing activities:
              
              
              28,786,086
              
              
              -Effect
                  of foreign currency translation on cash and cash
                  equivalents
              
              
              140,328
              
              
              -Net
                  increase in cash
              
              
              5,369,503
              
              
              -Cash-
                  beginning of period
              
              
              1,050,168
              
              
              -Cash-
                  end of period
              
              $
              6,419,671
              
              $
              -Cash
                  paid during the period for:Interest
                  paid
              
              $
              1,079,117
              
              $
              -Income
                  taxes paid
              
              $
              -
              
              $
              -Supplemental
                  disclosure of non cash activities:Accrued
                  on construction in progress
              
              $
              304,524
              
              $
              -
 
 See
        accompanying notes to condensed consolidated financial statements
  F-30
 
 **YUHE
        INTERNATIONAL INC.**
 **(Formerly
        known as First Growth Investors Inc.)**
 
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 
 **1.**
              **Basis
                  of presentation**
 
 The
        interim condensed consolidated financial statements included herein, presented
        in accordance with United States generally accepted accounting principles
        and
        stated in US dollars, have been prepared by the Company, without audit, pursuant
        to the rules and regulations of the Securities and Exchange Commission. Certain
        information and footnote disclosures normally included in financial statements
        prepared in accordance with generally accepted accounting principles have
        been
        condensed or omitted pursuant to such rules and regulations, although the
        Company believes that the disclosures are adequate to make the information
        presented not misleading. These statements reflect all adjustments, consisting
        of normal recurring adjustments, which, in the opinion of management, are
        necessary for fair presentation of the information contained therein. It
        is
        suggested that these interim condensed consolidated financial statements
        be read
        in conjunction with the financial statements of the Company for the year
        ended
        December 31, 2007 and notes thereto included in S-1 of Yuhe International,
        Inc.
        (Formerly known as First Growth Investors Inc.) filed on May 12, 2008, as
        amended. The Company follows the same accounting policies in the preparation
        of
        interim reports.
 
 Results
        of operations for the interim periods are not indicative of annual
        results.
 
 **2.
        Organization and Basis of Preparation of Financial
        Statements**
 
 **Yuhe
        International, Inc.**
 
 Yuhe
        International, Inc., formerly known as First Growth Investors Inc., “Yuhe” or
“the Company”, was originally organized under the laws of the State of Nevada on
        September 9, 1997. Prior to March, 2008, the Company was not engaged in any
        business activities and had no operations, income producing assets or
        significant operating capital. At December 31, 2007, the Company was at
        development stage until its business combination with Bright Stand on March
        12,
        2008.
  F-31
 
 **YUHE
        INTERNATIONAL INC.**
 **(Formerly
        known as First Growth Investors Inc.)**
 
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 
 **2.
        Organization and Basis of Preparation of Financial Statements -
        continued**
 
 On
        March
        12, 2008, the Company completed a reverse acquisition transaction with Bright
        Stand International Co., Ltd., “Bright Stand”, and Kunio Yamamoto, a Japanese
        person and the sole former shareholder of Bright Stand. Pursuant to the terms
        of
        the Equity Transfer Agreement, the Company acquired all of the outstanding
        capital stock of Bright Stand from Mr. Yamamoto in exchange for 126,857,134
        shares, equivalent to 8,626,318 post-split shares, of its common stock. As
        a
        result of the transaction, Mr. Yamamoto held 126,857,134 shares, equivalent
        to
        8,626,318 post-split shares, or 88.8 %, of our 142,857,134 shares, equivalent
        to
        9,714,312 post-split shares, of common stock then outstanding following the
        completion of all matters referred to above. At the closing, Bright Stand
        became
        a wholly-owned subsidiary of the Company. Accordingly, all references to
        common
        shares of Bright Stand’s common stock have been restated to reflect the
        equivalent numbers of Yuhe International, Inc. equivalent shares. Bright
        Stand
        thereby became the Company’s wholly-owned subsidiary and the former shareholders
        of Bright Stand became the Company’s controlling stockholders.
 
 This
        share exchange transaction resulted in Bright Stand former shareholders
        obtaining a majority voting interest in the Company. Generally accepted
        accounting principles require that the company whose shareholders retain
        the
        majority interest in a combined business be treated as the acquirer for
        accounting purposes, resulting in a reverse acquisition with Bright Stand
        as the
        accounting acquiror and Yuhe International, Inc. as the acquired party.
        Accordingly, the share exchange transaction has been accounted for as a
        recapitalization of the Company. The equity section of the accompanying
        financial statements have been restated to reflect the recapitalization of
        the
        Company due to the reverse acquisition as of the first day of the first period
        presented. The assets and liabilities acquired that, for accounting purposes,
        were deemed to have been acquired by Bright Stand were not
        significant.
 
 On
        March
        12, 2008, the Company closed a Securities Purchase Agreement with certain
        investors, the “Financing”. Pursuant to the terms of such Securities Purchase
        Agreement, such investors collectively invested $18,000,000 into Yuhe at
        the
        price of $0.21, $3.088 post-split, per share in exchange for our issuance
        of
        85,714,282 shares, equivalent to approximately 5,829,018 post-split shares,
        to
        such investors. Mr. Yamamoto also sold 14,285,710 shares of common stock,
        equivalent to 971,500 post-split shares, to such investors for $3,000,000.
        Immediately following the closing of the Securities Purchase Agreement, Mr.
        Yamamoto owned 112,571,424 shares of our common stock, equivalent to 7,654,895
        post-split shares,, and the investors owned 99,999,992 shares of our common
        stock, equivalent to 6,800,518 post-split shares,.
  F-32
  **YUHE
        INTERNATIONAL INC.**
 **(Formerly
        known as First Growth Investors Inc.)**
 
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 
 
 **2.
        Organization and Basis of Preparation of Financial Statements -
        continued**
 
 In
        connection with such private placement on March 12, 2008, as part of the
        compensation to the placement agents, Roth Capital Partners, LLC and WLT
        Brothers Capital, Inc., in connection with their services under the Securities
        Purchase Agreement, the Company issued to Roth Capital Partners, LLC and
        WLT
        Brothers Capital, Inc. warrants to acquire an aggregate of 6,999,999 shares
        of
        common stock, equivalent to 476,014 post-split shares, exercisable at any
        time
        after the date falling 6 months after their issuance. The warrants have a
        strike
        price equal to $0.252, $3.705 post-split, have a term of three years starting
        from March 12, 2008 and permit cashless or cash exercise at all times after
        they
        are exercisable until they expire on March 12, 2011. The shares of common
        stock
        issuable upon the exercise of the warrants have registration rights. In
        addition, Roth Capital Partners, LLC and WLT Brothers Capital, Inc. received
        cash compensation in the amount of $1.47 million. On October 27, 2008, we
        issued
        178,848 new shares to Roth Capital Partners, LLC based on their cashless
        exercise of 333,198 warrants issued to it as compensation for their services
        as
        co-placement agent.
 
 From
        the
        private placement arrangement, the Company raised gross proceeds of
        $18,000,000.
 
 Also,
        on
        March 12, 2008, our majority stockholder, Mr. Yamamoto, entered into an escrow
        agreement with the private placement investors. Mr. Yamamoto will deliver
        a
        certain number of shares of our common stock owned by him to the investors
        pro-rata in accordance with their respective investment amount for no additional
        consideration if:
 
 (i)
              our
                  after tax net income for our fiscal year ending on December 31,
                  2008 is
                  less than $9,000,000 and fiscal year ending on December 31, 2009
                  is less
                  than 95% of $13,000,000; and
 
 (ii)
              our
                  earnings per share reported in the fiscal year ending on December
                  31, 2009
                  is less than $0.74 on a fully diluted basis, the “Low Performance Events”.
 
 Mr.
        Yamamoto has placed an aggregate of 49,411,763 shares of common stock,
        equivalent to 3,359,889 post-split shares, “Make Good Shares”, into an escrow
        account pursuant to the terms of the Make Good Escrow Agreement by and among
        us,
        Mr. Yamamoto, the Investors and the escrow agent named therein. In the event
        we
        do not achieve the Targets in 2008 and 2009, Make Good Shares will be conveyed
        to the Investors pro-rata in accordance with their respective investment
        amount
        for no additional consideration. In the event that the foregoing Low Performance
        Events do not occur, the Make Good Shares will be transferred to Mr.
        Yamamoto.
 
 After
        the
        reverse acquisition, the total common stock issued and outstanding of the
        Company is 15,543,330 post-split shares.
 
 The
        Company amended its articles of incorporation on April 4, 2008 and changed
        its
        name into Yuhe International, Inc.
  F-33
  **YUHE
        INTERNATIONAL INC.**
 **(Formerly
        known as First Growth Investors Inc.)**
 
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 
 **2.
        Organization and Basis of Preparation of Financial Statements -
        continued**
 
 **Bright
        Stand International Limited, “Bright Stand”**
 
 On
        August
        3, 2007, Bright Stand International Limited, “Bright Stand”, was incorporated
        with limited liability in the British Virgin Islands. On January 31, 2008,
        Bright Stand International Limited completed the acquisition (note 4) of
        100%
        common stock of Weifang Yuhe Poultry Co., Limited, “PRC Yuhe”, and 43.75% of
        Weifang Taihong Feed Co., Ltd., Taihong. As a result, Bright Stand owned
        100% of
        PRC Yuhe and owned 43.75% direct interest of Taihong and 56.25% indirect
        interest of Taihong through PRC Yuhe. PRC Yuhe and Taihong became the
        wholly-owned subsidiaries of Bright Stand.
 
 **Weifang
        Yuhe Poultry Co., Ltd, “PRC Yuhe”**
 
 Weifang
        Yuhe Poultry Co., Ltd, “PRC Yuhe”, was established in Weifang, Shandong of the
        People’s Republic of China, the “PRC”, as a limited company on March 8, 1996.
        The Company currently operates through itself and owned 56.25% of Weifang
        Taihong Feed Co., Ltd. PRC Yuhe is a supplier of day-old chickens raised
        for
        meat production, or broilers, in the PRC.
 
 **Weifang
        Taihong Feed Co., Ltd., “Taihong”**
 
 Weifang
        Taihong Feed Co., Ltd. was established in Weifang, Shandong of the PRC as
        a
        limited company on May 26, 2003. Taihong is a feed stock company whose primary
        purpose is to supply feed stock for PRC Yuhe’s breeder chickens.
 
 The
        Company’s operations are conducted through its subsidiaries in the PRC, Weifang
        Yuhe Poultry Co. Ltd., “PRC Yuhe”, and Weifang Taihong Feed Co. Ltd., “Taihong”.
        The Company and its subsidiaries, hereinafter, collectively referred to as
“the
        Group”, are engaged in the business of chick and feed production.
  F-34
 
 **YUHE
        INTERNATIONAL INC.**
 **(Formerly
        known as First Growth Investors Inc.)**
 
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 
 **3.
        Summary of significant accounting policies**
 
 (a)  Principles
        of consolidation
 
 The
        condensed consolidated financial statements, prepared in accordance with
        generally accepted accounting principles in the United States of America,
        include the assets, liabilities, revenues, expenses and cash flows of the
        Company and all its subsidiaries. This basis of accounting differs in certain
        material respects from that used for the preparation of the books and records
        of
        the Company’s principal subsidiaries, which are prepared in accordance with the
        accounting principles and the relevant financial regulations applicable to
        enterprises with limited liabilities established in the PRC, “PRC GAAP”, the
        accounting standards used in the place of their domicile.  The accompanying
        condensed consolidated financial statements reflect necessary adjustments
        not
        recorded in the books and records of the Company’s subsidiaries to present them
        in conformity with US GAAP.
 
 The
        condensed consolidated financial statements of the Company include the accounts
        of Yuhe International, Inc, Bright Stand International Limited, Weifang Yuhe
        Poultry Co., Ltd and Weifang Taihong Feed Co., Ltd. after the date of
        acquisitions. All significant intercompany accounts, transactions and cash
        flows
        are eliminated on consolidation.
 
 The
        following table depicts the identity of the subsidiary:
 ***Name
                    of Company***
                
                ***Place
                    & date of***
                  ***Incorporation***
                
                ***Attributable
                    Equity***
                  ***Interest
                    %***
                
                ***Registered
                    Capital***Weifang
                    Yuhe Poultry Co.,
                  Ltd
                
                PRC/
                  March
                    8, 1996
                
                
                100
                %
                $
                11,045,467
                
                equivalent
                    to RMB
                  77,563,481Weifang
                    Taihong Feed Co.,
                  Ltd.
                
                PRC/
                  May
                    26 2003
                
                
                100
                %
                $
                965,379
                
                equivalent
                    to RMB
                  8,000,000
 
 (b)  Use
        of
        estimates
 
 The
        preparation of the financial statements in conformity with generally accepted
        accounting principles 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 financial statements and the reported amounts 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 estimates.
  F-35
 
 **YUHE
        INTERNATIONAL INC.**
 **(Formerly
        known as First Growth Investors Inc.)**
 
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 
 **3.
        Summary of significant accounting policies - continued**
 
 (c)  Intangible
        assets
 
 Intangible
        assets represent land use rights in the PRC. Land use rights are carried
        at cost
        and amortized on a straight-line basis over the period of rights of 50 years
        commencing from the date of acquisition of equitable interest. According
        to the
        laws of the PRC, the government owns all of the land in the PRC. Companies
        or
        individual are authorized to possess and use the land only through land usage
        rights approved by the PRC government.
 
 (d)  Economic
        and political risks
 
 The
        Company’s operations are conducted in the PRC. Accordingly, the Company’s
        business, financial condition and results of operations may be influenced
        by the
        political, economic and legal environment in the PRC, and by the general
        state
        of the PRC economy.
 
 The
        Company’s operations in the PRC are subject to special considerations and
        significant risks not typically associated with companies in North America
        and
        Western Europe. These include risks associated with, among others, the
        political, economic and legal environment and foreign currency exchange.
        The
        Company’s results may be adversely affected by changes in the political and
        social conditions in the PRC, and by changes in governmental policies with
        respect to laws and regulations, anti-inflationary measures, currency
        conversion, remittances abroad, and rates and methods of taxation, among
        other
        things.
 
 (e)  Plant
        and
        equipment
 
 Plant
        and
        equipment are carried at cost less accumulated depreciation. Depreciation
        is
        provided over their estimated useful lives, using the straight-line method.
        Estimated useful lives of the plant and equipment are as follows:
 
 Buildings
              20
                  yearsMachinery
              10
                  yearsVehicle
              5
                  yearsFurniture
                  and equipment
              3
                  years
 
 The
        cost
        and related accumulated depreciation of assets sold or otherwise retired
        are
        eliminated from the accounts and any gain or loss is included in the statement
        of income. The cost of maintenance and repairs is charged to income as incurred,
        whereas significant renewals and betterments are capitalized.
  F-36
  **YUHE
        INTERNATIONAL INC.**
 **(Formerly
        known as First Growth Investors Inc.)**
 
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 
 **3.
        Summary of significant accounting policies - continued**
 
 (f)  Guarantee
        Expense
 
 The
        Company accounts for its liability for product guaranteed in accordance with
        FASB Interpretation No. 45 (FIN 45), “Guarantor’s Accounting and Disclosure
        Requirements for Guarantees, Including Indirect Guarantees of Indebtedness
        of
        Others.” Under FIN 45, the aggregate changes in the liability for accruals
        related to product warranties issued during the reporting period must be
        charged
        to expense as incurred.
 
 The
        Company guarantees a 98% survival rate of its product by delivering additional
        2% of the product. The guarantee expires seven days after delivery. If the
        survival rate falls below 96%, the Company provides additional guarantee
        compensation to customers. Based on historical experience, the likelihood
        that
        survival rate falls below 96% is remote and therefore no accrued guarantee
        liability was recorded at year-end. Guarantee expense for the nine months
        ended
        September 30, 2008 and 2007 were $6,009 and $0, respectively.
 
 (g)  Accounting
        for the impairment of long-lived assets
 
 The
        long-lived assets held and used by the Company are reviewed for impairment
        whenever events or changes in circumstances indicate that the carrying amount
        of
        assets may not be recoverable. It is reasonably possible that these assets
        could
        become impaired as a result of technology or other industry changes.
        Determination of recoverability of assets to be held and used is done by
        comparing the carrying amount of an asset to future net undiscounted cash
        flows
        to be generated by the assets.
 
 If
        such
        assets are considered to be impaired, the impairment to be recognized is
        measured as the amount by which the carrying amount of the assets exceeds
        the
        fair value of the assets. Assets to be disposed of are reported at the lower
        of
        the carrying amount or fair value less costs to sell. During the reporting
        periods, there was no impairment loss.
  F-37
 
 **YUHE
        INTERNATIONAL INC.**
 **(Formerly
        known as First Growth Investors Inc.)**
 
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 
 **3.
        Summary of significant accounting policies - continued**
 
 (h)  Inventories
 
 Inventories
        consisting of raw materials, work in progress and finished goods are stated
        at
        lower of cost or net realizable value. The cost of inventories is determined
        using weighted average cost method, and includes expenditure incurred in
        acquiring the inventories and bringing them to their existing location and
        condition. Net realizable value is the estimated selling price in the ordinary
        course of business less any applicable selling expenses. Finished goods are
        comprised of direct materials, direct labor and an appropriate proportion
        of
        overhead. At each balance sheet date, inventories that are worth less than
        cost
        are written down to their net realizable value, and the difference is charged
        to
        the cost of revenues of that period.
 
 (i)  Trade
        receivables
 
 Trade
        receivables are recognized and carried at the original invoice amount less
        allowance for any uncollectible amounts. An estimate for doubtful accounts
        is
        made when collection of the full amount is no longer probable. Management
        adopted an allowance policy which provides an allowance equivalent to 30%
        of
        gross amount of accounts receivables due over 6 months and 60% of gross amount
        of accounts receivables due over 1 year. Full provision will be made for
        accounts receivables due over 2 years. Bad debts are written off as incurred.
        It
        is a common industry practice in the PRC that customers pay in advance prior
        to
        delivery of the products. As a result, the Company maintains a low level
        of
        trade receivables.
 
 (j)  Note
        receivables
 
 Note
        receivables are stated at the original principal amount less allowance for
        any
        uncollectible amounts. Management provides for an allowance when collection
        of
        the full amount is no longer probable by establishing an allowance equivalent
        to
        30% of gross amount of notes receivables due over 6 months and 60% of gross
        amount of notes receivables due over 1 year. Full provision will be made
        for
        notes receivables due over 2 years.
 
 (k)  Cash
        and
        cash equivalents
 
 The
        Company considers all highly liquid investments purchased with original
        maturities of three months or less to be cash equivalents. The Company maintains
        bank accounts only in the PRC. The Company does not maintain any bank accounts
        in the United States of America. Cash deposits in PRC banks are not insured
        by
        any government agency or entity.
 
 (l)  Revenue
        recognition
 
 Revenue
        from sales of the Company’s products is recognized when the significant risks
        and rewards of ownership have been transferred to the third-party distributor
        and larger producers at the time when the products are delivered to and accepted
        by them, the sales price is fixed or determinable as stated in the sales
        contract, and collection is reasonably assured.
 
 Customers
        do not have a general right of return on products delivered.
 
 (m)  Cost
        of
        revenues
 
 Cost
        of
        revenues consists primarily of material costs, employee compensation,
        depreciation and related expenses, which are directly attributable to the
        production of products. Write-down of inventory to lower of cost or market
        is
        also recorded in cost of revenues.
 
 (n)  Advertising
 
 The
        Group
        expensed all advertising costs as incurred. There were no advertising expenses
        for the nine months ended September 30, 2008 and 2007.
  F-38
 **3.
          Summary of significant accounting policies - continued**
 (o)  Retirement
        benefit plans
 
 The
        employees of the Group are members of a state-managed retirement benefit
        plan
        operated by the government of the PRC. The Group is required to contribute
        a
        specified percentage of payroll costs to the retirement benefit scheme to
        fund
        the benefits. The only obligation of the Group with respect to the retirement
        benefit plan is to make the specified contributions.
 
 Retirement
        benefits in the form of contributions under defined contribution retirement
        plans to the relevant authorities are charged to the statements of income
        as
        incurred. The retirement benefit expenses for the nine months ended September
        30, 2008 and 2007 were $ 52,796 and $0
        respectively.
 
 (p)  Income
        tax
 
 The
        Company accounts for income taxes using an asset and liability approach and
        allows for recognition of deferred 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 realization is uncertain.
 
 The
        Group
        is operating in the PRC, and in accordance with the relevant tax laws and
        regulations of PRC, the corporation income tax rate is 25%. Weifang Yuhe
        Poultry
        Co., Ltd **** is
        a
        poultry company, and in accordance with the relevant regulations regarding
        the
        favorable tax treatment for an outstanding poultry company, the Company is
        entitled to a tax free treatment.
 
 The
        corporate income tax for the subsidiary, Weifang Taihong Feed Co., Ltd is
        25%.
 
 (q)  Shipping
        and handling fees
 
 Shipping
        and handling fees are expensed when incurred. During the nine months ended
        September 30, 2008 and 2007, Shipping and handling charges included in the
        selling expenses were $ 7,913 and $0,
        respectively. During the three months ended September 30, 2008 and 2007,
        Shipping and handling charges included in the selling expenses were $3,021
        and
        $0, respectively.
 (r) Research
          and development
 
 The
          Company engages in continuous research and development to improve its know-how
          in feed ingredient composition, immunization system and breeding techniques
          gained through over 10 years of business. Research and development costs
          are
          charged to expense when incurred and are included in operating expenses.
          The
          Company did not incur any research and development costs during the three
          and
          nine months ended September 30, 2008 and 2007.
 (s)  Foreign
        currency translation
 
 The
        accompanying financial statements are presented in United States dollars.
        The
        functional currency of the Company is the Renminbi (RMB). The financial
        statements are translated into United States dollars from RMB at year-end
        exchange rates as to assets and liabilities and average exchange rates as
        to
        revenues and expenses. Capital accounts are translated at their historical
        exchange rates when the capital transactions occurred.
 
 September
                  30, 2008Balance
                  sheet
              RMB
                  6.8551 to US$1.00Statement
                  of income and comprehensive income
              RMB
                  6.8529 to US$1.00December
                  31, 2007Balance
                  sheet
              RMB
                  7.3141 to US$1.00Statement
                  of income and comprehensive income
              RMB
                  7.6172 to US$1.00
  F-39
  **YUHE
        INTERNATIONAL INC.**
 **(Formerly
        known as First Growth Investors Inc.)**
 
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 
 **3.
        Summary of significant accounting policies - continued**
 
 The
        RMB
        is not freely convertible into foreign currency and all foreign exchange
        transactions must take place through authorized institutions. No representation
        is made that the RMB amounts could have been, or could be, converted into
        US$ at
        the rates used in translation.
 
 (t)  Comprehensive
        income
 
 Comprehensive
        income is defined to include all changes in equity except those resulting
        from
        investments by owners and distributions to owners. Among other disclosures,
        all
        items that are required to be recognized under current accounting standards
        as
        components of comprehensive income are required to be reported in a financial
        statement that is presented with the same prominence as other financial
        statements. The component of comprehensive income includes foreign currency
        translation adjustment.
 
 (u)  Fair
        value of financial instruments
  SFAS
        No.
        107, “Disclosures about Fair Value of Financial Instruments” (“SFAS 107”)
        requires entities to disclose the fair values of financial instruments except
        when it is not practicable to do so. Under SFAS No. 107, it is not practicable
        to make this disclosure when the costs of formulating the estimated values
        exceed the benefit when considering how meaningful the information would
        be to
        financial statement users.
 
 The
        fair
        values of all assets and liabilities do not differ materially from their
        carrying amounts. None of the financial instruments held are derivative
        financial instruments and none were acquired or held for trading purposes
        during
        the years ended December 31, 2007 or 2006.
 
 (v)  Basic
        and
        diluted earnings per share
 
 The
        Company reports basic earnings per share in accordance with SFAS No. 128,
        “Earnings Per Share”. Basic earnings per share is computed using the weighted
        average number of shares outstanding during the periods presented. The weighted
        average number of shares of the Company represents the common stock outstanding
        during the reporting periods.
 
 Diluted
        earning per share is based on the assumption that all dilutive options were
        converted or exercised. Dilution is computed by applying the treasury stock
        method. Under this method, options are assumed to be exercised at the time
        of
        issuance, and as if funds obtained thereby were used to purchase common stock
        at
        the average market price during the year.
  F-40
 
 **YUHE
        INTERNATIONAL INC.**
 **(Formerly
        known as First Growth Investors Inc.)**
 
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 
 **3.
        Summary of significant accounting policies - continued**
 
 (w)  Recent
        accounting pronouncements
 
 In
        December 2007, the FASB issued SFAS No. 141R, “Business Combinations” (“SFAS No.
        141R”). SFAS No. 141R amends SFAS 141 and provides revised guidance for
        recognizing and measuring identifiable assets and goodwill acquired, liabilities
        assumed, and any noncontrolling interest in the acquiree. It also provides
        disclosure requirements to enable users of the financial statements to evaluate
        the nature and financial effects of the business combination. It is effective
        for fiscal years beginning on or after December 15, 2008 and will be applied
        prospectively. We are currently evaluating the impact of adopting SFAS No.
        141R
        on our consolidated financial statements.
 
 In
        December 2007, the Financial Accounting Standards Board (“FASB”) issued SFAS No.
        160, “Noncontrolling Interests in Consolidated Financial Statements--an
        amendment of ARB No. 51” (“SFAS No. 160”). SFAS No. 160 requires that ownership
        interests in subsidiaries held by parties other than the parent, and the
        amount
        of consolidated net income, be clearly identified, labeled, and presented
        in the
        consolidated financial statements. It also requires once a subsidiary is
        deconsolidated, any retained noncontrolling equity investment in the former
        subsidiary be initially measured at fair value. Sufficient disclosures are
        required to clearly identify and distinguish between the interests of the
        parent
        and the interests of the noncontrolling owners. It is effective for fiscal
        years
        beginning on or after December 15, 2008 and requires retroactive adoption
        of the
        presentation and disclosure requirements for existing minority interests.
        All
        other requirements shall be applied prospectively. We are currently evaluating
        the impact of adopting SFAS No. 160 on our consolidated financial
        statements.
 
 In
        March
        2008, the FASB issued FAS No. 161, “Disclosures about Derivative Instruments and
        Hedging Activities,” which requires enhanced disclosures about an entity’s
        derivative and hedging activities. This Statement is effective for financial
        statements issued for fiscal years and interim periods beginning after November
        15, 2008. Since FAS 161 only provides for additional disclosure requirements,
        there will be no impact on our results of operations and financial
        position.
  In
        May
        2008, the FASB issued Statement of Financial Accounting Standards No. 162,
        The
        Hierarchy of Generally Accepted Accounting Principles (“FAS 162"). This Standard
        identifies the sources of accounting principles and the framework for selecting
        the principles to be used in the preparation of financial statements of
        nongovernmental entities that are presented in conformity with generally
        accepted accounting principles. FAS 162 directs the hierarchy to the entity,
        rather than the independent auditors, as the entity is responsible for selecting
        accounting principles for financial statements that are presented in conformity
        with generally accepted accounting principles. The Standard is effective
        60 days
        following SEC approval of the Public Company Accounting Oversight Board
        amendments to remove the hierarchy of generally accepted accounting principles
        from the auditing standards. FAS 162 is not expected to have an impact on
        the
        financial statements.
 
 In
        May 2008, the FASB issued SFAS No. 163, Accounting for Financial
        Guarantee Insurance Contracts, an interpretation of FASB Statement No. 60
        (SFAS 163). This statement clarifies accounting for financial guarantee
        insurance contracts by insurance enterprises under FASB Statement No. 60,
        Accounting and Reporting by Insurance Enterprises. SFAS 163 is effective
        for
        fiscal years, and interim periods within those years, beginning after
        December 15, 2008. Because we do not issue financial guarantee insurance
        contracts, we do not expect the adoption of this standard to have an effect
        on
        our financial position or results of operations.
  F-41
 
 **YUHE
        INTERNATIONAL INC.**
 **(Formerly
        known as First Growth Investors Inc.)**
 
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 
 **4.**
              **Acquisition
                  of subsidiaries**
 
 Acquisition
        of 100% Weifang Yuhe Poultry Co., Limited, “PRC Yuhe”, and 43.75% of Weifang
        Taihong Feed Co., Ltd.
 
 On
        January 31, 2008, Bright Stand acquired 100% common stock of PRC Yuhe
        for $11,306,522, equivalent to RMB 81,450,000, and 43.75% of Weifang Taihong
        Feed Co., Ltd for $312,530, equivalent to RMB 2,244,000, and total amount
        is $11,619,052.
 
 The
        Company adopted SFAS No. 141, Business Combinations, which requires the use
        of
        the purchase method of accounting for any business combinations initiated
        after
        June 30, 2002. The results of PRC Yuhe and Taihong and the estimated fair
        market
        values of the assets and liabilities have been included in our consolidated
        financial statements from the date of acquisition. The purchase price for
        PRC
        Yuhe and Taihong was allocated to the assets acquired and liabilities assumed
        of
        PRC Yuhe and Taihong. All assets and liabilities assumed, based on their
        fair
        values.
 
 Accounts
                  receivables
              
              $
              1,475Other
                  receivables
              
              
              3,001,699Deposits
                  paid
              
              
              1,084,265Deferred
                  expenses
              
              
              602,918Advance
                  to suppliers
              
              
              305,013Inventories
              
              
              4,624,425Due
                  from related companies
              
              
              4,008,506Unlisted
                  investment
              
              
              279,738Plant
                  and equipment
              
              
              15,323,245Intangible
                  assets
              
              
              2,832,869Accounts
                  payable
              
              
              (4,800,664
              )Accrued
                  expenses
              
              
              (473,020
              )Payroll
                  and related liabilities
              
              
              (545,565
              )Other
                  tax payable
              
              
              (125,645
              )Advances
                  from customers
              
              
              (209,694
              )Other
                  payables
              
              
              (1,770,862
              )Due
                  to related co.
              
              
              (320,913
              )Notes
                  payables
              
              
              (10,549,316
              )Other
                  assumed liabilities Other payable
              
              
              (2,520,531
              )Net
                  assets acquired
              
              $
              10,747,943Less
                  : Purchase Consideration (net of cash)
              
              
              (10,567,946
              )Negative
                  good being transfer to construction in progress
              
              
              179,997
  F-42
 
 **YUHE
        INTERNATIONAL INC.**
 **(Formerly
        known as First Growth Investors Inc.)**
 
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 
 **4.**
              **Acquisition
                  of subsidiaries -
                  continued**
 
 The
        following table presents the unaudited results of operations of the Company
        as
        if the Yuhe acquisitions had been consummated as of January 1, 2008 and 2007
        and
        the results are shown for the nine months ended September 30, 2008 and 2007
        includes certain pro forma adjustments, including depreciation and amortization
        on the assets acquired, and other adjustments.
  For the nine months ended
                
                For the three months endedSeptember 30,
                
                September 30,
                
                September 30,
                
                September 30,2008
                
                2007
                
                2008
                
                2007(Pro forma)
                
                (Pro forma)
                
                (As reported)
                
                (Pro forma)Revenues
                
                $
                17,809,592
                
                $
                16,215,151
                
                $
                9,609,781
                
                $
                10,177,834Net
                    income
                
                $
                2,964,983
                
                $
                5,012,319
                
                $
                1,930,786
                
                $
                5,202,206Earnings
                    (loss) per shareBasic
                
                $
                0.22
                
                $
                0.59
                
                $
                0.12
                
                $
                0.61Diluted
                
                $
                0.21
                
                $
                0.59
                
                $
                0.12
                
                $
                0.61Weighted
                    average shares outstandingBasic
                
                
                13,750,966
                
                
                8,626,318
                
                
                15,543,330
                
                
                8,626,318Diluted
                
                
                13,985,255
                
                
                8,626,318
                
                
                15,989,256
                
                
                8,626,318
 
 **5.**
              **Inventories**
 
 Inventories
        consist of the following:
 
 September
                  30
              
              December
                  312008
              
              2007Raw
                  materials
              
              $
              485,432
              
              $
              -Work
                  in progress
              
              
              8,467,802
              
              
              -Finished
                  goods
              
              
              49,126
              
              
              -$
              9,002,360
              
              $
              -
  F-43
 
 **YUHE
        INTERNATIONAL INC.**
 **(Formerly
        known as First Growth Investors Inc.)**
 
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 
 **6.**
              **Other
                  receivables, net**
 
 Other
        receivables, net consist of the following:
 
 September
                  30
              
              December
                  312008
              
              2007Other
                  receivables
              
              $
              973,113
              
              $
              -Less:
                  Allowances
              
              
              (119,109
              )
              
              -$
              854,004
              
              $
              -
 
 Other
        receivables are unsecured, interest free and have no fixed repayment
        date.
 
 During
        the nine months ended September 30, 2008, bad debt expense was $77,888 and
        bad
        debt recovery was $26,571. There was no bad debt expense for the nine months
        ended September 30, 2007. During the three months ended September 30, 2008
        and
        2007, bad debt expense was $77,888 and $0, respectively.
 
 Allowance
        is made when collection of the full amount is no longer probable. Management
        reviews and adjusts this allowance periodically based on historical experience,
        current economic climate as well as its evaluation of the collectibility
        of
        outstanding accounts. The Group evaluates the credit risks of its customers
        utilizing historical data and estimates of future performance.
 
 **7.**
              **Note
                  receivables, net**
 
 Note
        receivables, net consist of the following:
 
 September
                  30,
              
              December
                  31,2008
              
              2007Note
                  receivables
              
              $
              80,148
              
              $
              -80,148
              
              
              -Less
                  : Allowances
              
              
              (55,008
              )
              
              -$
              25,140
              
              $
              -
  F-44
 
 **YUHE
        INTERNATIONAL INC.**
 **(Formerly
        known as First Growth Investors Inc.)**
 
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 **7.**
                **Note
                    receivables, net - continued**
 Note
        receivables are unsecured, interest free and have no fixed repayment
        date.
 
 Management
        provides for an allowance when collection of the full amount is no longer
        probable by establishing an allowance equivalent to 30% of gross amount of
        notes
        receivables due over 6 months and 60% of gross amount of notes receivables
        due
        over 1 year. Full provision will be made for notes receivables due over 2
        years.
 
 During
        the nine months ended September 30, 2008 and 2007, the recovery of bad debts
        was
        $430,554 and $0, respectively.
 
 **8.**
              **Unlisted
                  investments**
 
 Unlisted
        investments at September 30, 2008 represent the 3% investments in Hanting
        Rural
        Credit Coorperative, “Hanting”, recorded at cost. It is stated at cost because
        the Company does not have significant influence or control over Hanting.
        Under
        the cost method, the Company records the investment at cost, and recognizes
        as
        income dividends received that are distributed from net accumulated earnings
        of
        the investee since the date of acquisition by the Company. The net accumulated
        earnings of the investee subsequent to the date of investment are recognized
        by
        the Company only to the extent distributed by the investee as dividends.
        Dividends received in excess of earnings subsequent to the date of investment
        are considered a return of investment and are recorded as reductions of cost
        of
        the investment. A series of operating losses of an investee or other factors
        may
        indicate that a decrease in value of the investment has occurred which is
        other
        than temporary and should accordingly be recognized.
 
 For
        the
        three months and nine months period ended September 30, 2008, the Company
        recorded $0 and $6,074 as income from unlisted investment for dividends received
        from Hanting. Management of the Company has reviewed the investment in Hanting
        for impairment and determined there is no indication that the carrying amount
        of
        Hanting may not be recoverable.
 
 **9.**
              **Plant
                  and equipment, net**
 
 Plant
        and
        equipment consists of the following:
 
 September
                  30,
              
              December
                  31,2008
              
              2007At
                  costBuildings
              
              $
              7,968,239
              
              $
              -Machinery
              
              
              3,971,903
              
              
              -Motor
                  vehicles
              
              
              119,770
              
              
              -Furniture
                  and equipment
              
              
              77,534
              
              
              -12,137,446
              
              
              -Less:
                  accumulated depreciation
              
              
              (1,006,381
              )
              
              -Construction
                  in progress
              
              
              5,816,223
              
              
              -$
              16,947,288
              
              $
              -
 
 During
        the nine months ended September 30, 2008, depreciation expenses amounted
        to
        $996,126 among which $810,418 and $185,708 were recorded as cost of sales
        and
        administrative expense respectively.
 
 During
        the nine months ended September 30, 2007, depreciation expenses amounted
        to
        $0.
 
 During
        the three months ended September 30, 2008, depreciation expenses amounted
        to
        $374,216 among which $322,336 and $51,880 were recorded as cost of sales
        and
        administrative expense respectively.
 
 During
        the three months ended September 30, 2007, depreciation expenses amounted
        to
        $0.
 
 As
        of
        September 30, 2008, buildings and machinery of the Group with net book value
        of
        $14,652,999 were pledged as collateral under certain loan
        arrangements.
  F-45
 
 **YUHE
        INTERNATIONAL INC.**
 **(Formerly
        known as First Growth Investors Inc.)**
 
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 
 
 **10.**
              **Deposits
                  paid for acquisition of long term
                  assets**
 
 Deposits
        paid consist of the following:
 
 September****30,
              
              December
                  31,2008
              
              2007Deposits
                  paid for purchase of land
              
              $
              1,312,891
              
              $
              -Deposits
                  paid for construction in progress
              
              
              6,274,079
              
              
              -Deposits
                  paid for acquisition of farm
              
              
              2,334,029
              
              
              -Deposits
                  paid with capital commitment (Note 26)
              
              
              9,920,999
              
              
              -Deposits
                  paid for construction in progress
              
              
              390,735
              
              
              -Total
                  Deposits paid for acquisition of long term assets
              
              $
              10,311,734
              
              $
              -
 
 **11.**
              **Intangible
                  assets, net**
 
 Intangible
        assets consist of the following:
 
 September****30,
              
              December
                  31,2008
              
              2007Land
                  use rights, at cost
              
              $
              2,969,324
              
              $
              -Less:
                  accumulated amortization
              
              
              (43,603
              )
              
              -$
              2,925,721
              
              $
              -
 
 As
        of
        September 30, 2008, land use rights of the Group were pledged as collateral
        under certain loan arrangements.
 
 During
        the nine months ended September **** 30,
        2008
        and 2007, amortization expenses included in the cost of sales were $42,853
        and
        $0, respectively.
 
 During
        the three months ended September **** 30,
        2008
        and 2007, amortization expenses included in the cost of sales were $16,356
        and
        $0, respectively.
  F-46
 
 **YUHE
        INTERNATIONAL INC.**
 **(Formerly
        known as First Growth Investors Inc.)**
 
 **NOTES
        TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**
 
 
 **12.**
              **Due
                  from related companies**
 
 September
                  30,
              
              December
                  31,2008
              
              2007Hefeng
                  Green Agriculture Co., Ltd, “Hefeng Green”, – Mr. Gao Zhentao, a director
                  of the Company is also a director of Hefeng Green
              
              $
              75,744
              
              $
              -Shandong
                  Yuhe Food Co., Ltd, “Yuhe Group” – Mr. Gao Zhentao, a director of the
                  Company is also a director of Yuhe Group
              
              
              3,773,122
              
              
              -Shandong
                  Yuhe New Agriculture Academy of Sciences, “Shandong Yuhe” – Mr. Gao
                  Zhentao, a director of the Company is also a director of Shandong
                  Yuhe
              
              
              50,250
              
              
              -Weifang
                  Jiaweike Food Co., Ltd, “Weifang Jiaweike” – Mr. Gao Zhentao, a director
                  of the Company is also a director of Weifang Jiaweike
              
              
              26
              
              
              -Weifang
                  Yuhe Poultry Co., Ltd, “PRC Yuhe”- Mr. Gao Zhentao, a director of the
                  Company is also a director of PRC Yuhe
              
              
              -
              
              
              1,000,000$
              3,899,142
              
              $
              1,000,000
 
 The
        amounts due from related companies are unsecured, interest free and have
        no
        fixed repayment date.
 
 **13.**
              **Due
                  from a shareholder**
 
 As
        of
        September **** 30,
        2008,
        amount due from a shareholder consists of $15,000 due from Mr. Yamamoto.
        There
        was no amount due from shareholder as of December 31, 2007.
 
 The
        amount due from a shareholder is unsecured, interest free and has no fixed
        repayment date.
 
 **14.**
              **Loans
                  payable**
 
 Loans
        payable are loans from unrelated companies for temporary operation purposes.
        They are unsecured, interest free and have no fixed repayment date.
 
 **15.**
              **Other
                  payable**
 
 September
                  30,
              
              December
                  31,2008
              
              2007Accrued
                  on Construction in progress
              
              $
              304,524
              
              $
              -Interest
                  payable
              
              
              69,012
              
              
              -Deposits
                  received
              
              
              286,710
              
              
              -Others
              
              
              629,682
              
              
              -$
              1,289,929
              
              $
              -
  Deposit
        received represent deposits collected from customers as security for
        non-payment. Other payable represents apartment rental reimbursement to staff
        and insurance payable.
 
 F-47




**YUHE
      INTERNATIONAL INC.**


**(Formerly
      known as First Growth Investors Inc.)**





**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**





**16.**
              **Due
                  to related companies**





September 30,
            
            December 31,2008
            
            2007Weifang
                Hexing Breeding Co., Ltd, “Weifang Hexing” – Mr. Gao Zhentao, a director
                of the Company is also a director of Weifang Hexing
            
            $
            205,775
            
            $
            -Others
            
            
            23,013
            
            
            -$
            228,788
            
            $
            -





The
      amounts due to related companies are unsecured, interest free and have no fixed
      repayment date. These loans are used for working capital purposes.




F-48




**YUHE
      INTERNATIONAL INC.**


**(Formerly
      known as First Growth Investors Inc.)**





**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**





**17.**
            **Long-term
                loans**





The
      long-term loans are denominated in Chinese Renminbi and are presented in US
      dollars as follows:





September 30,
            
            December 31,2008
            
            2007Loans
                from Nansun Rural Credit, interest rate at 9.22% to 10.51% per annum,
                due
                from November 28, 2008 to May 17, 2010
            
            $
            8,752,608
            
            $
            -Loans
                from Shuangyang Rural Credit interest rate at 9.33% per annum, due
                on
                October 12, 2008
            
            
            948,199
            
            
            -Loans
                from Hanting Kaiyuan Rural Credit Cooperative, interest rate at 9.22%
                to
                13.31% per annum, due from November 28, 08 to January 10,
                2009
            
            
            1,064,900
            
            
            -10,765,707
            
            
            -Less:
                current portion of long-term loans
            
            
            (6,827,034
            )
            
            -$
            3,938,673
            
            $
            -




Future
      maturities of long-term loans as at September 30, 2008 are as follows:





September****30,20082009
            
            $
            6,827,0342010
            
            
            3,938,673$
            10,765,707




F-49





**YUHE
      INTERNATIONAL INC.**


**(Formerly
      known as First Growth Investors Inc.)**





**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**





**18.**
            **Income
                tax**





The
      Company is operating in the PRC, and in accordance with the relevant tax laws
      and regulations of the PRC, the corporate income tax rate is 25%. However,
      the
      Company is an agricultural company, and in accordance with the relevant
      regulations regarding the tax exemption, the Company is tax-exempt as long
      as it
      is registered as an agricultural entity.





Taihong
      is operating in the PRC, and in accordance with the relevant tax laws and
      regulations of the PRC, the corporate income tax rate is 25%.





The
      Group
      uses the asset and liability method, where deferred tax assets and liabilities
      are determined based on the expected future tax consequences of temporary
      differences between the carrying amounts of assets and liabilities for financial
      and income tax reporting purposes. There are no material timing differences
      and
      therefore no deferred tax asset or liability at September 30, 2008.





The
      provision for income taxes consists of the following:





For the nine months endedSeptember 302008
            
            2007Current
                tax-PRC
            
            $
            -
            
            $
            --Deferral
                tax provision
            
            
            -
            
            
            -$
            -
            
            $
            -




All
      of
      the Group’s income (loss) before income taxes is from PRC sources. Actual income
      tax expenses reported in the consolidated statements of income and comprehensive
      income differ from the amounts computed by applying the PRC statutory income
      tax
      rate of 25% and 33% for the fiscal years of 2008 and 2007 respectively to income
      (loss) before income taxes for the nine months ended September 30, 2008 and
      2007
      for the following reasons:





For
                the nine months endedSeptember
                302008
            
            2007Income
                (loss) before income taxes
            
            $
            2,823,449
            
            $
            -Computed
                “expected” income tax expense at 25%
            
            
            705,862
            
            
            -Tax
                effect on net taxable temporary differences
            
            
            (20,909
            )
            
            -Effect
                of cumulative tax losses
            
            
            116,437
            
            
            -Effect
                of tax holiday
            
            
            (801,390
            )
            
            -$
            -
            
            $
            -


F-50





**YUHE
      INTERNATIONAL INC.**


**(Formerly
      known as First Growth Investors Inc.)**





**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**





**19.**
            **Fair
                value of financial
                instruments**




The
      fair
      value of a financial instrument is the amount at which the instrument could
      be
      exchanged in a current transaction between willing parties. The carrying amounts
      of financial assets and liabilities, such as cash and cash equivalents, trade
      accounts receivable, other receivables, accounts payable, and other payables,
      approximate their fair values because of the short maturity of these instruments
      and market rates of interest.





**20.**
            **Common
                stock and warrants**





(a)
            Common
                Stock





On
      March
      12, 2008, the Company issued 126,857,134 shares of its common stock, equivalent
      to approximately 8,626,318 post-split shares,, par value $0.001 per share,
      to
      the sole stockholder of Bright Stand to effect the Reverse Merger Acquisition.
      At the same time, the Company issued 85,714,282 shares of common stock,
      equivalent to approximately 5,829,018 post-split shares, to the investors for
      gross proceeds of $18 million in the private placement.





The
      Company's issued and outstanding number of common stock immediately prior to
      the
      Reverse merger Acquisition was 16,000,000 shares, equivalent to 1,087,994
      post-split shares.





Effective
      on April 4, 2008, the Company effected a 1-for-14.70596492 reverse stock split
      of our common stock.





After
      the
      reverse acquisition, the total common stock issued and outstanding of the
      Company was 15,543,330 post-split shares.





(b)
            Warrants





The
      Company granted warrants to acquire an aggregate of 6,999,999 shares of common
      stock,,, equivalent to 476,014 post-split shares, to Roth Capital Partners,
      LLC
      and WLT Brothers Capital, Inc., for their services in connection with the
      private placement on March 12, 2008. The warrants have a strike price equal
      to
      $3.706, have a term of three years starting from March 12, 2008 and permit
      cashless or cash exercise at all times that they are exercisable. The warrants
      are exercisable at any time 6 months after their issuance.





The
      total
      number of warrants outstanding as at September 30, 2008 was 476,014 shares.
      On
      October 27, 2008, we issued 178,848 new shares to Roth Capital Partners, LLC
      based on their cashless exercise of 333,198 warrants issued to it
      as compensation for their services as co-placement agent.




(c)
            Additional
                paid-in capital





Prior
      to
      the Reverse Merger, the shareholder of Bright Stand contributed additional
      capital of $12,149,766 to Bright Stand for the acquisition of PRC Yuhe.
      Subsequent to the contribution of capital, Bright Stand entered into a reverse
      acquisition with Yuhe International and raised $18 million gross proceeds in
      the
      private placement as described in Note 20 (a).


F-51





**YUHE
      INTERNATIONAL INC.**


**(Formerly
      known as First Growth Investors Inc.)**





**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**




**21.**
              **Obligations
                  under registration rights
                  agreements**





The
      Company entered into a Registration Rights Agreement with certain investors
      on
      March 12, 2008 in the private placement. The Company is required to file a
      resale registration statement on Form S-1 or any other appropriate form (i)
      within 60 days following the closing for purposes of registering the resale
      of
      these shares, (ii) within 15 days with respect to any additional registration
      statement, (iii) within 15 days with respect to any additional registration
      statements required to be filed due to SEC Restrictions, (iv) within 30 days
      following the date on which it becomes eligible to utilize Form S-3 to register
      the resale of common stock, or (v) within 45 days following the date the Make
      Good Shares are delivered by Mr. Yamamoto to the investors.





The
      Company will be required to pay the investors liquidated damages if it fails
      to
      file a registration statement by the above filing deadlines or if it does not
      promptly respond to comments received from the SEC. The liquidated damages
      accrue at a rate of 0.5% per month of the aggregate investment proceeds which
      are $18 million received from the investors, capped at 5% of the total
      investment proceeds, or $900,000. The Company filed the Registration Statement
      on May 12, 2008.





Based
      on
      the Company’s experience since filing its registration statement on May 12,
      2008, the Company is in compliance with the Registration Rights Agreement.
      The
      Company believes that it is unlikely that it will be required to pay any
      liquidated damages under the provisions of the Registration Rights Agreement,
      and therefore has not recorded a liability for that potential obligation as
      at
      September 30, 2008.





**22.**
              **Stock
                  options**





On
      June
      13, 2008, the Company granted to the Chief Financial Officer, the “CFO”, of the
      Company an option to purchase 150,000 shares of the Company’s common stock at an
      exercise price of $3.708 per share for the 3 year’s employment. The options
      shall vest with respect to 33.3% of the total number of shares purchasable
      upon
      exercise thereof one year after the grant date and 33.3% on the second and
      third
      anniversary of the grant date, Mr. Hu will be fully vested in the option by
      that
      date and shall cease to vest if the executive cease to be the CFO of the Company
      for any reason.





On
      the
      same date, the Company granted to three independent directors of the Company
      an
      option to purchase 77,717 share of the Company’s common stock at an exercise
      price of $3.708 per share for the 3 year’s employment. The options shall vest
      with respect to 33.3% of the total number of shares purchasable upon exercise
      thereof one year after the grant date and 33.3% on the second and third
      anniversary of the grant date, the directors will be fully vested in the option
      by that date and shall cease to vest for any independent director if such
      independent director ceases to be an independent directors of the Company for
      any reason.




The
      options granted to the CFO and the three independent directors will expire
      on
      the fifth anniversary of the grant date and cease to vest if they cease to
      be
      the CFO or independent directors of the company for any reason.





During
      the nine month ended September 30, 2008, the Company granted 383,151 stock
      options. The Company recognizes compensation expense, net of estimated
      forfeitures, over the requisite service period, which is the period during
      which
      the grantee is required to provide services in exchange for the award. The
      Company has elected to recognize compensation cost for awards with only a
      service condition that has a graded vesting schedule on a straight-line basis
      over the requisite service period for the entire award.





The
      Company uses the Black-Scholes option pricing model to calculate the grant-date
      fair value of an award, with the following assumptions: no dividend yield,
      expected volatility of 109.40%, and a risk-free interest rate of 3.00%. In
      determining volatility of the Company’s options, the Company used the average
      volatility of the Company’s stock. Based on the Black-Scholes option pricing
      model, the entire option was valued at $2,186,499. In accordance with SFAS
      No.
      123R, the Company has recorded stock-based compensation expense during the
      three
      and nine months ended September 30, 2008 of $183,707 and $217,652, respectively,
      in connection with the issuance of this option.





The
      following table summarizes all Company stock option transactions between January
      1, 2008 and September 30, 2008




**Option**
              **Shares**
            
            **Vested**
              **Shares**
            
            **Weighted**
              **Average**
              **Exercise**
              **Price**
            
            **Remaining**
              **Contractual**
              **Term**Balance,
                January 1, 2008
            
            
            -
            
            
            -
            
            $
            -
            
            $
            -Granted
                or vested during the nine months ended September 30, 2008
            
            
            383,151
            
            
            -
            
            $
            3.708
            
            $
            5Expired
                during the nine months ended September 30, 2008
            
            
            -
            
            
            -
            
            
            -
            
            
            -Balance,
                September 30, 2008
            
            
            383,151
            
            
            -
            
            $
            3.708
            
            $
            5





The
      weighted average grant date fair value of options granted was $7.35 per share.
      The total number of stock options outstanding as at September 30, 2008 was
      383,151 shares.


F-52





**YUHE
      INTERNATIONAL INC.**


**(Formerly
      known as First Growth Investors Inc.)**





**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**





**23.**
            **Stock-Based
                Compensation**





The
      Company estimated the fair value of each warrant award on the date of grant
      using the Black-Scholes option-pricing model and the assumption noted in the
      following table. Expected volatility is based on the historical and implied
      volatility of a peer group of publicly traded entities. The expected term of
      options gave consideration to historical exercises, post-vesting cancellations
      and the options’ contractual term. The risk-free rate for the expected term of
      the option is based on the U.S. Treasury Constant Maturity at the time of grant.
      The assumptions used to value options granted during the nine months ended
      September 30, 2008 were as follows:





Nine Months Ended
              September 30, 2008Risk free interest rate
            
            
            3%Expected
                volatility
            
            
            109%Expected
                life (years)
            
            
            3





Stock
      Compensation-The Company granted warrants to acquire and aggregate of 6,999,999
      shares of common stock, equivalent to 476,014 post-split shares, to Roth Capital
      Partners, LLC and WLT Brothers Capital, Inc., for the services in connection
      with the private placement on March 12, 2008. The Company valued the options
      by
      Black-Scholes option-pricing model with the amount of $2,398,975 which recorded
      as cost of raising capital against additional paid-in capital.





**24.**
            **Significant
                concentrations and risk**





(a)
            Customer
                Concentrations





The
      Company has the following concentrations of business with each customer
      constituting greater than 10% of the Company’s gross sales:





For
                the nine months ended
              September
                30
            
            For
                the three months ended
              September
                302008
            
            2007
            
            2008
            
            2007Wang
                Jianbo
            
            
            11.7
            %
            
            -
            
            
            9.0
            %
            
            -Wei
                Yunchao
            
            
            10.1
            %
            
            -
            
            
            10.2
            %
            
            -


The
      Group
      has not experienced any significant difficulty in collecting its accounts
      receivable in the past and is not aware of any financial difficulties being
      experienced by its major customers.




The
      Group
      has the following concentrations of business with each supplier constituting
      greater than 10% of the Company’s purchase:





For
                the nine months ended
              September
                30
            
            For
                the three months ended
              September
                302008
            
            2007
            
            2008
            
            2007Ma
                Zhuping
            
            
            33.0
            %
            
            -
            
            
            32.7
            %
            
            -Shandong
                Yikshang Poultry Limited
            
            
            10.4
            %
            
            -
            
            
            -
            
            
            -





(b)
            Credit
                Risk





Financial
      instruments that potentially subject the Group to significant concentration
      of
      credit risk consist primarily of cash and cash equivalents. As of September
      30,
      2008, substantially all of the Group’s cash and cash equivalents were held by
      major financial institutions located in the PRC, which management believes
      are
      of high credit quality.





(c)
            Group’s
                operations are in China




All
      of
      the Group’s products are produced in China. The Group’s operations are subject
      to various political, economic, and other risks and uncertainties inherent
      in
      China. Among other risks, the Group’s operations are subject to the risks of
      transfer of funds; domestic and international customs and tariffs; changing
      taxation policies; foreign exchange restrictions; and political conditions
      and
      governmental regulations.




F-53





**YUHE
      INTERNATIONAL INC.**


**(Formerly
      known as First Growth Investors Inc.)**





**NOTES
      TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS**





**25.**
            **Business
                and geographical segments-**





The
      Company’s operations are classified into two principal reportable segments that
      provide different products or services.  PRC Yuhe is engaged in the
      business of breeding chick while Taihong is engaged in the business of feed
      production, in which most of the products were used internally.  Separate
      management of each segment is required because each business unit is subject
      to
      different production and technology strategies.




**Reportable
      Segments**





Production
              of chicks
            
            Production
              of feeds
            
            Corporate
            
            Production
              of chicks
            
            Production
              of feeds
            
            Corporate
            
            TotalFor the nine months ended
            
            For the nine months ended
            
            For thenine
              months ended
            
            For the nine
              months endedSeptember 30, 2008
            
            September 30, 2007
            
            September
              30, 2008
            
            September
              30, 2007External revenue
            
            $
            15,995,782
            
            $
            322,481
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            16,318,263
            
            $
            -Intersegment
                revenue
            
            
            -
            
            
            8,593,623
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            8,593,623
            
            
            -Interest
                income
            
            
            386
            
            
            1
            
            
            4,131
            
            
            -
            
            
            -
            
            
            -
            
            
            4,518
            
            
            -Interest
                expense
            
            
            (344,299
            )
            
            (418,869
            )
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (763,168
            )
            
            -Depreciation
                and amortization
            
            
            (955,356
            )
            
            (83,623
            )
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (1,038,979
            )
            
            -Net
                profit/(loss)
            
            
            3,205,560
            
            
            83,634
            
            
            (465,745
            )
            
            -
            
            
            -
            
            
            -
            
            
            2,823,449
            
            
            -Expenditures
                for long-lived assets
            
            
            12,271,784
            
            
            2,609
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            12,274,393
            
            
            -





Note:
      Intersegment revenue of $8,593,623 was eliminated in consolidation.


Expenditure
      for long-lived assets included accrued construction in progress amounting
      $304,524.





**Reportable
      Segments**





Production
              ofchicks
            
            Production
              offeeds
            
            Corporate
            
            Production
              of chicks
            
            Production
              of feeds
            
            Corporate
            
            TotalFor the three months ended
            
            For the three months ended
            
            For the three
              months ended
            
            For the three
              months endedSeptember 30, 2008
            
            September 30, 2007
            
            September
              30, 2008
            
            September
              30, 2007External revenue
            
            $
            9,480,412
            
            $
            129,369
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            -
            
            $
            9,609,781
            
            $
            -Intersegment
                revenue
            
            
            -
            
            
            4,079,840
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            4,079,840
            
            
            -Interest
                income
            
            
            63
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            63
            
            
            -Interest
                expense
            
            
            (157,591
            )
            
            (162,457
            )
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (320,048
            )
            
            -Depreciation
                and amortization
            
            
            (358,729
            )
            
            (31,841
            )
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (390,570
            )
            
            -Net
                profit/(loss)
            
            
            2,301,047
            
            
            52,223
            
            
            (422,484
            )
            
            -
            
            
            -
            
            
            -
            
            
            1,930,786
            
            
            -Expenditures
                for long-lived assets
            
            
            386,503
            
            
            555
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            387,058
            
            
            -


F-54





**25.**
            **Business
                and geographical segments -
                continued**





Note:
      Intersegment revenue of $4,079,840 was eliminated in consolidation.


Expenditure
      for long-lived assets included accrued construction in progress amounting
      $304,524.





The
      Group’s operations are located in the PRC. All revenue is from customers in the
      PRC. All of the company’s assets are located in the PRC. Accordingly, no
      analysis of the Group's sales and assets by geographical market is
      presented.





**26.**
            **Commitments
                and contingencies**





Operating
      Leases




In
      the
      normal course of business, the Group leases the land for hen house under
      operating lease agreements. The Group rents land, primarily for the feeding
      of
      the chickens. The operating lease agreements generally contain renewal options
      that may be exercised at the Group’s discretion after the completion of the base
      rental terms. The Group was obligated under operating leases requiring minimum
      rentals as follows:





Up
                to December 31,2008
            
            $
            38,8022009
            
            
            155,2092010
            
            
            143,0492011
            
            
            82,2472012
            
            
            82,247Thereafter
            
            
            1,529,568Total
                minimum lease payments
            
            $
            2,031,122





During
      the nine months ended September 30, 2008 and 2007, rental expenses were $118,265
      and $0, respectively.





During
      the three months ended September 30, 2008 and 2007, rental expenses were $45,283
      and $0, respectively.





As
      of
      September 30, 2008, the Group had capital commitment amounting to $10,518,263
      in
      relation to the construction cost, land acquisition and farm acquisition for
      PRC
      Yuhe and the Group paid the deposits of $9,920,999 related to these commitments
      and recorded under Deposits paid for acquisition of long term assets (Note
      10).


**Land
        for Hatchery Factory No. 3**
 On
        June
        10, 2008, PRC Yuhe entered into an agreement with Shandong Meiweite Food
        Ltd.
        and purchased land use rights for 45 years to an area covering 26,666 square
        meters.  According to the agreement, the total consideration for the sale
        and purchase is RMB 10 million, approximately equivalent to $1.5 million,
        and a
        sum of RMB 9 million, approximately equivalent to $1.3 million, has been
        paid
        according to the terms of such agreement.  PRC Yuhe will manage and utilize
        the land to build a new hatchery next year, bringing the total number of
        hatcheries to three by the end of 2009.
 
 **Purchase
        of Breeding Farms Nos. 3 & 4**
 On
        June
        7, 2008, PRC Yuhe entered into an agreement with Shandong Anrui Poultry Feed
        Ltd., and purchased land and the building on it for a total consideration
        of RMB
        17 million, approximately equivalent to $2.5 million, and a sum of RMB 16
        million, approximately equivalent to $2.4 million, has been paid according
        to
        the terms of such agreement. PRC Yuhe will utilize this facility as one of
        its
        breeding farms without the need to pay for lease payments after such agreement
        was signed.  PRC Yuhe will have avoided annual lease payments by
        $500,000.  The capacity of this breeding farm is 100,000 sets of parent
        broilers.
 
 **Construction
        of Breeding Farm No. 1**
 On
        August
        15, 2008, PRC Yuhe completed construction work and facilities to set up the
        southern farm of breeding farm No 1.  On August 30, 2008, PRC Yuhe
        purchased 100,000 sets of parent breeders and began to feed.  By the end of
        September 2008, PRC Yuhe has spent RMB 29 million, approximately equivalent
        to
        $4.5 million, to build breeding farm No 1.  The breeding farm can be split
        into the southern and the northern regions.  PRC Yuhe looks forward to
        completing the northern farm construction work and facilities to set up by
        the
        end of January in 2009; and beginning to breed parent broilers in the northern
        region by the end of February in 2009.  The residual scheduled payment is
        RMB 6 million, equivalent to $0.9 million, for the building and facilities;
        and
        RMB 4.9 million, approximately equivalent to $0.75 million, in
        machineries.  The capacity of the northern factory is 140,000 sets of
        parent broilers


F-55




**WEIFANG
      YUHE POULTRY CO., LTD**




**FINANCIAL
      STATEMENTS**


**FOR
      THE NINE MONTHS ENDED SEPTEMBER 30, 2007 AND 2006**


**(Stated
      in US dollars)**


F-56





**WEIFANG
      YUHE POULTRY CO., LTD**


CONTENTS
              
              PAGESCONSOLIDATED
                  BALANCE SHEETS
              
              F-58
                  to F-59CONSOLIDATED
                  STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
                  (UNAUDITED)
              
              F-60CONSOLIDATED
                  STATEMENTS OF CASH FLOWS (UNAUDITED)
              
              F-61NOTES
                  TO CONSOLIDATED FINANCIAL STATEMENTS
              
              F-62 to F-79




F-57





**WEIFANG
                YUHE POULTRY CO., LTD****CONSOLIDATED
                BALANCE SHEETS****SEPTEMBER
                30, 2007 AND DECEMBER 31, 2006****(Stated
                in US Dollars)**





Note
            
            9/30/2007
            
            12/31/2006(Unaudited)**ASSETS**Current
                assetsCash
                and cash equivalents
            
            
            
            
            $
            41,009
            
            $
            563,062Accounts
                receivable
            
            
            
            
            
            1,524Inventories
            
            
            3
            
            
            3,522,886
            
            
            3,362,941Advances
                to suppliers
            
            
            
            
            
            1,785,721
            
            
            471,791Total
                current assets
            
            
            
            
            $
            5,351,140
            
            $
            4,397,794Prepaid
                deposits
            
            
            
            
            
            279,842
            
            
            143,106Other
                receivables, net
            
            
            4
            
            
            549,195
            
            
            1,952,118Unlisted
                investments
            
            
            5
            
            
            267,373
            
            
            1,207,099Plant
                and equipment, net
            
            
            6
            
            
            13,705,734
            
            
            13,035,768Intangible
                assets, net
            
            
            7
            
            
            2,419,642
            
            
            2,365,384Due
                from related companies
            
            
            8
            
            
            8,327,210
            
            $
            4,127,520Due
                from directors
            
            
            9
            
            
            126,296
            
            
            -Deferred
                expenses
            
            
            
            
            
            509,735
            
            
            463,922**TOTAL
                ASSETS**
            
            
            
            
            $
            31,536,167
            
            $
            27,692,711**LIABILITIES
                  ANDSTOCKHOLDERS’ EQUITY**Current
                liabilitiesAccounts
                payable
            
            
            
            
            $
            7,281,554
            
            $
            7,352,688Current
                portion of long termliabilities
            
            
            13
            
            
            266,042
            
            
            5,219,060Loans
                payables
            
            
            10
            
            
            2,999,484
            
            
            4,882,907Payroll
                and payroll related liabilities
            
            
            
            
            
            98,022
            
            
            424,317Accrued
                expenses
            
            
            
            
            
            516,805
            
            
            96,938Advances
                from customers
            
            
            
            
            
            17,754
            
            
            5,544Tax
                payables
            
            
            
            
            
            128,978
            
            
            115,580Due
                to related companies
            
            
            11
            
            
            -
            
            
            2,567,739Total
                current liabilities
            
            
            
            
            $
            11,308,639
            
            $
            20,664,773




See
      accompanying notes to consolidated financial statements


F-58





**WEIFANG
                YUHE POULTRY CO., LTD****CONSOLIDATED
                BALANCE SHEETS (Continued)****SEPTEMBER
                30, 2007 AND DECEMBER 31, 2006****(Stated
                in US Dollars)**





Note
            
            9/30/2007
            
            12/31/2006(Unaudited)Long
                term liabilities
            
            
            13
            
            $
            9,947,883
            
            $
            4,603,032**TOTAL
                LIABILITIES**
            
            
            
            
            $
            21,256,522
            
            $
            25,267,805Commitments
                and contingencies
            
            
            18
            
            $
            -
            
            $
            -Minority
                interests
            
            
            
            
            $
            225,503
            
            $
            263,144**STOCKHOLDERS’
                EQUITY**Registered
                capital
            
            
            12
            
            $
            482,713
            
            $
            482,713Additional
                paid in capital
            
            
            
            
            
            6,681,775
            
            
            4,403,806Retained
                earnings (deficits)
            
            
            
            
            
            2,092,028
            
            
            (2,957,922
            )Accumulated
                other comprehensiveincome
            
            
            
            
            
            797,626
            
            
            233,165$
            10,054,142
            
            $
            2,161,762**TOTAL
                LIABILITIES AND****STOCKHOLDERS’
                EQUITY**
            
            
            
            
            $
            31,536,167
            
            $
            27,692,711





See
      accompanying notes to consolidated financial statements


F-59





**WEIFANG
                YUHE POULTRY CO., LTD****CONSOLIDATED
                STATEMENTS OF OPERATIONS AND COMPREHENSIVE****INCOME
                (LOSS) (UNAUDITED)****FOR
                THE NINE-MONTHS ENDED SEPTEMBER 30, 2007 AND
                2006****(Stated
                in US Dollars)**





Note
            
            **2007**
            
            **2006**(Unaudited)Net
                revenues
            
            
            
            
            $
            16,215,151
            
            $
            9,082,394Cost
                of revenues
            
            
            
            
            
            (9,185,871
            )
            
            (11,494,790
            )Gross
                profit (loss)
            
            
            
            
            $
            7,029,280
            
            $
            (2,412,396
            )Operating
                expenses:Selling
            
            
            
            
            
            (261,859
            )
            
            (461,229
            )General
                and administrative
            
            
            
            
            
            (964,180
            )
            
            (969,873
            )Operating
                income (loss)
            
            
            
            
            $
            5,803,241
            
            $
            (3,843,498
            )Other
                income (expenses):Interest
                income
            
            
            
            
            
            608
            
            
            9,442Interest
                expenses
            
            
            
            
            
            (691,048
            )
            
            (708,481
            )Investment
                losses
            
            
            
            
            
            (100,492
            )
            
            (106,915
            )Loss
                on disposal of fixed assets
            
            
            
            
            
            -
            
            
            (70,087
            )Income
                (loss) before income taxes
            
            
            
            
            $
            5,012,309
            
            $
            (4,719,539
            )Income
                taxes
            
            
            14
            
            
            -
            
            
            -Net
                  income (loss) before minorityinterests
            
            
            
            
            $
            5,012,309
            
            $
            (4,719,539
            )Minority
                interests loss
            
            
            
            
            
            37,641
            
            
            19,196Net
                income (loss)
            
            
            
            
            $
            5,049,950
            
            $
            (4,700,343
            )Other
                comprehensive income:Foreign
                  currency translationadjustment
            
            
            
            
            
            564,461
            
            
            142,535Comprehensive
                income (loss)
            
            
            
            
            $
            5,614,411
            
            $
            (4,557,808
            )




See
      accompanying notes to consolidated financial statements


F-60





**WEIFANG
                YUHE POULTRY CO., LTD****CONSOLIDATED
                STATEMENTS OF STOCKHOLDERS’ EQUITY****FOR
                THE NINE-MONTHS ENDED SEPTEMBER 30, 2007****(Stated
                in US Dollars)**




AccumulatedAdditional
              
              Retained
              
              otherRegistered
              
              paid-in
              
              earnings
              
              comprehensivecapital
              
              capital
              
              (deficits)
              
              income
              
              TotalBalance,
                  January 1, 2007
              
              $
              482,713
              
              $
              4,403,806
              
              $
              (2,957,922
              )
              $
              233,165
              
              $
              2,161,762Net
                  profit Assumsion of company
              
              
              -
              
              
              -
              
              
              5,049,950
              
              
              -
              
              
              5,049,950debt
                  by shareholder
              
              
              -
              
              
              2,277,969
              
              
              -
              
              
              -
              
              
              2,277,969Foreign
                  currency translation adjustment
              
              
              -
              
              
              -
              
              
              -
              
              
              564,461
              
              
              564,461Balance,
                  September 30, 2007
              
              $
              482,713
              
              $
              6,681,775
              
              $
              2,092,028
              
              $
              797,626
              
              $
              10,054,142




See
      accompanying notes to consolidated financial statements


F-61





**WEIFANG
                YUHE POULTRY CO., LTD****CONSOLIDATED
                STATEMENTS OF CASH FLOWS****(UNAUDITED)****FOR
                THE NINE-MONTHS ENDED SEPTEMBER 30, 2007 AND
                2006****(Stated
                in US Dollars)**





2007
            
            2006Cash
                flows from operating activitiesNet
                income (loss)
            
            $
            5,049,950
            
            $
            (4,700,343
            )Depreciation
            
            
            1,127,964
            
            
            1,046,145Amortization
            
            
            90,068
            
            
            44,800Minority
                interests
            
            
            (37,641
            )
            
            (19,196
            )Allowances
                for bad debt
            
            
            210,997
            
            
            148,843Loss
                on disposal of fixed assets
            
            
            -
            
            
            70,087Written
                off of inventories
            
            
            -
            
            
            1,022,431Loss
                on investments
            
            
            100,492
            
            
            106,915Adjustments
                to reconcile net income(loss)
                to net cash used in operatingactivitiesAccounts
                receivable
            
            
            (1,493
            )
            
            417Advances
                to suppliers
            
            
            (1,268,423
            )
            
            (555,031
            )Prepaid
                deposits
            
            
            (128,328
            )
            
            146,363Inventories
            
            
            (25,255
            )
            
            18,672Deferred
                expenses
            
            
            (26,743
            )
            
            181,802Accounts
                payable
            
            
            (356,946
            )
            
            3,924,936Payroll
                and payroll related liabilities
            
            
            (336,150
            )
            
            142,601Accrued
                expenses
            
            
            407,428
            
            
            (55,372
            )Advances
                from customers
            
            
            11,742
            
            
            5,416Tax
                payables
            
            
            8,604
            
            
            68,776Net
                cash provided by operating activities
            
            $
            4,826,266
            
            $
            1,598,262Cash
                flows from investing activitiesPurchase
                of plant and equipment
            
            $
            (565,960
            )
            $
            (62,109
            )Sale
                of plant and equipment
            
            
            -
            
            
            1,486,599Sale
                of equity investments
            
            
            867,034
            
            
            -Advances
                to loans receivables
            
            
            (107,807
            )
            
            (193,625
            )Proceeds
                for sales of henhouses
            
            
            1,347,098
            
            
            -Advances
                to directors
            
            
            (123,694
            )
            
            -Advances
                to related parties receivables
            
            
            (3,951,889
            )
            
            (2,132,089
            )Invest
                in land usage right
            
            
            (50,790
            )
            
            -Net
                cash (used in) investing activities
            
            $
            (2,586,008
            )
            $
            (901,224
            )


F-62





**WEIFANG
                YUHE POULTRY CO., LTD****CONSOLIDATED
                STATEMENTS OF CASH FLOWS****(UNAUDITED)****(Continued)****FOR
                THE NINE-MONTHS ENDED SEPTEMBER 30, 2007 AND
                2006****(Stated
                in US Dollars)**





Cash
                flows from financing activitiesRepayments
                to loans payables
            
            $
            (765,454
            )
            $
            (588,299
            )Proceeds
                from loans payables
            
            
            315,278
            
            
            -Repayment
                to related parties payables
            
            
            (2,323,378
            )
            
            (420,271
            )Net
                  cash provided by (use in) financingactivities
            
            $
            (2,773,554
            )
            $
            (1,008,570
            )Effect
                    of foreign currency translation on cash and cash
                    equivalents
            
            
            11,243
            
            
            2,602Decrease
                in cash and cash equivalents
            
            
            (522,053
            )
            
            (308,930
            )Cash
                and cash equivalents–beginning of period
            
            
            563,062
            
            
            437,677Cash
                and cash equivalents–end of period
            
            $
            41,009
            
            $
            128,747




Supplementary
                cash flow information:Interest
                paid
            
            $
            896,587
            
            $
            419,909




Non-cash
      investing and financing activities:





1.
            During
                nine-month ended September 30, 2007 and 2006, fixed asset additions
                financed with loans payables of $708,843 and $1,090,957, respectively.





2.
            During
                nine-month ended September 30, 2007, additional paid-in capital $2,277,969
                was recorded when shareholder assumed the company debt.





See
      accompanying notes to consolidated financial statements


F-63





**WEIFANG
      YUHE POULTRY CO., LTD**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**(Stated
      in US Dollars)**





**1.**
              **ORGANIZATION
                  AND PRINCIPAL
                  ACTIVITIES**





Weifang
      Yuhe Poultry Co., Ltd, "the Company" was established in Weifang, Shandong of
      the
      People’s Republic of China, the PRC as a limited company on March 8, 1996. The
      Company currently operates through itself and one subsidiary located in Mainland
      China: Weifang Taihong Feed Co., Ltd., "Taihong".





Taihong
      was established in Weifang, Shandong of the People’s Republic of China, the PRC,
      as a limited company on May 26, 2003. Pursuant to a group reorganization on
      September 14, 2007, the Company became the holding company of
      Taihong.





The
      Company and its subsidiary (hereinafter, collectively referred to as “the
      Group”) are engaged in the chick and feed production.





**2.**
              **SUMMARY
                  OF SIGNIFICANT ACCOUNTING
                  POLICIES**





*(a)*
            *Method
                of Accounting*





The
      accompanying consolidated financial statements have been prepared in conformity
      with accounting principles generally accepted in the United States of America.
      The Company's functional currency is the Chinese Renminbi; however the
      accompanying consolidated financial statements have been translated and
      presented in United States Dollars ($).





*(b)*
            *Principles
                of consolidation*





The
      consolidated financial statements are presented in US Dollars and include the
      accounts of the Company and its 56.25% subsidiary, Taihong. All significant
      inter-company balances and transactions are eliminated in
      combination.





The
      Company acquired its subsidiary on September 14, 2007 through a reorganization
      between entities under common control. Accordingly, the transaction was
      accounted for similar to a pooling of interests in accordance with SFAS 141
      Appendix D and is presented as if it had occurred at the beginning of the first
      period presented. The following table depicts the identity of the
      subsidiary:





***Name
                of Company***
            
            ***Place
                & date of***
              ***Incorporation***
            
            ***Attributable
                Equity***
              ***Interest
                %***
            
            ***Registered***
              ***Capital***Weifang
                Taihong Feed Co.,
              Ltd.
            
            PRC/
              May
                26 2003
            
            56.25
            
            $965,379
            
            (RMB8,000,000)





*(c)*
            *Use
                of estimates*





The
      preparation of the financial statements in conformity with generally accepted
      accounting principles 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 financial statements and the reported amounts 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 estimates.


F-64


**WEIFANG
      YUHE POULTRY CO., LTD**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**(Stated
      in US Dollars)**





**2.**
            **SUMMARY
                OF SIGNIFICANT ACCOUNTING POLICIES (****Continued)**





*(d)*
            *Economic
                and political risks*





The
      Company’s operations are conducted in the PRC. Accordingly, the Company’s
      business, financial condition and results of operations may be influenced by
      the
      political, economic and legal environment in the PRC, and by the general state
      of the PRC economy.




The
      Company’s operations in the PRC are subject to special considerations and
      significant risks not typically associated with companies in North America
      and
      Western Europe. These include risks associated with, among others, the
      political, economic and legal environment and foreign currency exchange. The
      Company’s results may be adversely affected by changes in the political and
      social conditions in the PRC, and by changes in governmental policies with
      respect to laws and regulations, anti-inflationary measures, currency
      conversion, remittances abroad, and rates and methods of taxation, among other
      things.





*(e)*
            *Plant
                and equipment*





Plant
      and
      equipment are carried at cost less accumulated depreciation. Depreciation is
      provided over their estimated useful lives, using the straight-line method.
      Estimated useful lives of the plant and equipment are as follows:





Buildings
            20
                yearsMachinery
            10
                yearsVehicle
            5
                yearsFurniture
                and equipment
            3
                years





The
      cost
      and related accumulated depreciation of assets sold or otherwise retired are
      eliminated from the accounts and any gain or loss is included in the statement
      of income. The cost of maintenance and repairs is charged to income as incurred,
      whereas significant renewals and betterments are capitalized.





*(f)*
            *Intangible
                assets*





Intangible
      assets represent land use rights in the PRC. Land use rights are carried at
      cost
      and amortized on a straight-line basis over the period of rights of 50 years
      commencing from the date of acquisition of equitable interest. According to
      the
      laws of PRC, the government owns all of the land in PRC. Companies or individual
      are authorized to possess and use the land only through land usage rights
      approved by the PRC government.


F-65


**WEIFANG
      YUHE POULTRY CO., LTD**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**(Stated
      in US Dollars)**





**2.**
            **SUMMARY
                OF SIGNIFICANT ACCOUNTING POLICIES (****Continued)**





*(g)*
            *Guarantee
                Expense*





The
      Company accounts for its liability for product guaranteed in accordance with
      FASB Interpretation No. 45 (FIN 45), “Guarantor’s Accounting and Disclosure
      Requirements for Guarantees, Including Indirect Guarantees of Indebtedness
      of
      Others.” Under FIN 45, the aggregate changes in the liability for accruals
      related to product warranties issued during the reporting period must be charged
      to expense as incurred.





The
      Company guarantees a 98% survival rate of its product by delivering additional
      2% of the product. The guarantee expires seven days after delivery. If the
      survival rate falls below 96%, the Company provides additional guarantee
      compensation to customers. Based on historical experience, the likelihood that
      survival rate falls below 96% is remote and therefore no accrued guarantee
      liability was recorded at year-end. The Company records guarantee expense as
      incurred. Guarantee expense for the nine months ended September 30, 2007 and
      2006 were $7,042 and $0, respectively.





*(h)*
            *Accounting
                for the impairment of long-lived
                assets*





The
      long-lived assets held and used by the Company are reviewed for impairment
      whenever events or changes in circumstances indicate that the carrying amount
      of
      assets may not be recoverable. It is reasonably possible that these assets
      could
      become impaired as a result of technology or other industry changes.
      Determination of recoverability of assets to be held and used is by comparing
      the carrying amount of an asset to future net undiscounted cash flows to be
      generated by the assets.





If
      such
      assets are considered to be impaired, the impairment to be recognized is
      measured as the amount by which the carrying amount of the assets exceeds the
      fair value of the assets. Assets to be disposed of are reported at the lower
      of
      the carrying amount or fair value less costs to sell. During the reporting
      periods, there was no impairment loss.





*(i)*
            *Inventories*





Inventories
      consisting of raw materials, work in progress and finished goods are stated
      at
      lower of cost and net realizable value. The cost of inventories is determined
      using weighted average cost method, and includes expenditure incurred in
      acquiring the inventories and bringing them to their existing location and
      condition. Net realizable value is the estimated selling price in the ordinary
      course of business less any applicable selling expenses. Finished goods are
      comprised of direct materials, direct labor and an appropriate proportion of
      overhead. At each balance sheet date, inventories that are worth less than
      cost
      are written down to their net realizable value, and the difference is charged
      to
      the cost of revenues of that period.




F-66


**WEIFANG
      YUHE POULTRY CO., LTD**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**(Stated
      in US Dollars)**





**2.**
            **SUMMARY
                OF SIGNIFICANT ACCOUNTING POLICIES (****Continued)**





*(j)*
            *Trade
                receivables*





Trade
      receivables are recognized and carried at the original invoice amount less
      allowance for any uncollectible amounts. An estimate for doubtful accounts
      is
      made when collection of the full amount is no longer probable. Management
      adopted an allowance policy which provides an allowance equivalent to 30% of
      gross amount of accounts receivables due over 6 months and 60% of gross amount
      of accounts receivables due over 1 year. Full provision will be made for
      accounts receivables due over 2 years. Bad debts are written off as incurred.
      It
      is a common industry practice in the PRC that customers pay in advance prior
      to
      delivery of the products. As a result, the Company maintains a low level of
      trade receivables.





*(k)*
            *Cash
                and cash equivalents*





The
      Company considers all highly liquid investments purchased with original
      maturities of three months or less to be cash equivalents. The Company maintains
      bank accounts only in the PRC. The Company does not maintain any bank accounts
      in the United States of America. Cash deposits in PRC banks are not insured
      by
      any government agency or entity.





*(l)*
            *Revenue
                recognition*





Revenue
      from sales of the Company’s products is recognized when the significant risks
      and rewards of ownership have been transferred to the third-party distributor
      and larger producers at the time when the products are delivered to and accepted
      by them, the sales price is fixed or determinable as stated in the sales
      contract, and collection is reasonably assured.





Customers
      do not have a general right of return on products delivered.





*(m)*
            *Cost
                of revenues*





Cost
      of
      revenues consists primarily of material costs, employee compensation,
      depreciation and related expenses, which are directly attributable to the
      production of products. Write-down of inventory to lower of cost or market
      is
      also recorded in cost of revenues.





*(n)*
            *Advertising*





The
      Group
      expensed all advertising costs as incurred. Advertising expenses for the
      nine-months ended September 30, 2007 and 2006 were $13,998 and $22,437
      respectively.


F-67


**WEIFANG
      YUHE POULTRY CO., LTD**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**(Stated
      in US Dollars)**





**2.**
            **SUMMARY
                OF SIGNIFICANT ACCOUNTING POLICIES (****Continued)**





*(o)*  *Retirement
      benefit plans*





The
      employees of the Group are members of a state-managed retirement benefit plan
      operated by the government of the PRC. The Group is required to contribute
      a
      specified percentage of payroll costs to the retirement benefit scheme to fund
      the benefits. The only obligation of the Group with respect to the retirement
      benefit plan is to make the specified contributions.





Retirement
      benefits in the form of contributions under defined contribution retirement
      plans to the relevant authorities are charged to the statements of income as
      incurred.





*(p)*  *Income
      tax*





The
      Company accounts for income taxes using an asset and liability approach and
      allows for recognition of deferred 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 realization is uncertain.





The
      Company is operating in the PRC, and in accordance with the relevant tax laws
      and regulations of PRC, the corporation income tax rate is 33%. However, the
      Company is a poultry company, and in accordance with the relevant regulations
      regarding the favorable tax treatment for outstanding poultry company, the
      Company is entitled to a tax free treatment until December 31, 2007.





The
      corporate income tax for the subsidiary, Weifang Taihong Feed Co., Ltd is 33%.





*(q)*  *Shipping
      and handling fees*





Shipping
      and handling fees are expensed when incurred. Shipping and handling charges
      included in the selling expenses for the nine-months ended September 30, 2007
      and 2006 were $9,025 and $23,620 respectively





*(r)*  *Statutory
      reserves*





Statutory
      reserves are referred to the amount appropriated from the net income in
      accordance with laws or regulations, which can be used to recover losses and
      increase capital, as approved, and are to be used to expand production or
      operations.





*(s)*  *Minority
      interests*





Minority
      interests refer to the 43.75% investment by third parties in the registered
      capital of Taihong and is not held by the Company.


F-68


**WEIFANG
      YUHE POULTRY CO., LTD**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**(Stated
      in US Dollars)**





**2.**
            **SUMMARY
                OF SIGNIFICANT ACCOUNTING POLICIES (****Continued)**





*(t)*  *Foreign
      currency translation*





The
      accompanying financial statements are presented in United States dollars. The
      functional currency of the Company is the Renminbi (RMB). The financial
      statements are translated into United States dollars from RMB at year-end
      exchange rates as to assets and liabilities and average exchange rates as to
      revenues and expenses. Capital accounts are translated at their historical
      exchange rates when the capital transactions occurred.




*9/30/2007*
            
            *12/31/2006*
            
            *9/30/2006*Twelve
                months ended
              RMB
                : US$ exchange rate
            
            
            -
            
            
            7.81750
            
            
            -Nine
                months ended
              RMB
                : US$ exchange rate
            
            
            7.5176
            
            
            -
            
            
            7.9168Average
                nine months ended
              RMB
                : US$ exchange rate
            
            
            7.6758
            
            
            -
            
            
            8.0183Average
                three months end
              RMB
                : US$ exchange rate
            
            
            7.5691
            
            
            -
            
            
            7.9771




The
      RMB
      is not freely convertible into foreign currency and all foreign exchange
      transactions must take place through authorized institutions. No representation
      is made that the RMB amounts could have been, or could be, converted into US$
      at
      the rates used in translation.





*(u)*  *Comprehensive
      income*





Comprehensive
      income is defined to include all changes in equity except those resulting from
      investments by owners and distributions to owners. Among other disclosures,
      all
      items that are required to be recognized under current accounting standards
      as
      components of comprehensive income are required to be reported in a financial
      statement that is presented with the same prominence as other financial
      statements. The component of comprehensive income includes foreign currency
      translation adjustment.





*(v)*  *Fair
      value of financial instruments*





SFAS
      No.
      107, “Disclosures about Fair Value of Financial Instruments” (“SFAS 107”)
      requires entities to disclose the fair values of financial instruments except
      when it is not practicable to do so. Under SFAS No. 107, it is not practicable
      to make this disclosure when the costs of formulating the estimated values
      exceed the benefit when considering how meaningful the information would be
      to
      financial statement users.





The
      fair
      values of all assets and liabilities do not differ materially from their
      carrying amounts. None of the financial instruments held are derivative
      financial instruments and none were acquired or held for trading purposes during
      the years ended December 31, 2007 or 2006.


F-69


**WEIFANG
      YUHE POULTRY CO., LTD**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**(Stated
      in US Dollars)**





**2.**
            **SUMMARY
                OF SIGNIFICANT ACCOUNTING POLICIES (****Continued)**





*(w)*  *Recent
      accounting pronouncements*




In
      December 2007, the FASB issued SFAS No. 141R, “Business Combinations” (“SFAS No.
      141R”). SFAS No. 141R amends SFAS 141 and provides revised guidance for
      recognizing and measuring identifiable assets and goodwill acquired, liabilities
      assumed, and any noncontrolling interest in the acquiree. It also provides
      disclosure requirements to enable users of the financial statements to evaluate
      the nature and financial effects of the business combination. It is effective
      for fiscal years beginning on or after December 15, 2008 and will be applied
      prospectively. We are currently evaluating the impact of adopting SFAS No.
      141R
      on our consolidated financial statements.





In
      December 2007, the Financial Accounting Standards Board (“FASB”) issued SFAS No.
      160, “Noncontrolling Interests in Consolidated Financial Statements — an
      amendment of ARB No. 51” (“SFAS No. 160”). SFAS No. 160 requires that ownership
      interests in subsidiaries held by parties other than the parent, and the amount
      of consolidated net income, be clearly identified, labeled, and presented in
      the
      consolidated financial statements. It also requires once a subsidiary is
      deconsolidated, any retained noncontrolling equity investment in the former
      subsidiary be initially measured at fair value. Sufficient disclosures are
      required to clearly identify and distinguish between the interests of the parent
      and the interests of the noncontrolling owners. It is effective for fiscal
      years
      beginning on or after December 15, 2008 and requires retroactive adoption of
      the
      presentation and disclosure requirements for existing minority interests. All
      other requirements shall be applied prospectively. We are currently evaluating
      the impact of adopting SFAS No. 160 on our consolidated financial
      statements.





In
      February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
      Financial Assets and Financial Liabilities - an amendment of FASB Statement
      No. 115”. This statement permits entities to choose to measure many financial
      instruments and certain other items at fair value. The objective is to improve
      financial reporting by providing entities with the opportunity to mitigate
      volatility in reported earnings caused by measuring related assets and
      liabilities differently without having to apply complex hedge accounting
      provisions. This Statement is expected to expand the use of fair value





In
      February 2007, the FASB issued SFAS No. 159, “The Fair Value Option for
      Financial Assets and Financial Liabilities - an amendment of FASB Statement
      No. 115”. This statement permits entities to choose to measure many financial
      instruments and certain other items at fair value. The objective is to improve
      financial reporting by providing entities with the opportunity to mitigate
      volatility in reported earnings caused by measuring related assets and
      liabilities differently without having to apply complex hedge accounting
      provisions. This Statement is expected to expand the use of fair value
      measurement, which is consistent with the Board’s long-term measurement
      objectives for accounting for financial instruments. We expect the Statement
      will have no material impact on our consolidated financial
      statements.


F-70


**WEIFANG
      YUHE POULTRY CO., LTD**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**(Stated
      in US Dollars)**





**3.**
            **INVENTORIES**





Inventories
      consist of the followings:




9/30/2007
            
            12/31/2006Raw
                materials
            
            $
            318,209
            
            $
            19,131Work
                in progress
            
            
            3,160,919
            
            
            3,060,157Finished
                goods
            
            
            43,758
            
            
            283,653$
            3,522,886
            
            $
            3,362,941





**4.**
            **OTHER
                RECEIVABLES, NET**





Other
      receivables, net consist of the followings:




9/30/2007
            
            12/31/2006Loan
                receivables
            
            $
            625,531
            
            $
            495,682Henhouses
                sales
            
            
            380,441
            
            
            1,688,5191,005,972
            
            
            2,184,201Less:
                Allowances
            
            
            (456,777
            )
            
            (232,083
            )$
            549,195
            
            $
            1,952,118





Other
      receivables are unsecured, interest free and have no fixed repayment date.
      Management provides for an allowance when collection of the full amount is
      no
      longer probable by establishing an allowance equivalent to 30% of gross amount
      of notes receivables due over 6 months and 60% of gross amount of notes
      receivables due over 1 year. Full provision will be made for notes receivables
      due over 2 years.








5.
            UNLISTED
                INVESTMENTS





Unlisted
      investments are investments in Weifang Jiaweike Food Co., Ltd, “Weifang
      Jiaweike” and Hanting Rural Credit Cooperative, “Hanting”. Management of the
      Company has reviewed the unlisted investments for any impairment and determined
      there is no indication that the carrying amount may not be
      recoverable.


F-71


**WEIFANG
      YUHE POULTRY CO., LTD**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**




**(Stated
      in US Dollars)**





5.
            UNLISTED
                INVESTMENTS (Continued)





Investment
      in Weifang Jiaweike is recorded using equity method of accounting. The
      consolidated statement of income includes the Group's share of the
      post-acquisition results of Weifang Jiaweike for the year. In the consolidated
      balance sheet, unlisted investments Weifang Jiaweike are stated at the Group's
      share of the net assets of Weifang Jiaweike plus the premium paid less any
      discount on acquisition in so far as it has not already been amortized to the
      statement of income, less any identified impairment loss. The remaining 51.5%
      of
      Weifang Jiaweike was hold by Shandong Yuhe Food Group Co., Ltd from which Mr.
      Gao Zhentao, the director of the company is also the director





*Portion
                of**nominal**Name
                of*
            *Place*
            
            *Form
                of*
            
            *value
                of**associate*
            *of*
            
            *business*
            
            *registered*
            
            *Principal**company*
            *registration*
            
            *structure*
            
            *capital*
            
            *activities*Weifang
                Jiaweike Food
              Co.,
                Ltd.
            PRC
            
            Limited
              company
            
            48.5
            
            Trading
                of
              foodstuff





**Investment
      in Hanting is stated at cost because the Group does not have significant
      influence or control over this investment.**





6.
            PLANT
                AND EQUIPMENT, NET





**Plant
      and equipment consists of the followings:**




9/30/2007
            
            12/31/2006At
                costBuildings
            
            $
            10,234,681
            
            $
            9,215,455Machinery
            
            
            5,608,125
            
            
            5,452,976Motor
                vehicles
            
            
            413,183
            
            
            411,660Furniture
                and equipment
            
            
            362,548
            
            
            346,625$
            16,618,537
            
            $
            15,426,716Less:
                accumulated depreciation
            
            
            (5,226,312
            )
            
            (3,919,713
            )Construction
                in progress
            
            
            2,313,509
            
            
            1,528,765$
            13,705,734
            
            $
            13,035,768




F-72


**WEIFANG
      YUHE POULTRY CO., LTD**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**




**(Stated
      in US Dollars)**





6.
            PLANT
                AND EQUIPMENT, NET (Continued)





Depreciation
      expenses included in the cost of sales for the nine-month ended September 30,
      2007 and 2006 were, $906,338 and $836,916 respectively, and included in the
      general and administrative expenses for the nine-month ended September 30,
      2007
      and 2006 were, $221,626 and $209,229 respectively.





As
      of
      September 30, 2007 and December 31, 2006, buildings and machinery of the Group
      were pledged as collateral under certain loan arrangements.





Interest
      capitalized for the construction in progress for the nine-months ended September
      30, 2007 and 2006 were amounting to $80,616 and $51,812
      respectively.








**7.**
            **INTANGIBLE
                ASSETS, NET**





Intangible
      assets consist of the followings:




9/30/2007
            
            12/31/2006Land
                use rights, at cost
            
            $
            2,660,269
            
            $
            2,571,070Less:
                accumulated amortization
            
            
            (240,627
            )
            
            (205,686
            )$
            2,419,642
            
            $
            2,365,384





As
      of
      September 30, 2007 and December 31, 2006, land use rights of the Group were
      pledged as collateral under certain loan arrangements.





Amortization
      expenses included in the cost of revenues for the nine-month ended September
      30,
      2007 and 2006 were $90,068 and $44,800 respectively.


F-73


**WEIFANG
      YUHE POULTRY CO., LTD**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**(Stated
      in US Dollars)**





**8.**
            **DUE
                FROM RELATED COMPANIES**





9/30/2007
            
            12/31/2006Hefeng
                Green Agriculture Co., Ltd, "Hefeng Green" – Mr. Gao
                Zhentao, a director of the Company is also a director of
                Hefeng Green
            
            $
            69,069
            
            $
            66,419Shandong
                Yuhe Food Co., Ltd, "Yuhe Group" – Mr. Gao Zhentao, a director
                of the Company is also a director of Yuhe Group
            
            
            6,162,750
            
            
            4,015,833Shandong
                Yuhe New Agriculture Academy of Sciences, "Shandong Yuhe" – Mr. Gao
                Zhentao, a director of the Company is also a director of
                Shandong Yuhe
            
            
            48,413
            
            
            45,268Weifang
                Hexing Breeding Co.,Ltd, "Weifang Hexing" – Mr. Gao
                Zhentao, a director of the Company is also a director of Weifang
                Hexing
            
            
            1,983,711
            
            
            -Weifang
                Jiaweike Food Co.,Ltd, "Weifang Jiaweike" – Mr Gao Zhentao, a
                director of the Company is also a director of Weifang
                Jiaweike
            
            
            63,267
            
            
            -$
            8,327,210
            
            $
            4,127,520





The
      amounts due from related companies are unsecured, interest free and have no
      fixed repayment date





**9.**
            **DUE
                FROM DIRECTORS**





9/30/2007
            
            12/31/2006Mr.
                Tan Yi
            
            $
            6,807
            
            $
            -Mr.
                Gao Zhenbo
            
            
            50,031
            
            
            -Mr.
                Gao Zhentao
            
            
            69,458
            
            
            -$
            126,296
            
            $
            -





The
      amounts due from directors are unsecured, interest free and have no fixed
      repayment date.








**10.**
            **LOANS
                PAYABLES**





Loans
      payables are loans from unrelated companies for temporary operation purposes.
      They are unsecured, interest free and have no fixed repayment
      date.


F-74


**WEIFANG
      YUHE POULTRY CO., LTD**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**(Stated
      in US Dollars)**





**11.**
            **DUE
                TO RELATED COMPANIES**





9/30/2007
            
            12/31/2006Weifang
                Hexing Breeding Co.,Ltd, "Weifang Hexing" – Mr. Gao Zhentao, a
                director of the Company is also a director of Weifang
                Hexing
            
            $
            -
            
            $
            1,879,785Weifang
                Jiaweike Food Co.,Ltd, "Weifang Jiaweike" – Mr. Gao Zhentao, a
                director of the Company is also a director of Weifang
                Jiaweike
            
            
            -
            
            
            687,954$
            -
            
            $
            2,567,739





The
      amounts due to related companies are unsecured, interest free and have no fixed
      repayment date. These loans are used for working capital purposes.




**12.**
            **REGISTERED
                CAPITAL**





As
      of
      September 30 2007 and December 31, 2006, capital contributions paid-up amounted
      to $482,713 (RMB4,000,000).


F-75


**WEIFANG
      YUHE POULTRY CO., LTD**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**(Stated
      in US Dollars)**





**13.**
            **LONG
                TERM LIABILITIES**





The
      long-term liabilities are denominated in Chinese Renminbi and are presented
      in
      US dollars as follows:




9/30/2007
              
              12/31/2006Loans
                  from Nansun Rural Credit, interest rate at 9.22% to 10.51% per
                  annum, due
                  from Dec 10, 07 to May 17, 10
              
              $
              6,651,059
              
              $
              -due
                  from Mar 23, 07 to Nov 28, 08
              
              
              -
              
              
              8,608,890Loans
                  from Shuangyang Rural Credit interest rate at 9.33% per annum,
                  due on Oct
                  12, 08
              
              
              864,638
              
              
              831,468Loans
                  from Hanting Kaiyuan Rural Credit Cooperative, interest rate at
                  9.22% to
                  13.31% per annum, due from Nov 28, 08 to Jan 10, 09
              
              
              2,301,266
              
              
              -Loans
                  from Hanting Rural Credit Cooperative, interest rate at 8.19% per
                  annum,
                  due from Nov 8, 09
              
              
              396,962
              
              
              381,734$
              10,213,925
              
              $
              9,822,092Less:
                  current portion of long term liabilities
              
              
              (266,042
              )
              
              (5,219,060
              )$
              9,947,883
              
              $
              4,603,032




Future
      maturities of long-term loans are as follows:




9/30/2007
            
            12/31/20062007
            
            
            266,042
            
            
            5,219,0602008
            
            
            5,254,336
            
            
            4,221,2992009
            
            
            1,368,017
            
            
            381,7332010
            
            
            3,325,530
            
            
            -$
            10,213,925
            
            $
            9,822,092





F-76




WEIFANG
      YUHE POULTRY CO.,
      LTD


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**(Stated
      in US Dollars)**





**14.**
            **INCOME
                TAX**





No
      deferred tax has been provided as there is no material temporary differences
      arising during the nine-month ended September 2007 and for the year ended
      December 31, 2006.





The
      Company is operating in the PRC, and in accordance with the relevant tax laws
      and regulations of PRC, the corporation income tax rate is 33%. However, the
      Company is an agricultural company, and in accordance with the relevant
      regulations regarding the tax exemption, the Company is tax-exempt as long
      as it
      is registered as an agricultural entity.





Taihong
      has been currently operating at a loss. Therefore, no tax has been
      provided.




**15.**
            **RELATED
                PARTIES TRANSACTIONS**





The
      following material transactions with related parties during the years were
      in
      the opinion of the directors, carried out in the ordinary course of business
      and
      on normal commercial terms:




9/30/2007
            
            12/31/2006Sales
                of goods to a related company
            
            $
            -
            
            $
            266,725




Sales
      to
      Weifang Hexing Breeding Co.,Ltd, a related company, for the nine-month ended
      September 2007 and for the year ended December 31, 2006 was nil and $266,725
      respectively.


F-77


**WEIFANG
      YUHE POULTRY CO., LTD**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**(Stated
      in US Dollars)**





**16.**
            **FAIR
                VALUE OF FINANCIAL
                INSTRUMENTS**




The
      fair
      value of a financial instrument is the amount at which the instrument could
      be
      exchanged in a current transaction between willing parties. The carrying amounts
      of financial assets and liabilities, such as cash and cash equivalents, trade
      accounts receivable, other receivables, accounts payable, and other payables,
      approximate their fair values because of the short maturity of these instruments
      and market rates of interest.





**17. 
      SIGNIFICANT CONCENTRATIONS AND RISK**





(a) 
      Customers Concentrations




The
      Group
      did not have any customer that individually comprised 10% or more of net revenue
      for the nine-month ended September 30, 2007 and for the year ended December
      31,
      2006.





(b)
      Credit Risk





Financial
      instruments that potentially subject the Company to significant concentration
      of
      credit risk consist primarily of cash and cash equivalents. As of September
      30,
      2007 and December 31, 2006, substantially all of the Company’s cash and cash
      equivalents were held by major financial institutions located in the PRC, which
      management believes are of high credit quality.





(c)
      Group’s operations are in China





All
      of
      the Group’s products are produced in China. The Group’s operations are subject
      to various political, economic, and other risks and uncertainties inherent
      in
      China. Among other risks, the Group’s operations are subject to the risks of
      transfer of funds; domestic and international customs and tariffs; changing
      taxation policies; foreign exchange restrictions; and political conditions
      and
      governmental regulations.





**18. 
      COMMITMENTS AND CONTINGENCIES**





The
      Group
      has given guarantee to the following parties as at September 30, 2007 which
      are
      summarized as follows:




Weifang
                Sansong Food Co., Ltd – a non-related party
            
            $
            385,761Shandong
                Yuhe Food Group Co., Ltd – shareholder of the Company
            
            
            2,128,339Shandong
                Dongxiang Logistic Co., Ltd – a non-related party
            
            
            266,042Weifang
                Yibang Commerce Co., Ltd – a non-related party
            
            
            332,553$
            3,112,695




Management
      has assessed the fair value of the obligation arising from the above financial
      guarantees and considered it is remote to affect the consolidated financial
      statements according to their previous experiences. Therefore, no obligations
      in
      respect of the above guarantees were recognized as of September 30,
      2007.





The
      Company did not give further guarantee to Weifang Sansong Food Co., Ltd when
      the
      guarantee was expired on November 26, 2007.


F-78


**WEIFANG
      YUHE POULTRY CO., LTD**


**NOTES
      TO CONSOLIDATED FINANCIAL STATEMENTS**


**(Stated
      in US Dollars)**





**19. 
      BUSINESS SEGMENTS**





The
      Company’s operations are classified into two principal reportable segments that
      provide different products or services.  Weifang is engaged in the business
      of breeding chicks while Taihong is engaged in the business of feed production,
      in which most of the product were used internally.  Separate management of
      each segment is required because each business unit is subject to different
      production and technology strategies.





**Reportable
      Segments**




Production of
                
                Production of
                
                Production of
                
                Production ofchicks (Weifang)
                
                feeds (Taihong)
                
                chicks (Weifang)
                
                chicks (Weifang)
                
                TotalFor the nine months ended
                
                For the nine months ended
                
                For the nine
                  months ended
                
                For the nine
                  months endedSeptember 30, 2007
                
                September 30, 2006
                
                September 30, 2007
                
                September 30, 2006External
                    revenue
                
                $
                15,998,703
                
                $
                216,448
                
                $
                8,046,249
                
                $
                1,036,145
                
                $
                16,215,151
                
                $
                9,082,394Inters
                    egment revenue
                
                
                -
                
                
                5,095,083
                
                
                
                
                
                4,482,607
                
                
                5,095,083
                
                
                4,482,607Interest
                    income
                
                
                572
                
                
                36
                
                
                9,337
                
                
                105
                
                
                608
                
                
                9,442Interest
                    expense
                
                
                (280,788
                )
                
                (410,260
                )
                
                (317,553
                )
                
                (390,928
                )
                
                (691,048
                )
                
                (708,481
                )Depreciation
                    and amortization
                
                
                (1,085,228
                )
                
                (132,804
                )
                
                (987,939
                )
                
                (103,006
                )
                
                (1,218,032
                )
                
                (1,090,945
                )Net
                    profit/(loss)
                
                
                5,098,346
                
                
                -86,037
                
                
                (4,675,662
                )
                
                (43,877
                )
                
                5,012,309
                
                
                (4,719,539
                )Assets
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -
                
                
                -Expenditures
                    for long-lived assets
                
                
                565,561
                
                
                399
                
                
                61,165
                
                
                944
                
                
                565,960
                
                
                62,109




Note:
      Intersegment revenue of $5,095,083 and $4,482,607 was eliminated in
      consolidation for the nine months ended September 30, 2007 and 2006,
      respectively.





The
      Group’s operations are located in the PRC. All revenue is from customers in the
      PRC. All of the company’s assets are located in the PRC. Accordingly, no
      analysis of the Group's sales and assets by geographical market is
      presented.




**20. 
      SUBSEQUENT EVENT**





At
      December 10, 2007, loan from Nansun Rural Credit of $266,042, was refinanced
      at
      interest rate of 10.68% and due on December 2009.




F-79





**YUHE
      INTERNATIONAL, INC.**





**UNAUDITED
      PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS**




F-80


**YUHE
      INTERNATIONAL, INC.**





**UNAUDITED
      PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS**





**Basis
      of Presentation**





On
      March
      12, 2008, Yuhe International, Inc. entered into a Share Exchange Agreement
      with
      Bright Stand International Co. Ltd. and its stockholders, pursuant to which
      Yuhe
      International, Inc. acquired all of the issued and outstanding capital stock
      of
      Bright Stand International Co. Ltd. in exchange for a total of 8,626,236 shares
      of our common stock, constituting 56% shares of Yuhe International, Inc. issued
      and outstanding common stock at the time of the merger agreement, $0.001 par
      value per share.





Yuhe
      International, Inc. completed the acquisition of Bright Stand International
      Co.
      Ltd., pursuant to the Merger Agreement in March 2008. The acquisition was
      accounted for as a reverse merger effected by a share exchange, wherein Bright
      Stand International Co. Ltd. was considered the acquirer for accounting and
      financial reporting purposes.





The
      unaudited pro forma consolidated statements of operations reflects the results
      of operations of the Company had the merger occurred on January 1, 2007. The
      pro
      forma consolidated statements of operations were prepared as if the transactions
      were consummated on January 1, 2007. These pro forma consolidated statements
      of
      operations have been prepared for comparative purposes only and do not purport
      to be indicative of the results of operations which actually would have resulted
      had the transaction occurred on the date indicated and are not necessarily
      indicative of the results that may be expected in the future.





Due
      to
      the fact that there was no trading and shareholding relationship between Yuhe
      International, Inc. with Bright Stand International Co. Ltd. before the share
      exchange, in the opinion of management, no pro forma adjustment directly
      attributable to the share exchange contemplated by the Agreement is to be made
      to the unaudited pro forma consolidated statements of operations of Yuhe
      International, Inc.


F-81


YUHE
      INTERNATIONAL, INC.


UNAUDITED
      PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS


FOR
      THE
      NINE MONTHS ENDED SEPTEMBER 30, 2008




Pro forma for
                  the period
                  from January
                  1, 2008 to
                  March 31,
                  2008
                
                As reported
                  from April 1,
                  2008 to June
                  30, 2008
                
                As reported
                  from July 1,
                  2008 to
                  September
                  30, 2008
                
                Pro forma
                  Adjustment
                
                Pro forma TotalNet
                    revenues
                
                $
                2,594,880
                
                $
                5,604,931
                
                $
                9,609,781
                
                $
                
                
                $
                17,809,592Cost
                    of revenue
                
                
                (2,212,145
                )
                
                (3,768,540
                )
                
                (7,089,355
                )
                
                
                
                
                (13,070,040
                )Gross
                    profit
                
                
                382,735
                
                
                1,836,391
                
                
                2,520,426
                
                
                
                
                
                4,739,552Operating
                    expensesSelling
                    expenses
                
                
                (77,537
                )
                
                (96,291
                )
                
                (135,658
                )
                
                
                
                
                (309,486
                )General
                    and administrative expenses
                
                
                (383,664
                )
                
                (457,961
                )
                
                (781,247
                )
                
                
                
                
                (1,622,872
                )Bad
                    debts recovery
                
                
                233,038
                
                
                73,770
                
                
                554,188
                
                
                
                
                
                860,996Total
                    operating expenses
                
                
                (228,163
                )
                
                (480,482
                )
                
                (362,717
                )
                
                
                
                
                (1,071,362
                )Income
                    from operations
                
                
                154,572
                
                
                1,355,909
                
                
                2,157,709
                
                
                
                
                
                3,668,190Non-operating
                    income (expenses)Interest
                    income
                
                
                163
                
                
                4,297
                
                
                63
                
                
                
                
                
                4,523Other
                    income
                
                
                11,504
                
                
                93,662
                
                
                93,062
                
                
                
                
                
                198,228Interest
                    expenses
                
                
                (266,641
                )
                
                (262,646
                )
                
                (320,048
                )
                
                
                
                
                (849,335
                )Other
                    expenses
                
                
                (30,545
                )
                
                (26,078
                )
                
                -
                
                
                
                
                
                (56,623
                )Total
                    other income (expenses)
                
                
                (285,519
                )
                
                (190,765
                )
                
                (226,923
                )
                
                
                
                
                (703,207
                )Net
                    Income (loss) before income tax
                
                
                (130,947
                )
                
                1,165,144
                
                
                1,930,786
                
                
                
                
                
                2,964,983Income
                    Tax
                
                
                -
                
                
                -
                
                
                -
                
                
                
                
                
                -Net
                    income (loss)
                
                $
                (130,947
                )
                $
                1,165,144
                
                $
                1,930,786
                
                $
                
                
                $
                2,964,983Earnings
                    per shareBasic
                
                
                (0.01
                )
                
                0.07
                
                
                0.12
                
                
                
                
                $
                0.22Diluted
                
                
                (0.01
                )
                
                0.07
                
                
                0.12
                
                
                
                
                $
                0.21Weighted
                    average shares outstandingBasic
                
                
                10,146,353
                
                
                15,543,330
                
                
                15,543,330
                
                
                
                
                
                13,750,966Diluted
                
                
                10,146,353
                
                
                15,868,739
                
                
                15,989,256
                
                
                
                
                
                13,985,255




F-82




YUHE
        INTERNATIONAL, INC.
 UNAUDITED
        PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
 FOR
        THE
        NINE MONTHS ENDED SEPTEMBER 30, 2007
  For
                  the Nine
                Months
                  Ended
                September
                  30, 2007
              
              For
                  theThree
                MonthsEnded
                  September 30, 2007Net
                  revenues
              
              $
              16,215,151
              
              $
              10,177,834Cost
                  of revenue
              
              
              (9,185,871
              )
              
              (4,189,523
              )Gross
                  profit
              
              
              7,029,280
              
              
              5,988,311Operating
                  expensesSelling
              
              
              (261,859
              )
              
              (107,299
              )General
                  and administrative
              
              
              (966,390
              )
              
              (444,991
              )Total
                  operating expenses
              
              
              (1,228,249
              )
              
              (552,290
              )Income
                  from operations
              
              
              5,801,031
              
              
              5,436,021Non-operating
                  income (expense)Interest
                  income
              
              
              608
              
              
              357Other
                  income
              
              
              17,987
              
              
              -Interest
                  expenses
              
              
              (691,048
              )
              
              (168,515
              )Other
                  expenses
              
              
              (116,269
              )
              
              (65,657
              )Total
                  other expenses
              
              
              (788,722
              )
              
              (233,815
              )Net
                  income before income tax
              
              
              5,012,309
              
              
              5,202,206Income
                  Tax
              
              
              -
              
              
              -Net
                  income
              
              $
              5,012,309
              
              $
              5,202,206Earnings
                  per shareBasic
              
              $
              0.58
              
              $
              0.60Diluted
              
              $
              0.58
              
              $
              0.60Weighted
                  average shares outstandingBasic
              
              
              8,626,318
              
              
              8,626,318Diluted
              
              
              8,626,318
              
              
              8,626,318




F-83


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





***Special
      Note Regarding Forward Looking Statements***





This
      Quarterly Report on Form 10-Q, including the following “Management’s Discussion
      and Analysis of Financial Condition and Results of Operations,” contains
      forward-looking statements that are based on the beliefs of the Company’s
      management and involve risks and uncertainties, as well as assumptions that,
      if
      they ever materialize or prove incorrect, could cause the results of the Company
      to differ materially from those expressed or implied by such forward-looking
      statements. The words “believe,” “expect,” “anticipate,” “project,” “targets,”
“optimistic,” “intend,” “aim,” “will” or similar expressions are intended to
      identify forward-looking statements. All statements other than statements of
      historical fact are statements that could be deemed forward-looking statements,
      including statements regarding new and existing products, technologies and
      opportunities; statements regarding market and industry segment growth and
      demand and acceptance of new and existing products; any projections of sales,
      earnings, revenue, margins or other financial items; any statements of the
      plans, strategies and objectives of management for future operations; any
      statements regarding future economic conditions or performance; uncertainties
      related to conducting business in China; any statements of belief or intention;
      any of the factors mentioned in the “Risk Factors” section of the Company’s S-1
      or amendment thereof or annual report on Form 10-K; and any statements of
      assumptions underlying any of the foregoing. Except as otherwise indicated
      by
      the context, references in this report to the “Company,” “Yuhe International,”
“we,” “us,” or “our,” are references to the combined business of Yuhe
      International, Inc. and its subsidiaries, except in the “Management’s Discussion
      And Analysis of Financial Condition And Results of Operation” where all
      historical financial information prior to March 12, 2008 refers to Weifang
      Yuhe
      Poultry Co. Ltd., “PRC Yuhe”, which includes the accounts of Weifang
      Taihong Feed Co. Ltd., “Taihong”.





***Overview***




We
      are in
      the middle of the broiler chicken supply chain. We purchase baby parent breeding
      stocks from primary breeder farms, raise them for hatching eggs and sell live
      day-old broilers to the market. Our business segment along the broiler supply
      chain has the highest margin along the supply chain. We produce high quality
      day-old broilers supported by our know-how in feed ingredient composition,
      immunization system and breeding techniques gained through over a decade
      experience.





Unless
      otherwise noted, all dollar figures provided herein are translated into United
      States Dollars from Renminbi at year-end exchange rates as to assets and
      liabilities and average exchange rates as to revenues and expenses. Capital
      accounts are translated at their historical exchange rates when the capital
      transactions occurred.





Unless
      otherwise noted, all historical financial information prior to March 12, 2008
      refers to PRC Yuhe, which includes the accounts of Taihong.





***Our
      Company History***





Our
      company has an offshore holding structure commonly used by foreign investors
      with operations in China. We are a Nevada corporation which directly owns 100%
      of the securities of Bright Stand International Limited, or “Bright Stand”, an
      international business company incorporated in the British Virgin Islands.
      Bright Stand directly owns 100% of the securities of PRC Yuhe, a wholly
      foreign-owned enterprise established under the laws of the PRC, and directly
      owns 43.75% and indirectly owns, through PRC Yuhe, the remaining 56.25% of
      the
      securities of Taihong, a foreign invested enterprise established under the
      laws
      of the PRC.




Mr.
      Kunio
      Yamamoto, Pinnacle Fund, L.P., Black River Small Capitalization Fund Ltd.,
      Ardsley Partners Fund II, LP and Halter Financial Investments, L.P. are our
      significant shareholders. As of September 30, 2008, Mr. Yamamoto owned 49.2%,
      Pinnacle Fund, L.P. owned 15.6%, Black River Small Capitalization Fund Ltd.
      owned 14.6%, Ardsley Partners Fund II, LP owned 7.3% and Halter Financial
      Investments, L.P. owned 6.1% of the total outstanding shares of our common
      stock.




4





The
      following chart depicts our organizational structure:









We
      did
      not become engaged in the day-old broiler business until March 12, 2008.
      Effective March 12, 2008, we closed an Exchange Agreement with Bright Stand
      and
      Kunio Yamamoto, a citizen of Japan, the sole former shareholder of Bright Stand.
      Pursuant to the terms of the Exchange Agreement, we acquired all of the
      outstanding capital stock of Bright Stand from Mr. Yamamoto in exchange for
      126,857,134 shares of our common stock, equivalent to 8,626,318 post-split
      shares. At the closing, Bright Stand became our wholly-owned subsidiary.
      Immediately following the closing of the Exchange Agreement, Mr. Yamamoto owned
      126,857,134 shares of our common stock, equivalent to 8,626,318 post-split
      shares.





Upon
      the
      closing of the Exchange Agreement, we gained operating control over PRC Yuhe
      and
      Taihong. PRC Yuhe has been owned by Bright Stand since January 31, 2008. Taihong
      has been owned by PRC Yuhe and Bright Stand since January 31, 2008. Before
      the
      closing of the Exchange Agreement, we were known as First Growth Investors,
      Inc., and were originally formed for the purposes of buying, selling and
      investing in vintage wines, which was our business from 1997 through December
      31, 2003. We had no operations from January 1, 2004 until the closing of the
      Exchange Agreement.





Effective
      April 4, 2008, we amended our articles of incorporation to change our name
      from
“First Growth Investors, Inc.” to “Yuhe International, Inc.”, and effect a
      1-for-14.70596492 reverse stock split of our common stock. Our Board of
      Directors and shareholders approved the name change and the reverse stock split
      pursuant to the Nevada Revised Statutes. The name change became effective with
      NASDAQ’s Over-the-Counter Bulletin Board at the opening for trading on April 7,
      2008, under the new stock symbol of “YUII.OB”.





On
      April
      20, 2008, we appointed CCG Elite Investor Relations as our investor relations
      firm effective on May 1, 2008. On June 13, 2008, we appointed three independent
      directors and one non-independent director to our board of directors and formed
      an audit committee, compensation committee and nomination committee under our
      board of directors.





***Our
      Business Operations***





Our
      business is part of the commercial broiler supply chain.





Day-old
      broilers are one-day-old broilers that are sold to broiler raisers. Day-old
      broilers sold by our wholly owned subsidiary, PRC Yuhe, are our primary source
      of revenue.




5




We
      purchase parent breeding chickens from grandparent breeder farms and raise
      them
      to maturity. Once these parent breeding chickens have matured, they produce
      hatching eggs that we incubate and then sell the resulting day-old broilers
      chicks to our customers.





Under
      normal circumstances, female parent breeder chickens become productive from
      the
      26th week, and are no longer commercially productive after the 66th week.
      Typically a breeder is capable of producing approximately 167 eggs which
      will be hatched to 137 broilers over its production lifetime and the breeders
      are maintained by us for a period of 420 days. We source our parent breeder
      chickens from licensed suppliers located in Beijing, and Shandong and Jiangsu
      provinces and these suppliers are required to have a vaccination certificate
      and
      a breeder production certificate for the sale of the breeders. Our hatching
      eggs
      typically must be incubated for a period of 21 days. At least 28 weeks usually
      pass from our receipt of a day-old parent breeder to our sale of the first
      day-old broiler.





We
      operate in two elements of the broiler supply chain: day-old broiler production
      and feed production. These activities are operated under two separate
      subsidiaries, PRC Yuhe and Taihong, respectively.





***Competition***





The
      market for day-old broilers in China is highly fragmented. Shandong Province
      has
      the highest number of day-old broilers in China.





Day-old
      broilers are very weak physically and need to be transported in closely
      controlled temperature conditions during delivery. Therefore, producers of
      broiler chicks usually only sell locally or to surrounding areas, which limits
      our current effective sales market and competition to North China.





Shandong
      Minhe Animal Husbandry Co., Ltd., also located in Shandong Province, is one
      of
      our major competitors for sales of day-old broilers. They are slightly larger
      than us in terms of their annual day-old broiler production volume. Another
      regional competitor of ours is Jilin Deda, which is located in Jilin Province
      in
      north-eastern China and is smaller than us in terms of annual day-old broiler
      production volume. However, Jilin Deda is an integrated chicken company, so
      it
      does not generally sell day-old broilers to unaffiliated third
      parties.





***Results
      of Operations***





We
      have
      provided below a discussion of our results of operations, as a result of our
      control and ownership of our subsidiaries, PRC Yuhe and Taihong, and other
      factors. We have consolidated the results of PRC Yuhe and Taihong into our
      Consolidated Financial Statements from February 1, 2008 to September 30, 2008.
      For comparison purposes, we have provided a Consolidated Statement of Operations
      for the nine months ended September 30, 2007 to provide comparable
      presentation to our reported results for the nine months ended September
      30, 2008. We believe that providing this financial statement as if we had
      consolidated PRC Yuhe and Taihong may assist investors in assessing performance
      between periods and in developing expectations of future performance.





**Three
      Months Ended September 30, 2008 Compared to Three Months Ended September 30,
      2007**





Discussion
      and analysis below is for the three months ended September 30, 2008, and the
      comparative three months period ended September 30, 2007. We use these items
      in
      internal performance measures to analyze performance between periods, develop
      internal projections and measure management performance.


6




All amounts,
              
              As a
              
              All amounts,
                other than
              
              
              
              Increase/
              
              Increase/other than
              
              percentage of
              
              percentage,
              
              
              
              (Decrease)
              
              (Decrease)percentage, in
              
              net revenues
              
              in U.S. dollars
              
              
              
              Dollar ($)
              
              PercentageU.S. dollarsFor the three
              
              For the three
              
              For the three
              
              
              
              For the three
              
              For the threemonths ended
              
              months ended
              
              months ended
              
              
              
              months ended
              
              months endedSept 30
              
              Sept 30
              
              Sept 30
              
              
              
              Sept 30
              
              Sept 302008
              
              2008
              
              2007
              
              
              
              2008
              
              2007(As reported)
              
              
              
              (Pro forma)**Sales
                  revenue**
              
              
              **9,609,781**
              
              
              **100.0**
              **%**
              
              **10,177,834**
              
              
              **100.0**
              **%**
              
              (568,053
              )
              
              **-5.6**
              **%**Costs
                  of goods sold
              
              
              7,089,355
              
              
              73.8
              %
              
              4,189,523
              
              
              41.2
              %
              
              2,899,832
              
              
              69.2
              %**Gross
                  profit**
              
              
              **2,520,427**
              
              
              **26.2**
              **%**
              
              **5,988,311**
              
              
              **58.8**
              **%**
              
              (3,467,884
              )
              
              **-57.9**
              **%**Bad
                  debts recovery
              
              
              (554,188
              )
              
              **-5.8**
              **%**
              
              -
              
              
              0.0
              %
              
              (554,188
              )
              
              0.0
              %Selling
                  expenses
              
              
              135,658
              
              
              1.4
              %
              
              107,299
              
              
              1.1
              %
              
              28,359
              
              
              26.4
              %General
                  and administrative expenses
              
              
              781,247
              
              
              8.1
              %
              
              444,991
              
              
              4.4
              %
              
              336,256
              
              
              75.6
              %**Operating
                  income**
              
              
              **2,157,709**
              
              
              **22.5**
              **%**
              
              **5,436,021**
              
              
              **53.4**
              **%**
              
              (3,278,312
              )
              
              **-60.3**
              **%**Interest
                  income
              
              
              63
              
              
              0.0
              %
              
              357
              
              
              0.0
              %
              
              (294
              )
              
              -82.3
              %Other
                  income
              
              
              93,062
              
              
              1.0
              %
              
              -
              
              
              0.0
              %
              
              93,062
              
              
              0.0
              %Interest
                  expenses
              
              
              320,048
              
              
              3.3
              %
              
              168,515
              
              
              1.7
              %
              
              151,533
              
              
              89.9
              %Other
                  expenses
              
              
              
              
              
              0.0
              %
              
              65,657
              
              
              0.6
              %
              
              (65,657
              )
              
              0.0
              %Income
                  taxes
              
              
              -
              
              
              0.0
              %
              
              -
              
              
              0.0
              %
              
              -**Net
                  income**
              
              
              **1,930,786**
              
              
              **20.1**
              **%**
              
              **5,202,206**
              
              
              **51.1**
              **%**
              
              (3,271,420
              )
              
              **-62.9**
              **%**




*Net
      revenue*





Sales
      revenue of $9.6 million represents sales of day-old broilers of $8.9 million
      with volume of 23.93 million, sales of broiler by-products of $0.49 million
      and
      sales of feed of $0.13 million, for the three months ended September 30, 2008.





Sales
      revenue decreased by $0.57 million, or 5.6%, to $9.6 million for the three
      months ended September 30, 2008 from $10.2 million for the three months ended
      September 30, 2007. The decrease was mainly driven by the decrease in sales
      price of the day-old broilers sold,, from 4.37 RMB in average for the three
      months ended September 30, 2007 to 2.57 RMB in average for the three months
      ended September 30, 2008, or a 41% decrease in sales price.. The monthly average
      price in July, August and September were 1.11, 2.71 and 3.21 RMB per day-old
      broiler. The average sales price in July was even lower than the unit cost
      for
      day-old broilers. The sharp price decline in July was a result of the
      temporarily closure of many chicken slaughters in North of China during June
      and
      July to conserve power supply for the Olympic game. After July, the volume
      increased from 16.5 million to 23.9 million, or by 45%, which compensated the
      decline of the selling price.





Sales
      revenue of broiler by-products is $ 0.49 million, or 5% of the total revenue.
      It
      consists of $0.12 million sales of eggs, $0.33 million sales of retired breeder,
      and $36,000 of others. Sales of broiler by-products increased $0.42 million,
      from $0.07 million for the three months ended September 30, 2007 to $0.49
      million for the three months ended September 30, 2008. The increase was mainly
      driven by the increase in sales volume of retired breeder stocks by 0.26 million
      kilograms.





Since
      almost all the products of Taihong were supplied to its parent, PRC Yuhe,
      revenue contributed from Taihong’s external sales comprised only approximately
      1% of our total revenues for the three months ended September 30, 2008.





*Cost
      of revenues*





Our
      cost
      of revenues amounted to approximately $7.1 million, or approximately 74% of
      our
      sales revenue, for the three months ended September 30, 2008.





Our
      cost
      of revenues increased by $2.9 million, or 69%, to $7.1 million for the three
      months ended September 30, 2008 from $4.2 million for the three months ended
      September 30, 2007. The main reason for the increase in the cost of revenues
      was
      the rise in sales volume. In addition, the cost for retired breeders was
      included in cost for the three months ended September 30, 2008; there were
      no
      sales of retired breeders in the same period in 2007.


7





The
      unit
      cost per day-old broiler was 1.97 RMB for the three months ended September
      30,
      2008 compared to 1.99 RMB for the three months ended September 30, 2007. The
      main reason for the decline of unit cost is due to the breeders experiencing
      peak productivity season in the third quarter 2008. The unit cost in the second
      quarter in fiscal year 2008 and 2007 is 2.29 RMB and 2.16 RMB
      individually.





As
      a
      percentage of net revenues, the cost of revenues increased by 33%, from 41%
      for
      the three months ended September 30, 2007, to 74% for the three months ended
      September 30, 2008. The increase in cost of revenues as a percentage of net
      revenues was due to the sharp decline in selling price in July as discussed
      above.





*Gross
      profits*





The
      gross
      profit amounted to approximately $2.5 million for the three months ended
      September 30, 2008.





Our
      gross
      profit decreased by $3.5 million to $2.5 million for the three months ended
      September 30, 2008 from gross profit of $6.0 million for the three months ended
      September 30, 2007.  Gross profit as a percentage of net revenues was 26%
      for the three months ended September 30, 2008, as compared to 59% for the three
      months ended September 30, 2007. The decrease was mainly attributable to
      the decline in sales price of the day-old broilers which we discussed
      above.




*General
      and administrative expenses*





Our
      General and administrative expenses amounted to approximately $781,000 for
      the
      three months ended September 30, 2008. It comprised mainly of human resources
      and related expenses of approximately $94,000, representing 25% of total general
      and administrative expenses, utility expenses of $114,000, representing 17%
      of
      total general and administrative expenses, and transportation expenses of
      $19,000, representing 8% of total general and administrative expenses. In
      addition, there was approximately $238,000 professional fee to investor relation
      firm, legal consultants and audit fee. General and administrative expenses
      also
      include stock based compensation expense of $183,000.





The
      General and administrative ** expenses
      increased approximately $336,000, or 76%, to $781,000 for the three months
      ended
      September 30, 2008 from $445,000 for the three months ended September 30, 2007.
      The increase in general and administrative expenses was mainly due to public
      company related expense such as professional fee and stock based compensation
      expense.





*Bad
      Debts Recovery*





During
      the three months ended September 30, 2008, bad debts recovery was $554,188.
      Bad
      debts recovery represents recovery of other receivables previously written
      off.





*Selling
      Expense*





Our
      selling expenses amounted to approximately $136,000 for the three months ended
      September 30, 2008. It comprised mainly of packaging expenses of approximately
      $95,000, representing 73% of total selling expenses. Human resources and related
      expenses of approximately $15,000, representing 12% of total selling expenses,
      and travel expense of $17,000, representing 13% of total selling expenses.





Our
      selling expenses increased by $29,000, or 26%, to $136,000 for the three months
      ended September 30, 2008 from $107,000 for the same period in 2007. The increase
      in selling expenses corresponds with the increase in sales volume from 16.5
      million day-old broilers to 23.9 million day-old broilers. As a percentage
      of
      net revenues, selling expenses increased to 1.4% for the three months ended
      September 30, 2008 as compared to 1.1% for the three months ended September
      30,
      2007.





*Interest
      expenses*





Interest
      expenses amounted to approximately $320,000 for the three months ended September
      30, 2008. Interest expenses consisted primarily of interest on bank loans.
      Interest expenses increased $151,000 to $320,000 for the three months ended
      September 30, 2008 from $169,000 for the three months ended September 30, 2007.
      The increase is partially attributable to the non-existence of some of the
      loans
      for the full period in 2007, resulting in lower interest expense for the
      comparable period in 2007. In addition, interest rates on some of the loans
      have
      increased compared to the same period in 2007. As we expect to extend or roll
      over the loans as they come due in the near future, the interest on bank loans
      will fluctuate depending on the interest rate environment.





*Provision
      for Income Taxes*





PRC
      Yuhe
      was entitled to an exemption from Chinese enterprises income tax (EIT) as a
      poultry producer. As a result, PRC Yuhe incurred no income tax expense for
      the
      three months ended September 30, 2008 and 2007.





In
      accordance with the relevant tax laws and regulations of PRC, our other PRC
      subsidiary Taihong is subject to the enterprise income tax rate of 25%. Since
      Taihong has been operating at a loss, there was no tax expense incurred for
      the
      three months ended September 30, 2008.


8





*Other
      income*





Other
      income amounted to $93,000 for the three months ended September 30, 2008. It
      is
      related to refunds from suppliers of the parent breeder due to quality
      reason.





*Net
      profit*





Net
      profit amounted to approximately $1.93 million for the three months ended
      September 30, 2008. Net profit decreased by $3.27 million to $1.93 million
      for
      the three months ended September 30, 2008 from net profit of $5.20 million
      for
      the three months ended September 30, 2007, as a result of the factors described
      above.





**Nine
      Months Ended September 30, 2008 Compared to Nine Months Ended September 30,
      2007**





We
      have
      consolidated the results of PRC Yuhe and Taihong into our Consolidated Financial
      Statements from February 1, 2008 to September 30, 2008. For comparison purposes,
      we have provided a Consolidated Statement of Operations for both nine months
      ended September 30, 2008 and 2007 to provide comparable presentation to our
      reported results for the nine months ended September 30, 2008 and 2007. We
      believe that providing this financial statement as if we had consolidated PRC
      Yuhe and Taihong may assist investors in assessing performance between periods
      and in developing expectations of future performance.


All amounts,
                
                As a
                
                
                
                
                
                Increase/
                
                Increase/other than
                
                percentage of
                
                
                
                
                
                (Decrease)
                
                (Decrease)percentage, in
                
                net revenues
                
                All amounts, other than
                
                
                
                Dollar ($)
                
                PercentageU.S. dollars
                
                
                
                percentage, in U.S. dollarsYTD
                
                For the nine
                
                For the nine
                
                For the nine
                
                
                
                For the nine
                
                
                
                For the nine
                
                For the threemonths ended
                
                months ended
                
                months ended
                
                
                
                months ended
                
                
                
                months ended
                
                months endedSept 30
                
                Sept 30
                
                Sept 30
                
                
                
                Sept 30
                
                
                
                Sept 30
                
                Sept 302008
                
                2008
                
                2008
                
                
                
                2007
                
                
                
                2008
                
                2007(As reported)
                
                
                
                (Pro forma)
                
                
                
                (Pro forma)**Sales
                    revenue**
                
                
                **16,318,263**
                
                
                **100.0**
                **%**
                
                **17,809,592**
                
                
                **100.0**
                **%**
                
                **16,215,151**
                
                
                **100.0**
                **%**
                
                **1,594,441**
                
                
                **9.8**
                **%**Costs
                    of goods sold
                
                
                11,732,602
                
                
                71.9
                %
                
                13,070,040
                
                
                73.4
                %
                
                9,185,871
                
                
                56.6
                %
                
                3,884,169
                
                
                42.3
                %**Gross
                    profit**
                
                
                **4,585,661**
                
                
                **28.1**
                **%**
                
                **4,739,552**
                
                
                **26.6**
                **%**
                
                **7,029,280**
                
                
                **43.4**
                **%**
                
                **(2,289,728**
                **)**
                
                **-32.6**
                **%**Bad
                    debts recovery
                
                
                (641,103
                )
                
                -3.9
                %
                
                (860,996
                )
                
                -4.8
                %
                
                -
                
                
                0.0
                %
                
                **(860,996**
                **)**
                
                **0.0**
                **%**Selling
                    expenses
                
                
                280,489
                
                
                1.7
                %
                
                309,486
                
                
                1.7
                %
                
                261,859
                
                
                1.6
                %
                
                47,627
                
                
                18.2
                %General
                    and administra
                
                
                1,500,458
                
                
                9.2
                %
                
                1,622,872
                
                
                9.1
                %
                
                966,390
                
                
                6.0
                %
                
                656,482
                
                
                67.9
                %**Operating
                    income**
                
                
                **3,445,817**
                
                
                **21.1**
                **%**
                
                **3,668,190**
                
                
                **20.6**
                **%**
                
                **5,801,031**
                
                
                **35.8**
                **%**
                
                **(2,132,841**
                **)**
                
                **-36.8**
                **%**Interest
                    income
                
                
                4,518
                
                
                0.0
                %
                
                4,523
                
                
                0.0
                %
                
                608
                
                
                0.0
                %
                
                3,915
                
                
                644.0
                %Other
                    income
                
                
                192,624
                
                
                1.2
                %
                
                198,228
                
                
                1.1
                %
                
                17,987
                
                
                0.1
                %
                
                180,241
                
                
                1002.1
                %Interest
                    expenses
                
                
                763,168
                
                
                4.7
                %
                
                849,335
                
                
                4.8
                %
                
                691,048
                
                
                4.3
                %
                
                158,287
                
                
                22.9
                %Other
                    expenses
                
                
                56,342
                
                
                0.3
                %
                
                56,623
                
                
                0.3
                %
                
                116,269
                
                
                0.7
                %
                
                (59,646
                )
                
                -50.3
                %Income
                    taxes
                
                
                -
                
                
                0.0
                %
                
                -
                
                
                0.0
                %
                
                -
                
                
                0.0
                %
                
                -**Net
                    income**
                
                
                **2,823,449**
                
                
                **17.3**
                **%**
                
                **2,964,983**
                
                
                **16.6**
                **%**
                
                **5,012,309**
                
                
                **30.9**
                **%**
                
                **(2,047,326**
                **)**
                
                **40.8**
                **%**




*Net
      revenue (As reported).* Sales
      revenue of $16.3 million represents sales of 37 million day-old broilers from
      the period February 1, 2008 to September 30, 2008.





*Net
      revenue (Pro forma).* Sales
      revenue increased by $1.59 million, or 9.8%, to $17.8 million for the nine
      months ended September 30, 2008 from $16.2 million for the nine months ended
      September 30, 2007. The increase was driven by the increase in sales volume
      of 9
      million day-old broilers, or 28%, from 32 million birds for the nine months
      ended September 30, 2007 to 41 million birds for the nine months ended September
      30, 2008. The increase in sales volume is partially offset by the decrease
      in
      selling price of day-old broilers from 3.6 RMB per bird for the nine months
      ended September 30, 2007 to approximately 2.82 RMB per bird for the nine months
      ended September 30, 2008.. The increase in sales volume was a result of increase
      in the purchase of new breeder stock which has now grown up to reach maturity
      level in the third quarter of 2008. The price decline was primarily the result
      of the temporary closure of chicken slaughters in June and July we discussed
      above.





*Cost
      of revenues (As reported).* Our
      cost
      of revenues amounted to approximately $11.7 million, or representing
      approximately 72% of our sales revenue from the period February 1, 2008 to
      September 30, 2008.


9





*Cost
      of revenues (Pro forma).* Our
      cost
      of revenues increased by $3.9 million, or 42%, to $13.1 million for the nine
      months ended September 30, 2008 from $9.2 million for the nine months ended
      September 30, 2007. The main reason for the increase in the cost of revenues
      was
      the increase in sales volume. In addition, the cost for retired breeders was
      included in cost for the nine months ended September 30, 2008; there were no
      sales of retired breeders in the same period in 2007.





As
      a
      percentage of net revenues, the cost of revenues increased by 17%, from 56%
      for
      the nine months ended September 30, 2007, to 73% for the nine months ended
      September 30, 2008. The increase in cost of revenues as a percentage of net
      revenues was mainly due to a decrease in the day old broiler’s selling price in
      the third quarter, as we discussed above.





*Gross
      profits (As reported).* The
      gross
      profit amounted to approximately $4.6 million from the period February 1, 2008
      to September 30, 2008. Gross profit as a percentage of net revenues was
      approximately 28.1% from the period February 1, 2008 to September 30, 2008.





*Gross
      profit (Pro forma).* Our
      gross
      profit decreased by $2.3 million to $4.7 million for the nine months ended
      September 30, 2008 from $7.0 million for the nine months ended September 30,
      2007.  Gross profit as a percentage of net revenues was 27% for the nine
      months ended September 30, 2008, as compared to 43% for the nine months ended
      September 30, 2007. The decrease was mainly attributable to the decline in
      sales price of our day-old broilers which was discussed above.





*General
      and administrative expenses (As reported).* The
      General and administrative expenses amounted to approximately $1.5 million
      from
      the period February 1, 2008 to September 30, 2008.





*General
      and administrative expenses (Pro forma).*  *The
      General and administrative* expenses
      increased $656,000, or 68%, to $1.6 million for the nine months ended September
      30, 2008 from $966,000 for the nine months ended September 30, 2007. The
      increase in general and administrative expenses was mainly due to the public
      company related expense in this fiscal year.





Bad
      Debts
      Recovery





During
      the nine months ended September 30, 2008, bad debts recovery was approximately
      $641,000 (as reported) and $861.000 (pro forma). Bad debts recovery represents
      recovery of other receivables previously written off.





*Selling
      Expenses (As reported).* Our
      selling expenses amounted to $280,000 from the period February 1, 2008 to
      September 30, 2008.





*Selling
      Expenses (Pro forma).* ** Our
      selling expenses increased by $48,000, or 18%, to $309,000 for the nine months
      ended September 30, 2008 from $262,000 for the same period in 2007. Selling
      expenses consisted of packaging expenses, payroll and traveling expenses. The
      increase in selling expenses was primarily due to the increase in sales volume.
      As a percentage of net revenues, selling expenses remain at 2% for the nine
      months ended September 30, 2008 and 2007.





*Interest
      expenses (As reported).* Interest
      expenses amounted to approximately $763,000 from the period February 1, 2008
      to
      September 30, 2008. Interest expenses consisted primarily of interest on bank
      loans.





*Interest
      expenses (Pro forma).* Interest
      expenses increased $158,000 to $849,000 for the nine months ended September
      30,
      2008 from $691,000 for the nine months ended September 30, 2007. Interest
      expenses consisted primarily of interest on bank loans. The increase in interest
      expense was due to $5.7 million of the $10.8 million bank loans not outstanding
      for the full nine months in 2007 while they were outstanding for the full nine
      months in 2008. Therefore, interest expense was higher for the nine months
      ended
      September 30, 2008 compared to 2007.





*Net
      profit*  *(As
      reported).* Net
      profit amounted to approximately $2.8 million from the period February 1, 2008
      to September 30, 2008, as a result of the factors described above.





*Net
      profit* ( *Pro
      forma).* Net
      profit decreased by $2.0 million to $3 million for the nine months ended
      September 30, 2008 from $5.0 million for the nine months ended September 30,
      2007, as a result of the factors described above.





***Liquidity
      and Capital Resources***





For
      the
      period  from
      February 1, 2008 to September 30, 2008





We
      expect
      that our present working capital will meet our foreseeable working capital
      needs
      for the next 12 months from the date of this filing.





In
      support of our long-term business plan, we already arranged a private placement
      on March 12, 2008 of $18,000,000 with net amount of $15,359,523 that we received
      up to September 30, 2008. This fund will be used for our foreseeable expansion
      in 2008 and 2009.




10




*General*


As
      of
      September 30, 2008, we had cash and cash equivalents of approximately
      $6,419,671. The following table provides detailed information about our net
      cash
      flow for the nine months period ended September 30, 2008.


Nine months ended
                September
                30, 2008Net
                  cash (used in) operating activities
              
              
              (3,018,153
              )Net
                  cash (used in) investing activities
              
              
              (20,538,758
              )Net
                  cash provided by financing activities
              
              
              28,786,086Effect
                  of foreign currency translation on cash and cash equivalents
              
              
              140,328Net
                  cash inflow
              
              
              5,369,503Cash
                  and cash equivalents at beginning of period
              
              
              1,050,168Cash
                  and cash equivalents at end of period
              
              
              6,419,671





*Operating
      Activities.* Net
      cash
      used in operating activities was $3.0 million for the nine months ended
      September 30, 2008. Net cash used in operating activities was primarily
      attributable to decrease in inventory of $4 million for normal business purpose
      of paying inventory and the purchase of breeder stocks to replace retired
      breeder stocks.





*Investing
      Activities.* Net
      cash
      used in investing activities for the nine months ended September 30, 2008 was
      $20.5 million. Net cash used in investing activities was mainly due to the
      acquisition of 100% common stock of PRC Yuhe and 43.75% of Taihong for
      approximately $10.6 million cash in January 2008.





The
      Company paid $11.5 million for capital expenditures; in which $1.4 million
      is
      for acquisition of property, plant and equipment and $10.1 million for deposits
      paid for acquisition of land and farm construction. The Company has capital
      commitment amounting $10.6 million, of which the Company has paid $10.3 million
      as deposits for property, plant and equipment. The Company is required to pay
      the remaining $0.3 million to complete the existing construction projects for
      the expansion of the farm and hatch houses. Also, by partly offsetting the
      proceeds from loan receivable and disposal of fixed assets in the total amount
      of $1.6 million, the Company has a net cash used in investing activities of
      $20.5 million.




The
      following is a summary of some of the Company’s investment in acquisition of
      land and farm construction of $8.2 million, including in the capital commitement
      of $10.6 million mentioned above.





Land
      for hatchery factory No. 3





On
      June
      10, 2008, PRC Yuhe entered into an agreement with Shandong Meiweite Food Ltd.
      and purchased land use rights for 45 years to an area covering 26,666 square
      meters. According to the agreement, the total consideration for the sale and
      purchase is RMB 10 million, approximately equivalent to $1.5 million, and a
      sum
      of RMB 9 million, approximately equivalent to $1.3 million, has been paid
      according to the terms of such agreement. PRC Yuhe will manage and utilize
      the
      land to build a new hatchery next year, bringing the total number of hatcheries
      to three by the end of 2009.





Purchase
      of breeding farms Nos. 3 & 4





On
      June
      7, 2008, PRC Yuhe entered into an agreement with Shandong Anrui Poultry Feed
      Ltd., and purchased land and the building on it for a total consideration of
      RMB
      17 million, approximately equivalent to $2.5 million, and a sum of RMB 16
      million, approximately equivalent to $2.4 million, has been paid according
      to
      the terms of such agreement. PRC Yuhe will utilize this facility as one of its
      breeding farms without the need to pay for lease payments after such agreement
      was signed. PRC Yuhe will have avoided annual lease payments by $500,000. The
      capacity of this breeding farm is 100,000 sets of parent broilers.





Construction
      of breeding farm No. 1





On
      August
      15, 2008, PRC Yuhe completed construction work and facilities to set up the
      southern farm of breeding farm No 1. On August 30, 2008, PRC Yuhe purchased
      100,000 sets of parent breeders and began to feed. By the end of September
      2008,
      PRC Yuhe has spent RMB 29 million, approximately equivalent to $4.5 million,
      to
      build breeding farm No 1. The breeding farm can be split into the southern
      and
      the northern regions. PRC Yuhe looks forward to completing the northern farm
      construction work and facilities to set up by the end of January in 2009; and
      beginning to breed parent broilers in the northern region by the end of February
      in 2009. The residual scheduled payment is RMB 6 million, equivalent to $0.9
      million, for the building and facilities; and RMB 4.9 million, approximately
      equivalent to $0.75 million, in machineries. The capacity of the northern
      factory is 140,000 sets of parent broilers.




*Financing
      Activities.* Net
      cash
      from financing activities totaled $28.8 million for the nine months ended
      September 30, 2008. The significant cash flows provided by financing
      activities was primarily a result of the business combination occurred during
      the period ended March 31, 2008. Bright Stand received $12.2 million
      capital contribution from its shareholder to use for acquisition of PRC Yuhe.
      In
      addition, $15.4 million of net proceeds was raised and received in the sale
      of
      the Company's common stock during the period ended June 30, 2008 The Company
      also had net cash proceeds of $1.1 million from receipt of receivables from
      and
      payments to related parties. Moreover, the Company had net borrowings of
      $201,000 from additional borrowings from and repayments to banks during the
      nine
      months ended September 30, 2008.


11




*Loan
      Facilities*


As
      of
      September 30, 2008, maturities of our bank loans are as follows:





As at September 30,
              20082008
            
            $
            5,762,1332009
            
            
            1,356,6542010
            
            
            3,646,920$
            10,765,707





All
      amounts, other than percentages, are in U.S. dollars




No
            
            Type
            
            Contracting Party
            
            Loan Periods
            
            Duration
            
            Interest rate
              Per annum
            
            Amount1
            
            Bank loan
            
            Nansun
                Rural Credit
            
            Nov
                28, 2008 –
              May
                17, 2010
            
            54
                months
            
            9.22%-10.51%
            $
            8,752,6082
            
            Bank
                loan
            
            Shuangyang
                Rural Credit
            
            May
                12, 2007 –
              Oct
                12, 2008
            
            17
                months
            
            9.33%
            
            948,1993
            
            Bank
                loan
            
            Hanting
                Kaiyuan Rural
              Credit
                Cooperative
            
            July
                1, 2007 –
              Jan
                1, 2009
            
            18
                months
            
            9.22%-13.31%
            
            1,064,901$
            10,765,708




We
      have
      loan facilities from three institutions and the following are the material
      terms
      of such bank loans





Loans
      from Nansun Rural Credit.





PRC
      Yuhe
      entered into four loan agreements with Nansun Rural Credit on November 28 2005,
      March 14, 2007, May 17, 2007 and December
      10, 2007. Interest rates for the loan agreements range from 7.68% to 8.76%
      per
      annum. Nansun Rural Credit also provided four loans to Taihong from November
      28,
      2005 to December 5, 2007 at interest rates ranging from 9.22% to 10.51% per
      annum. Loan from Nansun Rural Credit had a total outstanding principal balance
      of $8,752,608 as of September 30, 2008. PRC Yuhe and Taihong are obligated
      under
      these loan agreements to pay interest monthly and repay the loans on their
      maturity dates from November 28, 2008 to May 17, 2010. The loans are used for
      financing of working capital. All loans are secured by the land use right and
      building of PRC Yuhe and Taihong with a net book of $12,233,921 as of September
      30, 2008.





Loan
      from
      Shuangyang Rural Credit.





On
      May
      12, 2007. Taihong entered into a loan agreement with Shuangyang Rural Credit
      at
      an interest rate of 8.76% per annum on all outstanding principal. Outstanding
      principal balance on loan from Shuangyang Rural Credit totaled $948,199 as
      of
      September 30, 2008. Taihong is obligated under such loan agreement to pay
      interest monthly and repay the loan on its maturity date, October 12, 2008.
      We
      use the loan to finance the purchase of raw materials. The loan is secured
      by
      the plant and equipment of Taihong with a net book of $1,121,949 as of September
      30, 2008.





Loan
      from
      Hanting Kaiyuan Rural Credit Cooperative.





On
      July
      1, 2007, PRC Yuhe entered into a loan agreement with Hanting Kaiyuan Rural
      Credit Cooperative at interest rate of 9.248% per annum on all outstanding
      principal. Outstanding principal balance on loan from Hanting Kaiyuan Rural
      Credit Cooperative totaled $1,064,901 as of September 30, 2008. PRC Yuhe is
      obligated under such loan agreement to pay interest monthly and repay the loan
      on its maturity date, January 1, 2009. PRC Yuhe uses the loan to finance the
      purchase of raw materials. The loan is secured by the plant and equipment of
      PRC
      Yuhe with a net book of $1,297,128 as of September 30, 2008.





Due
      to
      related companies





As
      of
      September 30, 2008, the Company has $205,775 due to Weifang Hexing Breeding
      Co.,
      Ltd., a company which Mr. Gao Zhentao also serves as a director. The amounts
      due
      to this related company are unsecured, interest free and have no fixed repayment
      date. These loans are used for working capital purposes.


12




***Obligations
      Under Material Contracts***





Below
      is
      a table setting forth our material contractual obligations as of September
      30,
      2008:








Payment
                  due by periodContractual
                  Obligations
              
              Total
              
              Less
                  than 1
                year
              
              1-3
                  years
              
              3-5
                  years
              
              More
                  than
                5
                  yearsLong-Term
                  Debt Obligations
              
              $
              10,765,707
              
              $
              5,762,133
              
              $
              5,003,574
              
              
              -
              
              
              -Due
                  to Related Companies
              
              $
              228,788
              
              $
              228,788
              
              
              -
              
              
              -
              
              
              -Operating
                  Lease Obligations
              
              $
              2,031,122
              
              $
              38,802
              
              $
              298,258
              
              $
              164,494
              
              $
              1,529,568Capital
                  Lease Obligations
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Purchase
                  Obligations
              
              $
              10,518,263
              
              $
              10,518,263
              
              
              -
              
              
              -
              
              
              -Other
                  Long-Term Liabilities Reflected on the Registrant’s Balance Sheet under
                  GAAP
              
              
              -
              
              
              -
              
              
              -
              
              
              -
              
              
              -Total
              
              $
              23,543,880
              
              $
              16,547,986
              
              $
              5,301,832
              
              $
              164,494
              
              $
              1,529,568




***Critical
      Accounting Policies***





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 in the
      financial statements, including the notes thereto, and related disclosures
      of
      commitments and contingencies, if any. We consider our critical accounting
      policies to be those that require the more significant judgments and estimates
      in the preparation of financial statements, including the
      following:





l
            *Inventory*-
                Inventories consisting of raw materials, work in progress and finished
                goods are stated at lower of cost and net realizable value. The cost
                of
                inventories is determined using weighted average cost method, and
                includes
                expenditure incurred in acquiring the inventories and bringing them
                to
                their existing location and condition. Net realizable value is the
                estimated selling price in the ordinary course of business less any
                applicable selling expenses. Finished goods are comprised of direct
                materials, direct labor and an appropriate proportion of overhead.
                At each
                balance sheet date, inventories that are worth less than cost are
                written
                down to their net realizable value, and the difference is charged
                to the
                cost of revenues of that period.





l
            *Trade
                receivable –*Trade
                receivables are recognized and carried at the original invoice amount
                less
                allowance for any uncollectible amounts. An estimate for doubtful
                accounts
                is made when collection of the full amount is no longer probable.
                Bad
                debts are written off as incurred.





l
            *Plant
                and equipment -*Plant
                and equipment are carried at cost less accumulated depreciation.
                Depreciation is provided over their estimated useful lives, using
                the
                straight-line method. Estimated useful lives of the plant and equipment
                are as follows:




Buildings
            20
                yearsMachinery
            1 –
                10 yearsVehicle
            5
                yearsFurniture
                and equipment
            3
                years





The
      cost
      and related accumulated depreciation of assets sold or otherwise retired are
      eliminated from the accounts and any gain or loss is included in the statement
      of income. The cost of maintenance and repairs is charged to income as incurred,
      whereas significant renewals and betterments are capitalized.





l
            *Valuation
                of long-lived assets -*Long-lived assets held and used by the Company are reviewed for impairment
                whenever events or changes in circumstances indicate that the carrying
                amount of assets may not be recoverable. It is reasonably possible
                that
                these assets could become impaired as a result of technology or other
                industry changes. Determination of recoverability of assets to be
                held and
                used is by comparing the carrying amount of an asset to future net
                undiscounted cash flows to be generated by the
                assets.





If
      such
      assets are considered to be impaired, the impairment to be recognized is
      measured as the amount by which the carrying amount of the assets exceeds the
      fair value of the assets. Assets to be disposed of are reported at the lower
      of
      the carrying amount or fair value less costs to sell. During the reporting
      periods, there was no impairment loss.





l
            *Intangible
                assets*-
                Intangible assets represent land use rights in the PRC. Land use
                rights
                are carried at cost and amortized on a straight-line basis over the
                period
                of rights of 50 years commencing from the date of acquisition of
                equitable
                interest. According to the laws of PRC, the government owns all of
                the
                land in PRC. Companies or individual are authorized to possess and
                use the
                land only through land usage rights approved by the PRC
                government.


13




l
            *Guarantee
                Expense -*The
                Company accounts for its liability for product guaranteed in accordance
                with FASB Interpretation No. 45 (FIN 45), "Guarantor's Accounting
                and
                Disclosure Requirements for Guarantees, Including Indirect Guarantees
                of
                Indebtedness of Others."  Under FIN 45, the aggregate changes in the
                liability for accruals related to product warranties issued during
                the
                reporting period must be charged to expense as incurred.




The
      Company guarantees a 98% survival rate of its product by delivering additional
      2% of the product.  The guarantee expires seven days after delivery. 
If the survival rate falls below 98%, the Company provides additional guarantee
      compensation to customers.  Based on historical experience, the likelihood
      that survival rate falls below 96% is remote and therefore no accrued guarantee
      liability was recorded at period end.  The Company records guarantee
      expense as incurred.




l
            *Revenue
                recognition*-
                Net revenue is recognized when third-party distributors and broiler
                farms
                and integrated chicken companies take delivery and acceptance of
                products.  The Company treats both the distributors and broiler farms
                and integrated chicken companies as end customers.  The price is
                fixed or determinable as stated in the sales contract, and the
                collectibility is reasonably assured.  Customers do not have a
                general right of return on products
                delivered.




l
            *Use
                of estimates-*The preparation of the Company’s financial statements in conformity with
                accounting principles generally accepted in the United States of
                America
                (“GAAP”) requires management to make estimates and assumptions that affect
                reported amounts of assets and liabilities and disclosure of contingent
                assets and liabilities at the date of the financial statements and
                the
                reported amounts of revenues and expenses during the reporting period.
                Actual results could differ from those estimates. The financial statements
                include some amounts that are based on management’s best estimates and
                judgments. These accounts and estimates include, but are not limited
                to,
                the valuation of accounts receivable, other receivables, inventories,
                deferred income taxes, and the estimation on useful lives of plant
                and
                equipment. These estimates may be adjusted as more current information
                becomes available, and any adjustment could be
                significant.





l
            *Significant
                Estimates -*Relating
                to Specific Financial Statement Accounts and Transactions Are Identified
                -
                The financial statements include some amounts that are based on
                management’s best estimates and judgments. The most significant estimates
                relate to allowance for uncollectible accounts receivable, inventory
                work
                in process valuation and obsolescence, depreciation, useful lives,
                taxes,
                contingencies, and assumptions used in the Black-Scholes option pricing
                model to calculate the fair value of stock based compensation. These
                estimates may be adjusted as more current information becomes available,
                and any adjustment could be significant*.*




***Effects
      of Inflation***





Inflation
      and changing prices have not had a material effect on our business and we do
      not
      expect that inflation or changing prices will materially affect our business
      in
      the foreseeable future. However, the impact of inflation on PRC Yuhe and Taihong
      may not be readily recoverable in the prices of our products.





***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 or capital
      expenditures or capital resources that is material to an investor in our
      securities.




***Seasonality***




Our
      business has been subject to material seasonal variations in operations for
      the
      normal life cycle of 66 weeks of the breeder stock. Breeder stock produced
      eggs
      at their mature stage, around weeks 28 - 60 and therefore, our business will
      have seasonal variation on the early and aged stage of the breeder stock. In
      addition, we normally raised a new batch of breeder stock after the aged breeder
      stock retires and is sold. This impact of seasonality can be resolved when
      we
      expand our batches of breeder stocks.





**ITEM
      3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
      RISK**




Not
      required for a smaller reporting company.


14


**ITEM
      4. CONTROLS AND PROCEDURES**





Our
      management, with the participation of our chief executive officer and chief
      financial officer, Messrs. Gao Zhentao and Hu Gang, respectively evaluated
      the
      effectiveness of our disclosure controls and procedures. The term “disclosure
      controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the
      Exchange Act, means controls and other procedures of a company that are designed
      to ensure that information required to be disclosed by a company in the reports,
      such as this 10-Q, that it files or submits under the Exchange Act is recorded,
      processed, summarized and reported, within the time periods specified in the
      SEC’s rules and forms. Disclosure controls and procedures include, without
      limitation, controls and procedures designed to ensure that information required
      to be disclosed by a company in the reports that it files or submits under
      the
      Exchange Act is accumulated and communicated to the company’s management,
      including its principal executive and principal financial officers, as
      appropriate to allow timely decisions regarding required disclosure. Our
      disclosure controls and procedures are designed to provide reasonable assurance
      of achieving our objectives, and management necessarily applies its judgment
      in
      evaluating the cost-benefit relationship of possible controls and procedures.
      Based on that evaluation, Messrs. Gao and Hu concluded that as of September
      30,
      2008, our disclosure controls and procedures were effective at that reasonable
      assurance level.





There
      were no changes in our internal control over financial reporting identified
      in
      connection with the evaluation performed that occurred during the quarter
      covered by this report that has materially affected or is reasonably likely
      to
      materially affect, our internal control over financial reporting.




15


**PART
      II**


**OTHER
      INFORMATION**




**ITEM
      1. LEGAL PROCEEDINGS**




From
      time
      to time, we may become involved in various lawsuits and legal proceedings that
      arise in the ordinary course of business. However, litigation is subject to
      inherent uncertainties, and an adverse result in these or other matters may
      arise from time to time that may harm our business.





In
      May
      2008, Li Yu filed a claim against PRC Yuhe, Taihong and Yuhe Group claiming
      RMB
      2,400,000, approximately equivalent to $360,000, arising from an alleged RMB
      10,000,000, or approximately equivalent to $1,500,000, loan agreement dated
      October 31, 2007 entered into among Li Yu, as the lender, PRC Yuhe, Taihong,
      Yuhe Group, and Gao Zhentao. However, due to Li Yu’s failure to transfer the
      loan amount to the borrowers timely, PRC Yuhe and Taihong could not utilize
      the
      loan amount. As a result of the late remittance of funds, Yuhe Group has agreed
      to borrow and take over the RMB 10,000,000, approximately equivalent to
      $1,500,000, loan from PRC Yuhe and Taihong pursuant to a Capital Transfer
      Agreement dated November 28, 2007 by and among PRC Yuhe, Taihong and Yuhe Group.
      Yuhe Group has already repaid RMB 9,200,000, approximately equivalent to
      $1,380,000, to Li Yu.





With
      respect to the claim filed by Li Yu, while it appears that RMB 800,000,
      approximately equivalent to $120,000, remains unpaid under the loan
      agreement, Li Yu has claimed RMB 2,400,000, approximately equivalent to
      $360,000, without explaining his basis. In addition to litigating over
      venue, the borrowers claimed that the loan agreement was forged and
      counterclaimed losses due to Li Yu's failure to transfer the loan amount to
      the
      borrowers timely. The Court has not handed down any judgment yet. Management
      of
      the Company believes Li Yu's claim is not valid and if there is an adverse
      judgment, Yuhe Group has to pay such judgment pursuant to the Capital Transfer
      Agreement.





To
      our
      knowledge, no director, officer or affiliate of ours, and no owner of record
      or
      beneficial owner of more than five percent, 5%, of our securities, or any
      associate of any such director, officer or security holder is a party adverse
      to
      us or has a material interest adverse to us in reference to pending
      litigation.




**ITEM
      1A. RISK FACTORS**





There
      have been no material changes to the risk factors previously discussed in our
      Registration Statement on Amendment No. 4 to Form S-1 filed on or about
      November 7, 2008.




**ITEM
      2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF
      PROCEEDS**





Since
      January 1, 2005, we have issued unregistered securities to a limited
      number of accredited investors as described below:





(1)
        On November 16, 2007, we issued 14,000,000 shares of our common stock,
      equivalent to 951,996 post-split shares, to Halter Financial Investments, L.P.,
      an accredited inventor, for aggregate proceeds of $425,000. The issuance
      and sales of these securities were deemed to be exempt from registration
      pursuant to Section 4(2) of the Securities Act. We declared and paid a special
      cash dividend of $0.21 per share, equivalent to $3,088 per share
      post-split, to our shareholders on November 19, 2007. Halter Financial
      Investments, L.P. did not participate in such dividend. The dividend was payable
      to shareholders of record on November 15, 2007. The dividend payment date was
      November 19, 2007. The dividend was payable to our shareholders who held
      2,000,000 shares, equivalent to 135,995 post-split shares, of its common
      stock and resulted in a total dividend distribution of $420,000. The funds
      for
      the dividend came from the $425,000 proceeds received from the sale of common
      stock to Halter Financial Investments, L.P.





(2)
        On March 12, 2008 in connection with transactions related to the
      acquisition of Bright Stand International Limited, we issued 126,857,134 shares,
      equivalent to 8,626,318 post-split shares, of our common stock to Kunio
      Yamamoto, an accredited investor. The issuance and sales of these securities
      were deemed to be exempt from registration pursuant to Section 4(2) of the
      Securities Act.





(3)
        On March 12, 2008 we issued 85,714,282 shares, equivalent to 5,829,018
      post-split shares, of our common stock to twenty-five
      accredited investors for aggregate proceeds of approximately $18,000,000.
      The issuance and sales of these securities were deemed to be exempt from
      registration pursuant to Rule 506 under the Securities Act. We plan to use
      part of the proceeds to build new chicken farm and purchase new equipment for
      the expansion of our production capacity.





(4)
      On
      October 27, 2008, we issued 178,848 new shares to Roth Capital Partners, LLC
      based on their cashless exercise of 333,198 warrants issued to it
      as compensation for their services as co-placement agent. The issuance of
      these securities were deemed to be exempt from registration pursuant to Section
      4(2) of the Securities Act.


16





There
      were no underwritten offerings employed in connection with any of the
      transactions set forth above.




**ITEM
      3. DEFAULTS UPON SENIOR SECURITIES**




None.




**ITEM
      4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS**




None.




**ITEM
      5. OTHER INFORMATION**





**Subsequent
      events**





Co-operation
      with Shandong Nongbiao Purina Feed Co., Ltd.


On
        November 11, 2008, PRC Yuhe entered into an equipment leasing agreement and
        a
        tenancy agreement, collectively, the "Agreements", with Shandong
        Nongbiao Purina Feed Co., Ltd. "Shandong Nongbiao Purina".  Pursuant
        to the terms and conditions of the Agreements, Shandong Nongbiao Purina
        will lease certain equipment for feed production from, and
        install them at the premises owned by, PRC Yuhe.  The leasing term is
        10 years.  Shandong Nongbiao Purina shall pay to PRC Yuhe rental
        payments of up to RMB 10, 000,000, approximately equivalent to
        $1,500,000.  The rent payable by Shandong Nongbiao Purina under the
        tenancy agreement will be offset against the rental costs of the
        equipment.
  In
        connection with the execution of the Agreements, Yuhe Group would be the
        guarantor of PRC Yuhe for RMB 4,500,000, approximately equivalent to $675,000,
        for the first five years and for RMB 3,000,000, approximately equivalent
        to
        $450,000, for the next five years.  Yuhe Group is in the process of
        negotiating the terms of the guarantee agreement with the
        parties.





**ITEM
      6. INDEX TO EXHIBITS**




10.1
            Form
                of Stock Option Agreement (incorporated by reference to the Company’s
                Quarterly Report on Form 10-Q filed on August 14,
                2008).




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 furnished pursuant to 18 U.S.C. Section
                1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
                of
                2002. *





32.2
            Certification
                of 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. *




*
      filed herewith




17




**SIGNATURES**





In
      accordance with the requirements of the Exchange Act, the registrant caused
      this
      report to be signed on its behalf by the undersigned, thereunto duly
      authorized.





DATED:
      November 14, 2008





**YUHE
      INTERNATIONAL, INC.**





By:
            /s/
                Gao ZhentaoGao
                ZhentaoChief
                Executive Officer(On
                behalf of the Registrant and as Principal Executive
                Officer)By:
            /s/
                Hu GangHu
                GangChief
                Financial Officer(On
                behalf of the Registrant and as Principal Financial
                Officer)




18


**EXHIBIT
      INDEX**




ExhibitNumber
            Description10.1
            Form
                of Stock Option Agreement (incorporated by reference to the Company’s
                Quarterly Report on Form 10-Q filed on August 14,
                2008).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 furnished pursuant to 18 U.S.C. Section
                1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
                of
                2002.*32.2
            Certification
                of 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.*




*
      filed
      herewith


19