**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


Washington,
      D.C. 20549





**FORM
      10−Q**





(Mark
      One)


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


For
      the
      quarterly period ended: March 31, 2008





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


For
      the
      transition period from ____________ to _____________


Commission
      File Number:  333-83125





**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
o


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


Large
      accelerated filer o Accelerated
      filer o  Non-accelerated
      filer o 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 o  No x





The
      number of shares outstanding of each of the issuer’s classes of common equity,
      as of March 31, 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**Item
                1.
            Condensed
                Financial Statements
            
            F-1Item
                2.
            Management’s
                Discussion and Analysis of Financial Condition and Results of
                Operations
            
            1Item
                3.
            Quantitative
                and Qualitative Disclosures About Market Risk
            
            9Item
                4.
            Controls
                and Procedures
            
            9**PART
                II**Item
                1.
            Legal
                Proceedings
            
            10Item
                1A.
            Risk
                Factors
            
            10Item
                2.
            Unregistered
                Sales of Equity Securities and Use of Proceeds.
            
            10Item
                3.
            Defaults
                Upon Senior Securities
            
            11Item
                4.
            Submission
                of Matters to a Vote of Securities Holders
            
            11Item
                5.
            Other
                Information
            
            11Item
                6.
            Index
                to Exhibits
            
            11









**PART
      I**


**FINANCIAL
      INFORMATION**





**ITEM
      1. CONDENSED FINANCIAL STATEMENTS.**





**YUHE
      INTERNATIONAL INC.**


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





**CONDENSED
      CONSOLIDATED FINANCIAL STATEMENTS**


**FOR
      THE THREE MONTHS ENDED MARCH 31, 2008 AND 2007**





Index
      to
      condensed consolidated financial statements





PageCondensed
                Consolidated Balance Sheets
            
            F-2Condensed
                Consolidated Statements of Operations and Comprehensive
                Income
            
            F-3Condensed
                Consolidated Statements of Changes in Stockholders’ Equity
            
            F-4Condensed
                Consolidated Statements of Cash Flows
            
            F5 - F6Notes
                to Condensed Consolidated Financial Statements
            
            F7 - F32




F-1




**YUHE
      INTERNATIONAL INC.**


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





**CONDENSED
      CONSOLIDATED BALANCE SHEETS**


**(Stated
      in US Dollars)**





March 31,
              2008
            
            December 31,
              2007(unaudited)ASSETSCurrent
                assets:Cash
                and cash equivalents
            
            
            2,988,595
            
            $
            1,050,168Restricted
                cash
            
            
            1,750,000
            
            
            -Accounts
                receivables, net of allowances of $17,677
            
            
            1,510
            
            
            -Prepaid
                expenses
            
            
            38,577
            
            
            -Inventories
            
            
            7,149,839
            
            
            -Note
                receivables, net
            
            
            11,338,839
            
            
            -Advances
                to suppliers
            
            
            862,088
            
            
            -Total
                current assets
            
            
            24,129,448
            
            
            1,050,168Deposits
                paid
            
            
            1,144,790
            
            
            -Other
                receivables, net
            
            
            266,406
            
            
            -Unlisted
                investments
            
            
            286,235
            
            
            -Plant
                and equipment, net
            
            
            15,531,164
            
            
            -Intangible
                assets, net
            
            
            2,888,025
            
            
            -Due
                from related companies
            
            
            4,076,065
            
            
            1,000,000Due
                from directors
            
            
            253,558
            
            
            -Deferred
                expenses
            
            
            588,903
            
            
            -Total
                assets
            
            
            49,164,594
            
            $
            2,050,168LIABILITIES
                AND STOCKHOLDERS’ EQUITYCurrent
                liabilities:Accounts
                payable
            
            
            4,685,185
            
            $
            -Current
                portion of long term loans
            
            
            4,485,774
            
            
            -Loan
                payable
            
            
            2,408,464
            
            
            -Payroll
                and payroll related liabilities
            
            
            664,840
            
            
            -Accrued
                expenses
            
            
            1,066,098
            
            
            70Advances
                from customers
            
            
            156,340
            
            
            -Other
                tax payables
            
            
            138,152
            
            
            -Due
                to related companies
            
            
            953,507
            
            
            2,210Total
                current liabilities
            
            
            14,558,360
            
            
            2,280Non-current
                liabilitiesLong-term
                loans
            
            
            6,308,564
            
            
            -Total
                liabilities
            
            
            20,866,924
            
            
            2,280Shareholders'
                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
            
            
            29,542,836
            
            
            2,041,474Stock
                Subscription Receivable
            
            
            (1,403,937
            )
            
            -Accumulated
                deficits
            
            
            (274,693
            )
            
            (2,212
            )Accumulated
                other comprehensive income
            
            
            417,921
            
            
            -Total
                stockholders’ equity
            
            
            28,297,670
            
            
            2,047,888Total
                liabilities and stockholders’ equity
            
            
            49,164,594
            
            $
            2,050,168


See
      accompanying notes to condensed consolidated financial
      statements


F-2


**YUHE
      INTERNATIONAL INC.**


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





**CONDENSED
      CONSOLIDATED STATEMENTS OF** **INCOME
      AND COMPREHENSIVE INCOME**


**(Stated
      in US Dollars)**




For The Three Months EndedMarch 312008
            
            2007Net
                revenues
            
            $
            1,103,551
            
            $
            -Cost
                of revenue
            
            
            (874,707
            )
            
            -Gross
                profit
            
            
            228,844
            
            
            -Operating
                ExpensesSelling
                expenses
            
            
            (48,540
            )
            
            -General
                and administrative expenses
            
            
            (247,824
            )
            
            -Total
                operating expenses
            
            
            (296,364
            )
            
            -Loss
                from operations
            
            
            (67,520
            )
            
            -Non-operating
                incomeInterest
                income
            
            
            158
            
            
            -Other
                income
            
            
            5,900
            
            
            -Interest
                expenses
            
            
            (180,474
            )
            
            -Other
                expenses
            
            
            (30,545
            )
            
            -Total
                other expenses
            
            
            (204,961
            )
            
            -Net
                loss before income taxes
            
            
            (272,481
            )
            
            -Income
                taxes
            
            
            -
            
            
            -Net
                loss
            
            $
            (272,481
            )
            $
            -Other
                comprehensive incomeForeign
                currency translation
            
            
            417,921
            
            
            -Comprehensive
                income
            
            $
            145,440
            
            $
            -Loss
                per share
            
            $
            (0.03
            )
            $
            -Weighted
                average shares outstanding
            
            
            10,146,353
            
            
            8,626,318




See
      accompanying notes to condensed consolidated financial statements




F-3




**YUHE
      INTERNATIONAL INC.**


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





**CONDENSED
      CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY**


**(Stated
      in US Dollars)**


**Common stock**
                
                
                
                **Stock**
                
                
                
                **Accumulated**
                  **other**
                
                **Total****Shares**
                  **outstanding**
                
                **Amount**
                
                **Additional**
                  **paid-in capital**
                
                **subscription**
                  **receivable**
                
                **Retained**
                  **Earnings**
                
                **comprehensive**
                  **income**
                
                **shareholders’**
                  **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
                )
                
                
                
                
                
                
                
                
                
                
                (994
                )Pre-acquisition
                    contingency adjustment (See (i) below)
                
                
                
                
                
                
                
                
                (377,543
                )
                
                
                
                
                
                
                
                
                
                
                (377,543
                )Share
                    issued in private placement at $0.21 per share
                
                
                
                
                
                5,829
                
                
                17,994,171
                
                
                
                
                
                
                
                
                
                
                
                18,000,000Cost
                    of raising capital
                
                
                5,829,018
                
                
                
                
                
                (2,262,934
                )
                
                
                
                
                
                
                
                
                
                
                (2,262,934
                )Stock
                    subscription receivable
                
                
                
                
                
                
                
                
                
                
                
                (1,403,937
                )
                
                
                
                
                
                
                
                (1,403,937
                )Warrants
                    issued in connection with private placement
                
                
                
                
                
                
                
                
                2,398,975
                
                
                
                
                
                
                
                
                
                
                
                2,398,975Cost
                    of raising capital - issuance of warrants
                
                
                
                
                
                
                
                
                (2,398,975
                )
                
                
                
                
                
                
                
                
                
                
                (2,398,975
                )Net
                    loss for the period
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                (272,481
                )
                
                
                
                
                (272,481
                )Foreign
                    currency translation adjustment
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                
                417,921
                
                
                417,921Balance
                    at March 31, 2008
                
                $
                15,543,330
                
                $
                15,543
                
                $
                29,542,836
                
                $
                (1,403,937
                )
                $
                (274,693
                )
                $
                417,921
                
                $
                28,297,670





(i)
      Being
      adjustment of overstated net asset value relating to reversal of waiver of
      debt
      payable in respect of Yuhe Poultry group after acquisition date of January
      31,
      2008 as a pre-acquisition contingency.




F-4




**YUHE
      INTERNATIONAL INC.**


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





***CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS***


***(Stated
      in US Dollars)***





For The Three Months EndedMarch 312008
            
            2007Cash
                flows from operating activitiesNet
                loss
            
            $
            (272,481
            )
            $
            -Adjustments
                to reconcile net income to net cash used in operating
                activities:Depreciation
            
            
            244,464
            
            
            -Amortization
            
            
            10,414
            
            
            -Allowances
                for bad debt
            
            
            (13,145
            )
            
            -Changes
                in operating assets and liabilities:Advances
                to suppliers
            
            
            (538,226
            )
            
            -Prepaid
                expenses
            
            
            (10,333
            )
            
            -Deposits
                paid
            
            
            (2,801
            )
            
            -Inventories
            
            
            (2,366,280
            )
            
            -Accounts
                payable
            
            
            (222,125
            )
            
            -Payroll
                and payroll related liabilities
            
            
            104,323
            
            
            -Accrued
                expenses
            
            
            569,571
            
            
            -Advances
                from customers
            
            
            (56,979
            )
            
            -Other
                tax payables
            
            
            9,383
            
            
            -Net
                cash used in operating activities
            
            
            (2,544,215
            )
            
            -Cash
                flows from investing activitiesDeposits
                paid and acquisition of property, plant and equipment
            
            
            (248,616
            )
            
            -Acquisition
                of subsidiaries
            
            
            (10,255,416
            )
            
            -Advances
                to notes receivables
            
            
            (11,726,770
            )
            
            -Advances
                to related parties receivables
            
            
            (208,458
            )
            
            -Net
                cash used in investing activities
            
            
            (22,439,260
            )
            
            -




F-5




**YUHE
      INTERNATIONAL INC.**


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





***CONDENSED
      CONSOLIDATED STATEMENTS OF CASH FLOWS***


***(Stated
      in US Dollars)***





Cash
                flows from financing activitiesProceeds
                from loan payable
            
            
            778,870
            
            
            -Proceeds
                from related party
            
            
            1,285,168
            
            
            -Capital
                contribution by shareholder
            
            
            12,149,750
            
            
            -Proceeds
                from common stock sale - net of offering costs
            
            
            12,583,129
            
            
            -Net
                cash flows provided by financing activities:
            
            
            26,796,917
            
            
            -Effect
                of foreign currency translation on cash and cash
                equivalents
            
            
            124,985
            
            
            -Net
                increase in cash
            
            
            1,938,427
            
            
            -Cash-
                beginning of period
            
            
            1,050,168
            
            
            -Cash-
                end of period
            
            $
            2,988,595
            
            $
            -Supplemental
                disclosure of non cash investing and financing activities:Interest
                paid
            
            $
            181,474
            
            $
            -Income
                taxes paid
            
            $
            -
            
            $
            -





See
      accompanying notes to condensed consolidated financial statements




F-6




**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. 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. The Company was not presently 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-7


**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 of its common stock, equivalent to 8,626,236 post-split shares. As a
      result of the transaction, Mr. Yamamoto held 126,857,134 shares, equivalent
      to
      8,626,236 post-split shares, or 88.8% of our 142,857,134 shares of common stock
      then outstanding, equivalent to 9,714,230 post-split shares, 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 shareholder
      of Bright Stand became the Company’s controlling stockholder.





This
      share exchange transaction resulted in Bright Stand’s former shareholder
      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
      to
      such investors, equivalent to 971,423 post-split shares, 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 7,654,815
      post-split shares, and the investors owned 99,999,992 shares of our common
      stock, equivalent to 6,799,962 post-split shares.




F-8


**2.
      Organization and Basis of Preparation of Financial Statements -
      continued**





In
      connection with the private placement on March 12, 2008, as part of the
      compensation to the placement agent, Roth Capital Partners, LLC, 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.





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 $12,350,000; 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-9




**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, “Weifang,” and 43.75% of
      Weifang Taihong Feed Co., Ltd., “Taihong”. As a result, Bright Stand owned 100%
      of Weifang and owned 43.75% direct interest of Taihong and 56.25% indirect
      interest of Taihong through Weifang. Weifang and Taihong became the wholly-owned
      subsidiaries of Bright Stand.





**Weifang
      Yuhe Poultry Co., Ltd, “Weifang”**





Weifang
      Yuhe Poultry Co., Ltd, “Weifang”, 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. Weifang is a supplier of day-old chickens raised for
      meat
      production, or broilers, in the People’s Republic of China.





**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 Weifang’s breeder chickens.





The
      Company’s operations are conducted through its subsidiaries in the PRC, Weifang
      Yuhe Poultry Co. Ltd., “Weifang,” and Weifang Taihong Feed Co. Ltd., “Taihong”.
      The Company and its subsidiary, hereinafter, collectively referred to as “the
      Group,” are engaged in the business of chick and feed production.





F-10


**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
      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 RMB77,563,481
            )Weifang
                Taihong Feed Co.,
              Ltd.
            
            
            PRC/
              May
                26 2003
            
            
            100
            %
            $
            965,379
            
            
            (equivalent
                to RMB8,000,000
            )





(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-11




**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 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.





(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-12




**3.
      Summary of significant accounting policies - continued**





(f)  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.





(g)  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.





(h)  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. Bad debts are
      written off as incurred.




F-13


**3.
       Summary of significant accounting policies -
      continued**





(i)  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.





(j)  Revenue
      recognition





Net
      revenue is recognized when the customer takes delivery and acceptance of
      products, 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.





(k)  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.





(l)  Advertising





The
      Group
      expensed all advertising costs as incurred. Advertising expenses for the three
      months ended March 31, 2008 and 2007 were $0 and $0
      respectively.


F-14


**3.
      Summary of significant accounting policies - continued**





(m)  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 three months ended March
      31,
      2008 and 2007 were $13,345 and $0 respectively.





(n)  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 an outstanding poultry company, the
      Company is entitled to a tax free treatment until March 31, 2008.





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





(o)  Shipping
      and handling fees





Shipping
      and handling fees are expensed when incurred. Shipping and handling charges
      included in the selling expenses for the three months ended March 31, 2008
      and
      2007 were $1,861 and $0 respectively.


F-15


**3.
      Summary of significant accounting policies - continued**





(p)  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.





March
                31, 2008Balance
                sheet
            RMB
                7.0222 to US$1.00Statement
                of income and comprehensive income
            RMB
                7.1757 to US$1.00December
                31, 2007Balance
                sheet
            RMB
                7.31410 to US$1.00Statement
                of income and comprehensive income
            RMB
                7.61720 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.





(q)  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.


F-16


**3.
      Summary of significant accounting policies - continued**





(r)  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.





(s)  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-17


**4.**  **Acquisition
      of subsidiaries**





Acquisition
      of 100% Weifang Yuhe Poultry Co., Limited and 43.75% of Weifang Taihong Feed
      Co., Ltd





On
      January 31, 2008, the Group acquired 100% common stock of Weifang Yuhe Poultry
      Co., Limited and 43.75% of Weifang Taihong Feed Co., Ltd of for $10,255,416
      in
      cash.





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 Weifang 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
      Weifang and Taihong was allocated to the assets acquired and liabilities assumed
      of Weifang 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
            
            
            15,125,244Intangible
                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
            
            
            (1,438,990
            )Due
                to related co.
            
            
            (515,811
            )Other
                long-term payable
            
            
            (136,975
            )Notes
                payables
            
            
            (10,549,316
            )Other
                assumed liabilities Other payable
            
            
            (2,815,056
            )Net
                assets acquired-net of cash acquired
            
            $
            10,255,416


F-18


**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 three months ended March 31, 2008 and 2007
      includes certain pro forma adjustments, including depreciation and amortization
      on the assets acquired, and other adjustments.





For the three months ended2008
            
            2007Pro forma Information:Revenues
            
            $
            2,596,883
            
            $
            2,835,087Net
                profit
            
            $
            (129,051
            )
            $
            (650,266
            )Net
                profit per share - basic and diluted
            
            $
            (0.01
            )
            $
            (0.01
            )Shares
                used for computing earnings per share
            
            
            10,146,353
            
            
            8,626,318





**5.**  **Inventories**





Inventories
      consist of the following:





March 31
            
            December 312008
            
            2007Raw
                materials
            
            $
            599,787
            
            $
            -Work
                in progress
            
            
            6,447,593
            
            
            -Finished
                goods
            
            
            102,459
            
            
            -$
            7,149,839
            
            $
            -


F-19


**6.**  **Other
      receivables, net**





Other
      receivables, net consist of the following:





March 31
            
            December 312008
            
            2007Other
                receivables
            
            $
            304,033
            
            $
            -Less:
                Allowances
            
            
            (37,627
            )
            
            -$
            266,406
            
            $
            -





Other
      receivables are unsecured, interest free and have no fixed repayment
      date.





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:





March 31
            
            December 312008
            
            2007Weifang
                Shanhe Zhuzho Diecasting Material Co. Ltd.
            
            $
            10,042,815
            
            $
            -Shandong
                Dingxin Biotechnology Co. Ltd.
            
            
            1,220,252
            
            
            -Others
            
            
            549,808
            
            
            -11,812,875
            
            
            -Less
                : Allowances
            
            
            (474,036
            )
            
            -$
            11,338,839
            
            $
            -





Note
      receivables to unrelated third parties are unsecured, interest free and repaid
      within one year which is recorded under current assets.


F-20


**8.**  **Unlisted
      investments**





Unlisted
      investments at March 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.





**9.**  **Plant
      and equipment, net**





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




March 31
            
            December 312008
            
            2007At
                costBuildings
            
            $
            7,653,530
            
            $
            -Machinery
            
            
            3,335,347
            
            
            -Motor
                vehicles
            
            
            153,399
            
            
            -Furniture
                and equipment
            
            
            69,285
            
            
            -$
            11,211,561
            
            $
            -Less:
                accumulated depreciation
            
            
            (249,808
            )
            
            -Construction
                in progress
            
            
            4,569,411
            
            
            -$
            15,531,164
            
            $
            -





Depreciation
      expenses amounting to $244,464 included in the cost of sales for the months
      ended March 31, 2008 and 2007 were $169,311 and $0 respectively, and included
      in
      the general and administrative expenses for the months ended March 31, 2008
      and
      2007 were, $ 75,153 and $0 respectively.





As
      of
      March 31, 2008, buildings and machinery of the Group were pledged as collateral
      under certain loan arrangements.


F-21


**10.**  **Intangible
      assets, net**





Intangible
      assets consist of the following:




March 31
            
            December 312008
            
            2007Land
                use rights, at cost
            
            $
            2,898,666
            
            $
            -Less:
                accumulated amortization
            
            
            (10,641
            )
            
            -$
            2,888,025
            
            $
            -





As
      of
      March 31, 2008, land use rights of the Group were pledged as collateral under
      certain loan arrangements.





Amortization
      expenses included in the cost of revenues for the months ended March 31, 2008
      and 2007 were $10,414 and $0 respectively.





**11.**
            **Due
                from related companies**





March 31
            
            December 312008
            
            2007Hexing
                Green Agriculture Co., Ltd – Mr. Gao Zhentao, the director of the
                company is also the director
            
            $
            73,942
            
            $
            -Shandong
                Yuhe Food Co., Ltd – Mr. Gao Zhentao, the director of the company is also
                the director
            
            
            3,951,703
            
            
            -Shandong
                Yuhe New Agriculture Academy of Sciences – Mr. Gao Zhentao, the director
                of the company is also the director
            
            
            50,395
            
            
            -Weifang
                Jiaweike Food Co., Ltd – Mr. Gao Zhentao, the director of the company is
                also the director
            
            
            25
            
            
            -Weifang
                Yuhe Poultry Co., Ltd- Gao Zhentao, the director of the company is
                also
                the director
            
            
            -
            
            
            1,000,000$
            4,076,065
            
            $
            1,000,000




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


F-22


**12.**  **Due
      from directors**





Details
      of due from directors are as follows:




March 31
            
            December 312008
            
            2007Mr.
                Tan Yi
            
            $
            81,375
            
            $
            -Mr.
                Gao Zhenbo
            
            
            79,941
            
            
            -Mr.
                Gao Zhentao
            
            
            77,242
            
            
            -Mr.
                Yamamoto
            
            
            15,000
            
            
            -$
            253,558
            
            $
            -





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





**13.**  **Loans
      payable**





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





**14.**  **Due
      to related companies**





March
                31
            
            December
                312008
            
            2007Weifang
                Hexing Breeding Co., Ltd – Mr. Gao Zhentao, the director of the
                company is also the director
            
            $
            756,655
            
            $
            -Guangli
                International Limited – Mr. Gao Zhentao, the director of the company is
                also the director
            
            
            19,863
            
            
            -Others
            
            
            176,989
            
            
            -$
            953,507
            
            $
            -





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-23


**15.**  **Long-term
      liabilities**


March
                  31
              
              December
                  312008
              
              2007Loans
                  from Nansun Rural Credit, interest rate at 9.22% to 10.51% per
                  Annum, due
                  from November 28, 08 to May 17, 10
              
              $
              8,544,331
              
              
              -Loans
                  from Shuangyang Rural Credit interest rate at 9.33% per annum,
                  due on
                  October 12, 08
              
              
              925,636
              
              
              -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,
                  09
              
              
              1,039,560
              
              
              -Loans
                  from Hanting Rural Credit Cooperative, interest rate at 8.19% per
                  annum,
                  due from November 8, 09
              
              
              284,811
              
              
              -$
              10,794,338
              
              
              -Less:
                  current portion of long-term Liabilities
              
              
              (4,485,774
              )
              
              -$
              6,308,564
              
              
              -





Future
      maturities of long-term loans as at March 31, 2008 are as follows:





March 3120082008
            
            $
            4,485,7742009
            
            
            2,748,4262010
            
            
            3,560,138$
            10,794,338


F-24


**16.**  **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 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
      is operating in the PRC, and in accordance with the relevant tax laws and
      regulations of PRC, the corporation income tax rate is 33%. Taihong has net
      operating losses of $49,570 for the three months ended March 31, 2008, resulting
      in a deferred tax asset of $16,358 which has been fully reserved.





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 March 31, 2008.





The
      provision for income taxes consists of the following:





2008
            
            2007Current
                tax-PRC
            
            $
            -
            
            $
            --Deferral
                tax provision
            
            
            -
            
            
            -$
            -
            
            $
            -


F-25


**16.**  **Income
      tax - continued**





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 year of 2008 and 2007 respectively to income
      (loss) before income taxes for the three months ended March 31, 2008 and 2007
      for the following reasons:





2008
            
            2007Income
                (loss) before income taxes
            
            $
            (272,481
            )
            $
            --Computed
                      “expected” income tax asset at 25%
            
            $
            68,120
            
            $
            -Valuation
                      allowance for deferred tax Assets
            
            
            -
            
            
            -Effect
                of cumulative tax losses
            
            
            -
            
            
            -Tax
                holiday
            
            
            (68,120
            )
            
            -$
            -
            
            $
            -





**17.**  **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.


F-26


**18.**  **Common
      stock and warrants**





(a)
            Common
                Stock





On
      March
      12, 2008, the Company issued 126,857,134 shares of its common stock, par value
      $0.001 per share, equivalent to approximately  8,626,318 post-split shares,
      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 to the investors, equivalent to approximately 5,829,018 post-split
      shares, 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 is 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 is 15,543,330 post-split shares.





(b)
            Warrants





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 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. There are no diluted
      effects for the three months ended March, 2008 since those warrants are
      exercisable after September 11, 2008.




The
      total
      number of warrants outstanding as at March 31, 2008 was 476,014 shares


F-27


**19.
      Stock Subscription Receivable**





On
      March
      12, 2008, the Company issued 85,714,282 shares of common stock to the investors,
      equivalent to approximately  5,829,018 post-split shares, for gross
      proceeds of $18 million in the private placement. Under the placement, the
      Company has deposited an aggregate of $1,750,000 as restricted cash (Note 20)
      and the Company paid $ 2,262,934 in cash as compensation to the related party
      involved in this private placement. As at March 31, 2008, the Company has not
      received the funds amounting to $1,403,937 and has recorded the amounts due
      under the caption “Stock Subscription Receivable” in the accompanying balance
      sheet.





During
      the three months ended March 31, 2008, the Company received the funds amounting
      to $12,583,129 and has recorded the proceeds from common stock sale in the
      accompanying statements of cash flows.





**20.
      Restricted cash**





March 31
            
            December 312008
            
            2007Cash
                held by escrow agents
            
            $
            1,750,000
            
            $
            -




On
      March
      12, 2008, the Company consummated with certain accredited investors, the
“Investors,” a private placement of 85,714,282 shares of common stock,
      equivalent to approximately 5,829,018 post-split shares, for an aggregate
      purchase price of approximately $18,000,000. Under this private placement
      arrangement, the Company signed three covenants with investors.


F-28




**20.**  **Restricted
      cash**




Covenants:
      The Securities Purchase Agreement contains certain covenants on our part,
      including the following:





(a)
      Board
      of Directors. Within 180 days following the closing, the Company is required
      to
      nominate a minimum of five members to our Board of Directors, a majority of
      which must be “independent,” as defined under the Nasdaq Marketplace Rules, and
      to take all actions and obtain all authorizations, consents and approvals as
      are
      required to be obtained in order to effect the election of those
      nominees.





(b)
      Chief
      Financial Officer. Within 180 days following the closing, the Company is
      required to hire a chief financial officer, “CFO,” who is a certified public
      accountant, fluent in English and familiar with US GAAP and auditing procedures
      and compliance for US public companies.





(c)
      Investor Relations Firm. Within 60 days following the closing, the Company
      is
      required to hire one of the following investor relations firms: CCG Elite,
      Hayden Communications or Integrated Corporate Relations.





In
      connection with the above three post-closing covenants, the Company has
      deposited an aggregate of $1,750,000, $750,000 as board holdback escrow amount,
      $750,000 as CFO holdback escrow amount, and $250,000 as investor relations
      firm
      holdback amount, from the gross proceeds of the private placement in the escrow
      account pursuant to the Holdback Escrow Agreement by and among us, the investors
      and the escrow agent named therein. In the event the Company fails to comply
      with any of the above covenants in a timely fashion, it will incur liquidated
      damages of 1% on a daily pro-rata basis for any portion of a month of the gross
      proceeds of the private placement, or 2% if it suffer a holdback event relating
      to Board of Directors or CFO in a 30-day period, to be subtracted from the
      holdback escrow fund, until its compliance with such covenants.





The
      Company is required to fulfill the above covenants within 60 days to 180 days,
      therefore, the deposit of $1,7500,000 to escrow accounts recorded as restricted
      cash under current assets.


F-29


**21.**  **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 three months ended
      March 31, 2008 were as follows:





**Three Months Ended**
              **March 31, 2008**Risk
                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.


F-30


**22.**  **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:





March
                31
            
            March
                312008
            
            2007Wang
                Jianbo
            
            
            18.98
            %
            $
            -Tin
                Lizhiu
            
            
            11.85
            %
            
            -Wei
                Yunchao
            
            
            17.38
            %
            
            -




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





March
                31
            
            March
                312008
            
            2007Ma
                Zhuping
            
            
            27.57
            %
            $
            -Shandong
                Yikshang Poultry Limited
            
            
            17.24
            %
            
            -Sin
                Yupin
            
            
            10.60
            %
            
            -




(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 March 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.





(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.





**23.**  **Business
      and geographical segments**





The
      Group
      currently engages in one business segment, the business of chick and feed
      production. No analysis of the Group's sales and assets by business is presented
      as most of the feed products are used internally.





**24.**  **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 Groups discretion after the
      completion of the base rental terms. In addition, many of the rental agreements
      provide for regular increases to the base rental rate at specified intervals,
      which usually occur on an annual basis. The Group was obligated under operating
      leases requiring minimum rentals as follows:


F-31





Up
                to December 31,2008
            
            $
            111,1712009
            
            
            148,2272010
            
            
            136,6142011
            
            
            78,5482012
            
            
            78,548Thereafter
            
            
            1,460,764Total
                minimum lease payments
            
            $
            2,013,872





During
      the three months ended March 31, 2008, rent expenses amounted to $21,705 was
      recorded as cost of sales.


F-32





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





***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 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.





***Overview***





We
      are a
      supplier of day-old chickens raised for meat production, or broilers, in the
      People’s Republic of China, which is also commonly referred to as the PRC or
      China. Our day-old broilers are primarily sold to broiler farms and integrated
      chicken companies, which are vertically-integrated companies that engage in
      the
      whole broiler supply-chain, for the purpose of raising them to market-weight
      broilers. Our operations are conducted exclusively by our subsidiaries in
      China.





We
      purchase parent breeding stock from breeder farms, raise them to produce
      hatchling eggs, and hatch the eggs to day-old broilers. Currently, we operate
      ten breeder farms and two hatcheries with a total annual capacity of 708,000
      sets of breeders and 80 hatchers through our wholly owned subsidiary, Weifang
      Yuhe Poultry Co. Ltd., or Weifang. Our day-old broilers are primarily purchased
      by broiler farms and integrated chicken companies for the purpose of raising
      them to market-weight broilers. Our customers are located in the ten provinces
      and municipal areas centered around Shandong Province. In connection with our
      day-old broiler business, we also operate a feed stock company named Weifang
      Taihong Feed Co. Ltd., or Taihong, whose primary purpose is to supply feed
      stock
      for our breeders. Our operations are conducted exclusively by our subsidiaries
      Weifang and Taihong in China.





Our
      principal executive office is located at 301 Hailong Street, Hanting District,
      Weifang, Shandong Province, The People’s Republic of China. Our Internet address
      is http://www.yuhepoultry.com.




Unless
      otherwise noted, all historical information prior to March 12, 2008 refers
      to
      Weifang.





***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 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 owns Weifang Yuhe Poultry Co. Ltd., or “Weifang”, a wholly
      foreign-owned enterprise established under the laws of the PRC, and Weifang
      Taihong Feed Co. Ltd., or “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 May 8, 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.




1




The
      following chart depicts our organizational structure:




yhue





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, equivalent to 8,626,236 post-split shares, of our common
      stock. 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, equivalent to 8,626,236 post-split shares, of our common
      stock.





Upon
      the
      closing of the Exchange Agreement we gained operating control over Weifang
      and
      Taihong. Weifang has been owned by Bright Stand since January 31, 2008. Taihong
      has been owned by Weifang 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 (i) change our name
      from “First Growth Investors, Inc.” to “Yuhe International, Inc.”, and (ii)
      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.





***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, Weifang, are our primary source
      of
      revenue.





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 137 hatching eggs 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.


2





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, Weifang 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, 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, Weifang and Taihong, and other
      factors. We have consolidated the results of Weifang and Taihong into our
      Consolidated Financial Statements from February 1, 2008 to March 31, 2008.
      For
      comparison purposes, we have provided a Consolidated Statement of Operations
      for
      both three months ended March 31, 2008 and 2007 to provide comparable
      presentation to our reported results for the three months ended March 31, 2008
      and 2007. We believe that providing this financial statement as if we had
      consolidated Weifang and Taihong may assist investors in assessing performance
      between periods and in developing expectations of future performance. We use
      these items in internal performance measures to analyze performance between
      periods, develop internal projections and measure management
      performance.




All amounts,
              other than
              percentage,in
              U.S. dollars
            
            As a
              percentage of
              net revenues
            
            All amounts, other than
              percentage, in U.S. dollars
            
            Increase/
              (Decrease)
              Dollar ($)
            
            Increase/
              (Decrease)
              PercentageFor the three
              months ended
              March 31
            
            For the three
              months ended
              March 31
            
            For the three
              months ended
              March 31
            
            For the three
              months ended
              March 31
            
            For the three
              months ended
              March 31
            
            For the three
              months ended
              March 312008
            
            2008
            
            2008
            
            2007
            
            2008
            
            2007(As reported)
            
            
            
            (Pro forma)
            
            (Pro forma)Sales
                revenue
            
            
            1,103,551
            
            
            100.00
            %
            
            2,596,883
            
            
            2,978,138
            
            
            (381,255
            )
            
            -12.80
            %Costs
                of goods sold
            
            
            874,707
            
            
            79.26
            %
            
            2,213,940
            
            
            3,052,796
            
            
            (838,856
            )
            
            -27.48
            %Gross
                profit (loss)
            
            
            228,844
            
            
            20.74
            %
            
            382,943
            
            
            (74,658
            )
            
            457,601
            
            
            -612.93
            %Selling
                expenses
            
            
            48,540
            
            
            4.40
            %
            
            77,576
            
            
            62,160
            
            
            15,416
            
            
            24.80
            %General
                and administrative expenses
            
            
            247,824
            
            
            22.46
            %
            
            143,178
            
            
            204,847
            
            
            61,669
            
            
            -30.10
            %Operating
                (loss) income
            
            
            (67,520
            )
            
            -6.12
            %
            
            162,189
            
            
            (341,665
            )
            
            503,854
            
            
            -147.47
            %Interest
                income
            
            
            158
            
            
            0.01
            %
            
            162
            
            
            16
            
            
            146
            
            
            912.50
            %Other
                income
            
            
            5,900
            
            
            0.53
            %
            
            5,900
            
            
            -
            
            
            5,900
            
            
            0
            %Interest
                expenses
            
            
            180,474
            
            
            16.35
            %
            
            266,757
            
            
            271,279
            
            
            (4,522
            )
            
            -1.67
            %Other
                expenses
            
            
            30,545
            
            
            2.77
            %
            
            30,545
            
            
            37,338
            
            
            (6,793
            )
            
            0
            %Income
                taxes
            
            
            -
            
            
            0.00
            %
            
            -
            
            
            -
            
            
            -
            
            
            0
            %Net
                income (loss)
            
            
            (272,481
            )
            
            -24.69
            %
            
            (129,051
            )
            
            (650,266
            )
            
            521,215
            
            
            -80.15
            %




3





*Net
      revenue (As reported).* Sales
      revenue of $1.1 million represents sales of 1.6 million day-old broilers from
      the period February 1, 2008 to March 31, 2008.





Day-old
      broiler are one-day
      old chickens which are specially bred for meat production and sold to broiler
      farms.





*Net
      revenue (Pro forma).* Sales
      revenue decreased by $0.38 million, or 12.8%, to $2.60 million for the three
      months ended March 31, 2008 from $2.98 million for the three months ended March
      31, 2007. The
      decrease was driven by the
      decrease in sales volume of our day-old broilers by 4.00 million birds, or
      58.95%, from 8.77 million birds for the three months ended March 31, 2007 to
      4.77 million birds for the year ended March 31, 2008. The decrease in sales
      volume was a result of low productivity level of the breeder stock, which had
      not grown up to reach maturity level in the first quarter of 2008, therefore,
      the breeder stock could not produce as much eggs as the breeder stock in the
      first quarter in 2007. However, the selling price of day-old broilers saw a
      steady rise from $0.3165 per bird for the three months ended March 31, 2007
      to
      approximately $0.63 per bird for the three months ended March 31, 2008. The
      price growth was primarily the result of an increase in the general demand
      for
      high-grade day-old broilers in North China, which in turn was largely driven
      by
      the substantial economic growth that China continued to experience for the
      three
      month ended March 31, 2008, and the consequent shortage of broilers in the
      market. The outbreak of avian flu in 2006 hit the poultry industry badly and
      the
      market started to rebound at the beginning of 2007, resulting in a huge demand
      for our day old broilers. The third generation stock was imported and its import
      volume was closely controlled by the PRC government. We have not seen an
      increase in the trend of the import volume. Therefore, while there was a slight
      decrease of 12.8% in revenue, there was a significant decrease in the sales
      volume of 58.98%.





In
      response to these recent increases in consumer demand, we increased our maximum
      parent breeder stock manufacturing capacity to approximately 0.72 million sets
      by December 2007. We anticipate that North China’s strong economic growth will
      continue in 2008 and believe that this growth will drive a strong demand for
      high-grade, day-old broilers. In response to this strong demand in the market,
      we hope to increase our market share by increasing our capacity in the next
      couple of years.





Sales
      of
      retired breeder stocks increased $0.18 million, or 337.47%, from $0.051 million
      for the year ended March 31, 2007 to $0.23 million for the three months ended
      March 31, 2008. The sales quantity of retired breeder stocks increased 0.13
      million kilograms, or 128.02% while the average unit price increased by 92.01%.
      The increase of revenue from the sale of retired breeder stocks during the
      three
      months ended March 31, 2008 was in response to the breeder stock is old enough
      and the productivity is decreased. As a results, the new breeder stock is
      growing up which is in early stage and maintain a low productivity level of
      day
      old broiler.





Since
      almost all the products of Taihong were supplied to its parent, Weifang, revenue
      contributed from Taihong’s external sales comprised only approximately 7% of our
      total revenues for the three months ended March 31, 2008, and are expected
      to
      constitute less than 10% of our annual revenues in the future.





*Cost
      of revenues (As reported).* Our
      cost
      of revenues amounted to approximately $875,000, or representing approximately
      79% of our sales revenue for the three months ended March 31, 2008.





*Cost
      of revenues (Pro forma).* Our
      cost
      of revenues decreased by $0.84 million, or 27.84%, to $2.21 million for the
      three months ended March 31, 2008 from $3.05 million for the three months ended
      March 31, 2007. The main reason for a decrease in the cost of revenues was
      a
      decrease in sales volume as we sold 3.6 million birds for the three months
      ended
      March 31, 2008 compared with 8.77 million birds for the same period of 2007.
      As
      a percentage of net revenues, the cost of revenues decreased by 17.26%, from
      102.51% for the three months ended March 31, 2007, to 85.25% for the three
      months ended March 31, 2008. The decrease in cost of revenues as a percentage
      of
      net revenues was mainly due to an increase in the average selling price which
      we
      discussed above for the three months ended March 31, 2008.





*Gross
      profits (As reported).* Our
      gross
      profit amounted to approximately $0.23 million for the three months ended March
      31, 2008.  Gross
      profit as a percentage of net revenues was approximately 21% for the three
      months ended March 31, 2008.





*Gross
      profit (Pro forma).* Our
      gross
      profit increased by $0.50 million to $0.38 million for the three months ended
      March 31, 2008 from gross loss of $0.75 million for the three months ended
      March
      31, 2007.  Gross
      profit as a percentage of net revenues was 14.75% for the three months ended
      March 31, 2008, as compared to (2.5%) for the three months ended March 31,
      2007. The  increase
      was mainly attributable to the
      rise in average selling price of our day-old broilers which we discussed above
      for the three months ended March 31, 2008.


4





Both
      three month periods ended March 31, 2008 and 2007 were unstable periods which
      saw a low in gross profit margin and gross loss respectively. For the three
      months ended March 31, 2007, it was the retirement stage of the breeder stock
      which got old and had low production rate. As the life cycle of the breeder
      is
      66 weeks, one year later for the three months ended March 31, 2008, we are
      waiting at an early age stage for the breeder stock to grow up. Hence, the
      breeder stock had lower
      egg
      production rates, lower production rates of day-old broilers and consequently
      comparatively higher absorption of fixed hatching costs.





*General
      and administrative expenses (As reported).* Our
      General and administrative expenses amounted to approximately $248,000 for
      the
      three months ended March 31, 2008. It comprised mainly of human resources and
      related expenses of approximately $70,600—representing 28.5% of total general
      and administrative expenses, pension costs of $12,400—5.02% of total general and
      administrative expenses, motor delivery expenses of $17,000—6.84% of total
      general and administrative expenses, travel expenses of $11,300—4.55% of total
      general and administrative expenses, entertainment of $19,000—7.64% of total
      general and administrative expenses, bank charges of $20,500—8.26% of total
      general and administrative expenses, office expenses of $15,000—5.9% of total
      general and administrative expenses, and other tax expenses of $9,400—3.79% of
      total general and administrative expenses.





*General
      and administrative expenses (Pro forma).*  *Our
      General and administrative* expenses
      decreased $0.06 million, or 30.10%, to $0.14 million for the three months ended
      March 31, 2008 from $0.20 million for the three months ended March 31, 2007. The
      decrease in general and administrative expenses was mainly due to the
      management’s more
      efficient control of the
      general and administrative expenses. As a
      percentage of net revenues, administrative expenses decreased to 5.51% for
      the
      three months ended March 31, 2008 as compared to 6.88% for the three months
      ended March 31, 2007.





*Selling
      Expenses (As reported).* Our
      selling expenses amounted to approximately $49,000 for the three months ended
      March 31, 2008. It comprised mainly of human resources and related expenses
      of
      approximately $14,200—representing 29.2% of total selling expenses, travel
      expense of $11,000—22.67% of total selling expenses, quarantine fee of
      $8,200—16.8% of total selling expenses, and packing expenses of $8,000—16.39% of
      total selling expenses.





*Selling
      Expenses (Pro forma).* Our
      selling expenses increased by $0.02 million, or 24.80%, to $0.08 million
      for the three months ended March 31, 2008 from $0.06 million 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 an additional
      of
      inspection fee amounting to $0.01 million for the day-old broiler incurred
      for
      the three months ended March 31, 2008, which had been exempted by the government
      in 2007 after the outbreak of avian influenza in China. Also, there is an
      increase in $0.01 million of traveling expenses for the staff in our marketing
      department for the three months ended March 31, 2008.





*Interest
      expenses (As reported).* Interest
      expenses amounted to approximately $180,000 for the three months ended March
      31,
      2008. Interest expenses consisted primarily of interest on bank loans. As we
      expect to extend or roll over the loans as they come due in the near future,
      the
      interest on bank loans will remain steady in the near future.





*Interest
      expenses (Pro forma).* Interest
      expenses decreased $0.01 million to $0.26 million for the three months ended
      March 31, 2008 from $0.27 million for the three months ended March 31, 2007.
      Interest expenses consisted primarily of interest on bank loans. As we continued
      to roll over the loans as they come due in the past two years, interest on
      bank
      loans for the year ended March 31, 2008 stayed almost at the same level as
      that
      for the same period of 2007. The minor difference in interest expenses was
      mainly due to a
      small amount of loan having been repaid compared with the period ended March
      31,
      2007.





*Interest
      income (As reported).* Interest
      income amounted to approximately $200 for the three months ended March 31,
      2008
      Interest income consisted mainly of interest on cash deposited with banks.





*Pro
      forma- Interest income (Pro forma).* Interest
      income increased by approximately $146 to $162 for the three months ended March
      31, 2008 from $16 for the three months ended March 31, 2007. The increase was
      commensurable with an increase in cash and cash equivalent of approximately
      $2.99 million as of March 31, 2008 to approximately $72,024 as of March 31,
      2007. Interest income consisted mainly of interest on cash deposited with banks.


5





*Provision
      for Income Taxes.* Weifang
      was entitled to an exemption from Chinese enterprises income tax (EIT), due
      to
      the fact that Weifang has been recognized as “the national leading agricultural
      enterprise”. In accordance with the relevant regulations regarding the tax
      exemption, Weifang is tax-exempt as long as it is recognized as “the national
      leading agricultural enterprise”. As a result, Weifang incurred no income tax
      expense for the three months ended March 31, 2008 and 2007.





In
      December of 2007, the PRC government announced the elimination of income taxes
      on poultry producers, effective as of January 1,  2008.





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 March 31, 2008.





*Net
      loss*  *(As
      reported).* Net
      loss
      amounted to approximately $272,000 for the three months ended March 31, 2008,
      as
      a result of the factors described above .





*Net
      Loss*  *(Pro
      forma).* Net
      loss
      decreased by $0.52 million to $0.13 million for the three months ended March
      31,
      2008 from net loss of $0.65 million for the three months ended March 31, 2007,
      as a result of the factors described above .





***Liquidity
      and Capital Resources***





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 $12,583,129 that received
      up
      to March 31, 2008. We believed that this fund will be used for our foreseeable
      expansion in 2008 and 2009.





*General*


As
      of
      March 31, 2008, we had cash and cash equivalents of approximately $2,990,000.
      The following table provides detailed information about our net cash flow for
      all financial statements periods presented in this report.




Three months ended
              March 31, 2008Net
                cash (used in) operating activities
            
            
            (2,544,215
            )Net
                cash (used in) investing activities
            
            
            (22,439,260
            )Net
                cash provided by financing activities
            
            
            26,796,917Effect
                of foreign currency translation on cash and cash
                equivalents
            
            
            124,985Net
                cash inflow
            
            
            1,938,427Cash
                and cash equivalents at beginning of period
            
            
            1,050,168Cash
                and cash equivalents at end of period
            
            
            2,988,595





*Operating
      Activities.* Net
      cash
      used in operating activities was $2.5 million for the three months ended March
      31, 2008. Net cash used in operating activities was primarily attributable
      to a
      net loss of $272,000, increase in inventory of $2,390,000, increase in deferred
      expenses of $576,000, increase in advances to suppliers of $538,000, decrease
      in
      accounts payable of $222,000, increase in accrued expenses of $569,000, which
      was partially set off with a decrease in payroll and payroll related expenses
      of
      $104,000.




*Investing
      Activities.*





Net
      cash
      used in investing activities for the three months ended March 31, 2008 was
      $22.4
      million. Net cash used in investing activities was mainly due to the acquisition
      of subsidiaries of approximately $10.26 million, increase in advances to loans
      receivables of approximately $11.73 million, increase in advances to related
      parties receivables of approximately $0.21 million and addition of property,
      plant and equipment of approximately $0.25 million.


6





*Financing
      Activities.* Net cash
      from financing activities totaled $26.80 million for the three months ended
      March 31, 2008. It was a combination of proceeds from common stock sale of
      approximately $12.58 million, proceeds from loans payable of approximately
      $7.91
      million, proceeds from related party loan of approximately $1.29 million, and
      capital contribution by shareholder of approximately $12.15 million.





*Loan
      Facilities*





As
      of
      March 31, 2008, maturities of our bank loans are as follows:




As at March 31,
              20082008
            
            $
            4,485,7742009
            
            
            2,748,4262010
            
            
            3,560,138$
            10,794,338




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




No
            
            Type
            
            Contracting
                Party
            
            Valid
                Date
            
            Duration
            
            Amount1
            
            
            Bank
                loan
            
            
            Nansun
                Rural Credit
            
            
            Nov
                28, 2005 –
              May
                17, 2010
            
            
            54
                months
            
            $
            8,544,3312
            
            
            Bank
                loan
            
            
            Shuangyang
                Rural Credit
            
            
            May
                12, 2007 –
              Oct
                12, 2008
            
            
            17
                months
            
            $
            925,6363
            
            
            Bank
                loan
            
            
            Hanting
                Kaiyuan Rural Credit Cooperative
            
            
            July
                1, 2007 –
              Jan
                1, 2009
            
            
            18
                months
            
            $
            1,039,5604
            
            
            Bank
                loan
            
            
            Hanting
                Rural Credit Cooperative
            
            
            Nov
                10, 2006 –
              Nov
                8, 2009
            
            
            36
                months
            
            $
            284,811$
            10,794,338





According
      to the loans shown in the above table, there were $10.36 million in total that
      will mature on or before the end of October 12, 2008, January 10, 2009, November
      8, 2009 and May 17, 2010, respectively. We will repay the loan when it matures,
      from either an internal source of funds or we will refinance such
      loan.




We
      believe our available working capital, having considered the credit facilities
      referred to above and proceeds from the private placement, should be adequate
      to
      sustain our operations at our current level at least for the next twelve months.
      However, depending on our future needs and changes and trends in the capital
      markets affecting our shares and the Company, we may determine to seek
      additional equity or debt financing in the private or public
      markets.




***Obligations
      Under Material Contracts***





Below
      is
      a table setting forth our material contractual obligations as of March 31,
      2008:





Payment
                due by periodContractual
                Obligations
            
            Total
            
            Less
                than 1 year
            
            1-3
                years
            
            3-5
                years
            
            More
                than 5 yearsLong-Term
                Debt Obligations
            
            $
            10,794,338
            
            $
            4,485,774
            
            $
            6,308,564
            
            
            -
            
            
            -Operating
                Lease Obligations
            
            $
            2,013,872
            
            $
            111,171
            
            $
            284,841
            
            $
            157,096
            
            $
            1,460,764Total
            
            $
            12,808,210
            
            $
            4,596,945
            
            $
            6,593,405
            
            $
            157,096
            
            $
            1,460,764




7




***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:





·
            *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.





·
            *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.





·
            *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.





·
            *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.





·
            *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.


8





·
            *Revenue
                recognition*-
                Net revenue is recognized when customer takes delivery and acceptance
                of
                products, the price is fixed or determinable as stated on sales contract,
                and the collectibility is reasonably assured. Customers do not have
                a
                general right of return on products
                delivered.





·
            *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.





·
            *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, and
                contingencies. 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 Weifang 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.




**ITEM
      4. CONTROLS AND PROCEDURES**





Our
      management, with the participation of our chief executive officer and chief
      financial officer, Messrs. Gao Zhentao and Jiang Yingjun, 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 Jiang
      concluded that as of March 31, 2008, our disclosure controls and procedures
      were
      effective at that reasonable assurance level.


9





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.





**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.





We
      are
      currently not aware of any such legal proceedings or claims that we believe
      will
      have a material adverse affect on our business, financial condition or operating
      results.





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 Form S-1 filed on May 12, 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
      persons 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. 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
      8,626,236 post-split shares, of our common stock to Kunio Yamamoto. 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 5,828,539 post-split shares,
      of our common stock to certain 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.


10





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**





None.





**ITEM
      6. INDEX TO EXHIBITS**




31.1
            Certification
                of Principal Executive Officer filed pursuant to Section 302 of the
                Sarbanes-Oxley Act of 2002. *





31.2
            Certification
                of Principal Financial Officer filed pursuant to Section 302 of the
                Sarbanes-Oxley Act of 2002. *





32.1
            Certification
                of Principal Executive Officer 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


11





**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:
      May 20, 2008





**YUHE
      INTERNATIONAL, INC.**





By:
            /s/
                Gao ZhentaoGao
                ZhentaoChief
                Executive Officer(On
                behalf of the Registrant and as Principal Executive
                Officer)By:
            /s/
                Jiang YingjunJiang
                YingjunChief
                Financial Officer(On
                behalf of the Registrant and as Principal Financial
                Officer)




12





**EXHIBIT
      INDEX**





ExhibitNumber
            Description31.1
            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