¨	Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

 

Nevada		87-0569467
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
301 Hailong Street Hanting District, Weifang, Shandong Province The People’s Republic of China
(Address including zip code of principal executive offices)

 

 

 

 

 

 

Large accelerated filer o	Accelerated filer o
Non-accelerated filer o	Smaller reporting company x

 

 

 

 

 

 

YUHE INTERNATIONAL, INC.

CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008

Index to consolidated financial statements

	Page
Report of Independent Registered Public Accounting Firm	F-2
Consolidated Balance Sheets	F-3 - F-4
Consolidated Statements of Income and Comprehensive Income	F-5
Consolidated Statements of Changes in Stockholders’ Equity	F-6
Consolidated Statements of Cash Flows	F-7 - F-8
Notes to Consolidated Financial Statements	F-9 - F-45

 

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YUHE INTERNATIONAL, INC.

CONSOLIDATED BALANCE SHEETS

(Stated in US Dollars)

		December 31,
		2009				2008
ASSETS
Current assets:
Cash and cash equivalents		$	14,047,147			$	13,412,205
Accounts receivable, net of allowances of $18,868 and $18,845			838				902
Inventories			6,560,783				6,644,961
Advances to suppliers			359,179				4,472,509
Deferred tax assets			17,766				-
Total current assets			20,985,713				24,530,577
Plant and equipment, net			29,556,712				27,112,276
Deposits paid for acquisition of long term assets			16,082,613				2,280,988
Notes receivable, net and other receivable, net			33,635				74,720
Unlisted investments held for sale			300,172				299,427
Intangible assets, net			2,851,411				2,909,752
Due from related companies			-				3,706,589
Net investment in direct financing lease			382,742				-
Long term prepaid rent			6,570,038				604,973
Total assets		$	76,763,036			$	61,519,302
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable		$	5,740,912			$	4,606,055
Current portion of long term loans			9,433,686				1,356,832
Other payable			1,343,901				937,535
Accrued expenses and payroll related liabilities			2,366,134				2,125,587
Advances from customers			678,366				673,528
Other taxes payable			150,764				141,541
Loan from director			292,517				291,792
Other liabilities			143,949				143,591
Due to related companies			1,208				210,633
Total current liabilities			20,151,437				10,487,094
Non-current liabilities
Long-term loans			1,360,206				9,410,289
Total liabilities			21,511,643				19,897,383

 

F-3

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YUHE INTERNATIONAL, INC.

CONSOLIDATED BALANCE SHEETS

(Stated in US Dollars)

Stockholders' Equity
Preferred 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, 15,722,180 shares issued and outstanding			15,722				15,722
Additional paid-in capital			30,672,849				29,944,016
Retained earnings			23,316,794				10,522,673
Accumulated other comprehensive income			1,246,028				1,139,508
Total stockholders’ equity			55,251,393				41,621,919
Total liabilities and stockholders’ equity		$	76,763,036			$	61,519,302

The accompanying notes are an integral part of these consolidated financial statements

 

F-4

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F-6

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YUHE INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Stated in US Dollars)

		Year Ended
		December 31
		2009				2008
Cash flows from operating activities
Net income		$	12,794,121			$	10,524,885
Adjustments to reconcile net income to net cash used in operating activities:
Stock based compensation			728,833				401,359
Depreciation			2,033,341				1,668,059
Amortization			65,541				59,209
Capitalized interest in construction in progress			(662,711	)			(437,221	)
Bad debts expense (recovery)			56,220				(813,000	)
Gain on disposal of fixed assets			(24,567	)			(84,663	)
Income from unlisted investment			(15,522	)			(12,251	)
Changes in operating assets and liabilities:
Accounts receivable			66				(25	)
Advances to suppliers			4,113,119				(11,781,086	)
Inventories			100,646				(1,652,341	)
Deferred tax assets			(17,756	)			-
Deferred expenses			-				(1,000	)
Accounts payable			760,193				(408,001	)
Other payable			403,821				(739,165	)
Payroll and payroll related liabilities			(104,315	)			626,620
Accrued expenses			339,891				(459,221	)
Advances from customers			3,161				455,983
Other taxes payable			8,866				9,386
Net cash provided by (used in) operating activities			20,582,948				(2,642,473	)
Cash flows from investing activities
Deposit paid and acquisition of property, plant and equipment			(18,187,196	)			(4,580,275	)
Advance to notes receivable			-				(3,432,603	)
Proceeds from disposal of fixed assets			27,834				118,216
Acquisition of subsidiaries			-				(10,567,946	)
Proceeds from notes receivable			44,637				4,309,226
Proceeds received from related parties receivables			3,713,806				1,106,240
Purchase of leased land use rights			(5,960,354	)			-
Net cash used in investing activities			(20,361,273	)			(13,047,592	)

F-7

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YUHE INTERNATIONAL, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Stated in US Dollars)

Cash flows from financing activities
Proceeds from loan payable			1,067,114				1,300,726
Repayment of loan payable			(1,067,114	)			(1,099,842	)
Proceeds from related party payable			-				260,454
Repayment of related party payable			(209,828	)			(58,629	)
Proceeds from capital lease			594,476				-
Capital contribution by shareholder			-				12,149,750
Proceeds from issuance of common stock, net of issuance cost			-				15,359,523
Net cash flows provided by financing activities:			384,648				27,911,982
Effect of foreign currency translation on cash and cash equivalents			28,619				140,120
Net increase in cash			634,942				12,362,037
Cash- beginning of year			13,412,205				1,050,168
Cash- end of year		$	14,047,147			$	13,412,205
Cash paid during the period for:
Interest paid		$	1,405,500			$	1,199,467
Income taxes paid		$	-			$	-
Supplemental disclosure
Transfer of construction in progress to fixed assets		$	4,009,791			$	7,022,128
Property, plant and equipment acquired with accounts payable		$	362,802			$	-
Supplemental disclosure of non-cash investing activities:
Dividend received for increasing the investments in Hanting Rural Credit Cooperative		$	-			$	6,074

 The accompanying notes are an integral part of these consolidated financial statements

F-8

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YUHE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

 

1.	Basis of presentation

The 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, pursuant to the rules and regulations of the Securities and Exchange Commission. 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.

2.	Organization and Basis of Preparation of Financial Statements

Yuhe International, Inc.

Yuhe International, Inc., formerly known as First Growth Investors, Inc., “Yuhe” or “the Company”, was originally organized under the laws of the State of Nevada on September 9, 1997. Prior to its business combination with Bright Stand, the Company was not engaged in any business activities and had no operations, income producing assets or significant operating capital. At December 31, 2007, the Company was at development stage until its business combination with Bright Stand on March 12, 2008.

On March 12, 2008, the Company completed a reverse acquisition transaction with Bright Stand International Limited, “Bright Stand”, and Kunio Yamamoto, a Japanese person and the sole former shareholder of Bright Stand.

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 acquirer 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 has 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 historical financial statements for periods prior to March 12, 2008, are those of Bright Stand except that the equity section and earnings per share have been retroactively restated to reflect the reverse acquisition.

F-9

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YUHE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

 

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

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

Weifang Yuhe Poultry Co., Ltd., “PRC Yuhe”, was established in Weifang, Shandong of the People’s Republic of China, the “PRC”, as a limited company on March 8, 1996. PRC Yuhe 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 People’s Republic of China, the “PRC”, as a limited company on May 26, 2003. Taihong is a feed stock company whose primary purpose is to supply feed stock for PRC Yuhe’s breeder chickens.

The Company’s operations are conducted through its subsidiaries in the People’s Republic of China, PRC Yuhe, and Taihong. The Company and its subsidiaries, hereinafter, collectively referred to as “the Group”, are engaged in the business of chicken and feed production.

F-10

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YUHE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

3.	Summary of significant accounting policies

 

(a) Principles of consolidation

The 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 generally accepted accounting principles in the United States of America.

The 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.

(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.

(c) Reclassification

Certain reclassifications have been made to prior-period comparative financial statements to conform to the current period presentation. These reclassifications had no effect on previously reported results of operations or financial position.

F-11

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YUHE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

 

3.	Summary of significant accounting policies - continued

Reclassifications have been made to bad debts (expense) recovery in the consolidated statements of income and comprehensive income for the year ended December 31, 2008 to conform to the year ended December 31, 2009 presentation.

(d) 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 PRC laws, the government owns all of the land in the PRC. Companies or individuals are authorized to possess and use the land only through land usage rights approved by the PRC government.

(e) 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.

(f) 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:

F-12

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YUHE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

3.	Summary of significant accounting policies - continued

Buildings	20 years
Machinery	10 years
Vehicle	5 years
Furniture 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.

(g) Guarantee Expense

The Company accounts for its liability for product guaranteed in accordance with the FASB accounting standard, the aggregate changes in the liability for accruals related to product warranties issued during the reporting period must be charged to expense as incurred.

The Company guarantees a 98% survival rate of its product by delivering additional 2% of the product. The guarantee expires seven days after delivery. If the survival rate falls below 96%, the Company provides additional guarantee compensation to customers. Based on historical experience, the likelihood that survival rate falls below 96% is remote and therefore no accrued guarantee liability was recorded at year-end. Guarantee expense for the years ended December 31, 2009 and 2008 were $0 and $65,769, respectively.

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

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

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

 

F-13

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YUHE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

 

3.	Summary of significant accounting policies - continued

 

(i) Inventories

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

(j) Trade receivables

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

(k) Notes receivable

Notes receivable are stated at the original principal amount less allowance for any uncollectible amounts. Management provides for an allowance when collection of the full amount is no longer probable by establishing an allowance equivalent to 30% of gross amount of notes receivables due over 6 months and 60% of gross amount of notes receivable due over 1 year. Full provision will be made for notes receivable due over 2 years.

(l) 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.

 

F-14

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YUHE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

 

3.	Summary of significant accounting policies - continued

(m) Revenue recognition

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

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

(n) 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.

(o) Advertising

The Company expensed all advertising costs as incurred.  The advertising expenses were $4,149 and $0 for the years ended December 31, 2009 and 2008, respectively.

(p) Retirement benefit plans

The employees of the Company are members of a state-managed retirement benefit plan operated by the government of the PRC.  The Company is required to contribute a specified percentage of payroll costs to the retirement benefit scheme to fund the benefits. The only obligation of the Company 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 years ended December 31, 2009 and 2008 were $89,819 and $75,049 respectively.

F-15

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YUHE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

 

3.	Summary of significant accounting policies - continued

(q) 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 the PRC, the corporation income tax rate is 25%. Weifang Yuhe Poultry Co., Ltd is a poultry company, and in accordance with the relevant regulations regarding the favorable tax treatment for an outstanding poultry company, the Company is entitled to a tax free treatment.

The corporate income tax for the subsidiary, Weifang Taihong Feed Co., Ltd is 25%.

(r) Shipping and handling fees

Shipping and handling fees are expensed when incurred.  During the years ended December 31, 2009 and 2008, Shipping and handling charges included in the selling expenses were $30,609 and $11,686 respectively.

(s) Foreign currency translation

The accompanying financial statements are presented in United States dollars. The functional currency of the Company and Bright Stand is US$ and the functional currency of PRC Yuhe and Taihong is Renminbi (RMB).  The financial statements of PRC Yuhe and Taihong 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.

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

 

F-16

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YUHE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

 

3.	Summary of significant accounting policies - continued

(t) Comprehensive income

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

(u) Fair value of financial instruments

 

A FASB accounting standard requires entities to disclose the fair values of financial instruments except when it is not practicable to do so. Under this accounting standard, it is not practicable to make this disclosure when the costs of formulating the estimated values exceed the benefit when considering how meaningful the information would be to financial statement users.

The fair values of all assets and liabilities do not differ materially from their carrying amounts. None of the financial instruments held are derivative financial instruments and none were acquired or held for trading purposes during the years ended December 31, 2009 or 2008.

(v) Basic and diluted earnings per share

The Company reports basic earnings per share in accordance with the FASB accounting standard. 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 earnings per share is based on the assumption that all dilutive options were converted or exercised. Dilution is computed by applying the treasury stock method. Under this method, options are assumed to be exercised at the time of issuance, and as if funds obtained thereby were used to purchase common stock at the average market price during the year.

F-17

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YUHE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

3.	Summary of significant accounting policies - continued

(w) Statutory reserve

In accordance with the relevant laws and regulations of the PRC and the articles of association of the Company’s PRC subsidiaries, PRC Yuhe and Taihong are required to allocate 10% of their net income reported in the PRC statutory accounts, after offsetting any prior years’ losses, to the statutory surplus reserve, on an annual basis.  When the balance of such reserve reaches 50% of the respective registered capital of the subsidiaries, any further allocation is optional.  The statutory surplus reserves can be used to offset prior years’ losses, if any, and may be converted into registered capital, provided that the remaining balance of the reserve after such conversion is not less than 25% of registered capital. The statutory surplus reserve is non-distributable.

4.	Recently adopted accounting pronouncements

Accounting Standards Codification

In June 2009, the Financial Accounting Standards Board (“FASB”) issued a standard that established the FASB Accounting Standards Codification (the “ASC”), which effectively amended the hierarchy of U.S. generally accepted accounting principles (“GAAP”) and established only two levels of GAAP, authoritative and non-authoritative. All previously existing accounting standard documents were superseded, and the ASC became the single source of authoritative, nongovernmental GAAP, except for rules and interpretive releases of the Securities and Exchange Commission (the “SEC”), which are sources of authoritative GAAP for SEC registrants. All other non-grandfathered, non-SEC accounting literature not included in the ASC became non-authoritative. The ASC was intended to provide access to the authoritative guidance related to a particular topic in one place. New guidance issued subsequent to June 30, 2009 will be communicated by the FASB through Accounting Standards Updates. The ASC was effective for financial statements for interim or annual reporting periods ending after September 15, 2009. The Company adopted and applied the provisions of the ASC for its quarterly reporting ended June 30, 2009, and has eliminated references to pre-ASC accounting standards throughout the consolidated financial statements. The adoption of the ASC did not have a material impact on the Company’s consolidated financial statements.

F-18

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YUHE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

4.	Recently adopted accounting pronouncements – continued

Subsequent Events

In May 2009, the FASB issued new guidance on the treatment of subsequent events which is intended to establish general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued.  Specifically, management of a reporting entity is required to evaluate subsequent events through the date that financial statements are issued and disclose the date through which subsequent events have been evaluated, as well as the date the financial statements were issued. This new guidance was effective for fiscal years and interim periods ended after June 15, 2009, and must be applied prospectively. The Company adopted this guidance in the quarter ended June 30, 2009. Subsequent events have been evaluated through March 25, 2010, the date the consolidated financial statements were issued as further discussed in this accounting standard.

Fair Value and Other-Than-Temporary Impairments

In April 2009, the FASB issued new guidance intended to provide additional application guidance and enhanced disclosures regarding fair value measurements and impairments of securities. New guidance related to determining fair value when the volume and level of activity for the asset or liability have significantly decreased and identifying transactions that are not orderly provides additional guidelines for estimating fair value in accordance with pre-existing guidance on fair value measurements. New guidance on recognition and presentation of other-than-temporary impairments provides additional guidance related to the disclosure of impairment losses on securities and the accounting for impairment losses on debt securities, but does not amend existing guidance related to other-than-temporary impairments of equity securities. The new guidance was effective for fiscal years and interim periods ended after June 15, 2009. As such, the Company adopted this guidance for the quarter ended June 30, 2009. Adoption of the new guidance did not have a material impact on the Company’s consolidated financial statements.

Financial Instruments

In April 2009, the FASB issued an accounting standard that requires disclosures about fair value of financial instruments not measured on the balance sheet at fair value in interim financial statements as well as in annual financial statements. Prior to this accounting standard, fair values for these assets and liabilities were only disclosed annually. This standard applies to all financial instruments within its scope and requires all entities to disclose the method(s) and significant assumptions used to estimate the fair value of financial instruments. This standard does not require disclosures for earlier periods presented for comparative purposes at initial adoption, but in periods after the initial adoption, this standard requires comparative disclosures only for periods ending after initial adoption. The adoption of this standard did not have a material impact on the disclosures related to its consolidated financial statements.

F-19

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YUHE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

 

5.	Recently Issued Accounting Pronouncements Not Yet Adopted

Fair Value Measurement

In August 2009, the FASB issued an Accounting Standards Update (“ASU”) regarding measuring liabilities at fair value. This ASU provides additional guidance clarifying the measurement of liabilities at fair value in circumstances in which a quoted price in an active market for the identical liability is not available; under those circumstances, a reporting entity is required to measure fair value using one or more of valuation techniques, as defined. This ASU is effective for the first reporting period, including interim periods, beginning after the issuance of this ASU. The adoption of this ASU did not have a material impact on the Company’s consolidated financial statements.

Decreases in Ownership of a Subsidiary – a Scope Clarification

In January 2010, the FASB issued an accounting standard update to address the accounting and reporting for Decreases in ownership of a subsidiary. This amendment to Topic 810 clarifies, but does not change, the scope of current US GAAP. It clarifies the decrease in ownership provisions of Subtopic 810-10 and removes the potential conflict between guidance in that Subtopic and asset derecognition and gain or loss recognition guidance that may exist in other US GAAP. An entity will be required to follow the amended guidance beginning in the period that it first adopts FAS 160 (now included in Subtopic 810-10). For those entities that have already adopted FAS 160, the amendments are effective at the beginning of the first interim or annual reporting period ending on or after December 15, 2009. The amendments should be applied retrospectively to the first period that an entity adopted FAS 160. The Company does not expect the provisions of ASU 2010-02 to have a material effect on the financial position, results of operations, or cash flows of the Company.

Distributions to Shareholders with Components of Stock and Cash

In January 2010, the FASB issued an accounting standard update to address the accounting for distributions to shareholders with components of stock and cash (A Consensus of the FASB Emerging Issues Task Force). This amendment to Topic 505 clarifies the stock portion of a distribution to shareholders that allows them to elect to receive cash or stock with a limit on the amount of cash that will be distributed is not a stock dividend for purposes of applying Topics 505 and 260 for interim and annual periods ending on or after December 15, 2009, and should be applied on a retrospective basis. The Company does not expect the provisions of ASU 2010-01 to have a material effect on the financial position, results of operations, or cash flows of the Company.

F-20

---

 

YUHE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

5.	Recently Issued Accounting Pronouncements Not Yet Adopted - continued

Own-Share Lending Arrangements in Contemplation of Convertible Debt issuance or Other Financing

In October 2009, the FASB issued an accounting standard update to address equity-classified share lending arrangements on an entity’s own shares, when executed in contemplation of a convertible debt offering or other financing. This accounting update addresses how to account for the share-lending arrangement and the effect, if any, that the loaned shares have on earnings-per-share calculations. The share lending arrangement is required to be measured at fair value and recognized as an issuance cost associated with the convertible debt offering or other financing. Earnings-per-share calculations would not be affected by the loaned shares unless the share borrower defaults on the arrangement and does not return the shares. If counterparty default is probable, the share lender is required to recognize an expense equal to the then fair value of the unreturned shares, net of the fair value of probable recoveries. This accounting update is effective for share lending agreements entered into after June 15, 2009, and effective for fiscal years and interim periods within those years beginning on or after December 15, 2009 for all other outstanding arrangements, with retrospective application to those arrangements on the effective date. The Company is currently evaluating the impact of this statement upon its adoption on the Company’s consolidated financial statements.

Other accounting standards that have been issued or proposed by the FASB or other standards-setting bodies that do not require adoption until a future date are not expected to have a material impact on our consolidated financial statements upon adoption.

F-21

---

 

YUHE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

 

6.	Acquisition of subsidiaries

On January 31, 2008, Bright Stand acquired 100% common stock of Weifang Yuhe Poultry Co., Limited for $11,306,522 (RMB 81,450,000) and 43.75% of Weifang Taihong Feed Co., Ltd for $312,530 (RMB 2,244,000) and total amount was $11,619,052.

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 the results are shown for the year ended December 31, 2008 includes certain pro forma adjustments, including depreciation and amortization on the assets acquired, and other adjustments.

		For The Year Ended December 31,
		2008
		(Pro forma)
Revenues		$	36,117,611
Net income		$	10,666,419
Earnings per share
Basic		$	0.75
Diluted		$	0.74
Weighted average shares outstanding
Basic			14,233,268
Diluted			14,476,504

F-22

---

 

 

YUHE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

 

7.	Inventories

Inventories consist of the following:

		December 31				December 31
		2009				2008
Raw materials		$	5,275,629			$	5,281,429
Work in progress			1,285,154				1,272,217
Finished goods			-				91,315
		$	6,560,783			$	6,644,961

8.	Unlisted investments

Unlisted investments at December 31, 2009 represent the 3% investments in Hanting Rural Credit Cooperative, “Hanting” recorded at cost.  For the years ended December 31, 2009 and 2008, the Company recorded $15,522 and $12,251, respectively as income from unlisted investment for dividends received from Hanting.   Management of the Company has reviewed the investment in Hanting for impairment and determined there is no indication that the carrying amount of Hanting may not be recoverable.

F-23

---

 

 

YUHE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

 

 

9.	Plant and equipment, net

Plant and equipment consists of the following:

 

		December 31,				December 31,
		2009				2008
At cost
Buildings		$	19,071,808			$	14,951,197
Machinery			6,006,596				5,064,593
Motor vehicles			120,069				119,786
Furniture and equipment			102,154				82,815
			25,300,627				20,218,391
Less: accumulated depreciation			(3,716,677	)			(1,678,071	)
			21,583,950				18,540,320
Construction in progress			7,972,762				8,571,956
		$	29,556,712			$	27,112,276

During the year ended December 31, 2009, depreciation expenses amounted to $2,033,341 among which $1,840,897 and $192,444 were recorded as cost of sales and administrative expense, respectively.  During the year ended December 31, 2008 depreciation expenses amounted to $1,668,059 among which $1,431,939 and $236,120 were recorded as cost of sales and administrative expense, respectively.

Capitalized interest expense included in construction in progress totaled $662,711 and $437,221 for the years ended December 31, 2009 and 2008, respectively.

As of December 31, 2009 and 2008, buildings and machinery of the Company with net book value of $6,600,351 and $7,741,962 were pledged as collateral under certain loan arrangements.

F-24

---

 

 

YUHE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

 

10.	Deposits paid for acquisition of long term assets

Deposits paid consist of the following:

		December 31,				December 31,
		2009				2008
Deposits paid for purchase of land use right		$	-			$	1,458,959
Deposit paid for purchase of buildings			12,139,473				-
Deposits paid for construction in progress			218,336				-
Deposits paid for capital commitment			12,357,809				1,458,959
Deposits paid for purchase of equipment			3,724,804				822,029
Total Deposits paid for acquisition of long term assets		$	16,082,613			$	2,280,988

11.	Intangible assets, net

Intangible assets consist of the following:

		December 31,				December 31,
		2009				2008
Land use rights, at cost		$	2,977,098			$	2,969,714
Less: accumulated amortization			(125,687	)			(59,962	)
		$	2,851,411			$	2,909,752

As of December 31, 2009 and 2008, land use rights of the Company with net book value of $2,851,411. The entire amount was pledged as collateral under certain loan arrangements.

During the years ended December 31, 2009 and 2008, amortization expenses included in the cost of sales were $65,541 and $59,209 respectively.

F-25

---

 

YUHE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

 

 

11.	Intangible assets, net – continued

The estimated aggregate amortization expenses for the land use right for the five succeeding years are as follows:

Year
2010		$	65,576
2011			65,576
2012			65,576
2013			65,576
2014			65,576
thereafter			2,523,531
		$	2,851,411

12.	Due to related companies

		December 31,				December 31,
		2009				2008
Weifang Hexing Breeding Co., Ltd. "Weifang Hexing" - Gao Zhentao, a director of the Company is also a director of Weifang Hexing		$	-			$	185,885
Others			1,208				24,748
		$	1,208			$	210,633

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

13.	Loan from director

Loan from director totaled $292,517 at December 31, 2009 and represents bank loan borrowed by a director on behalf of the Company.  The loan is due on November 26, 2011 and bears interest at 7.56% per annum.

F-26

---

 

YUHE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

14.	Due from related companies

		December 31,				December 31,
		2009				2008
Hexing Green Agriculture Co., Ltd., "Hexing Green", - Mr. Gao Zhentao, a director of the Company is also a director of Hexing Green		$	-			$	75,754
Shandong Yuhe Food Co., Ltd, "Yuhe Food"- Mr. Gao Zhentao, a director of the Company is also a director of Yuhe Food			-				3,580,553
Shandong Yuhe New Agriculture of Sciences, "Shandong Yuhe"- Mr. Gao Zhentao, a director of the Company is also a director of Shandong Yuhe			-				50,257
Weifang Jiaweike Food Co., Ltd, "Weifang Jiaweike" - Mr. Gao Zhentao, a director of the Company is also a director of Weifang Jiaweike			-				25
		$	-			$	3,706,589

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

15.	Other payable

		December 31,				December 31,
		2009				2008
Interest payable		$	69,193			$	69,021
Deposits received			471,344				473,448
Others			803,364				395,066
		$	1,343,901			$	937,535

Deposit received represent deposits collected from customers as security for non-payment.

Other payable represents apartment rental reimbursement to staff and insurance payable.

F-27

---

 

 

YUHE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

 

16.	Long-term loans

 

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

		December 31,				December 31,
		2009				2008
Loans from Nansun Rural Credit, interest rate at 7.56% to 13.82% per annum, balance due on March 10, May 17, May 28, Nov 29, 2010 and Dec 10, 2011		$	8,775,521				8,753,757
Loan from Shuangyang Rural Credit, interest rate at 9.83% per annum, due on October 13, 2010			950,682				948,324
Loan from Hanting Kaiyuan Rural Credit Cooperative, interest rate at 7.56% per annum, renew the due date from January 10, 2009 to January 7, 2011			1,067,689				1,065,040
			10,793,892				10,767,121
Less: current portion of long-term loans			(9,433,686	)			(1,356,832	)
		$	1,360,206				9,410,289

Future maturities of long-term loans as at December 31, 2009 are as follows:

December 31,
2010		$	9,433,686
2011			1,360,206
		$	10,793,892

17.	Accrued expenses and payroll related liabilities

		December 31,				December 31,
		2009				2008
Salary		$	1,254,780			$	1,142,094
Employee benefits			102,385				97,520
Others			224,185				157,607
Accrued expenses			784,784				728,366
		$	2,366,134			$	2,125,587

Payroll and payroll related liabilities represent accrued payroll and welfare benefits to employees.

 

F-28

---

 

YUHE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

 

18.	Income tax

The Company was incorporated in Nevada and is subject to U.S. income tax at the statutory tax rate of 34%.  No provision for income taxes have been made as the Company has a taxable loss for the years ended December 31, 2009 and 2008. The Company has accumulated net operating loss carry forward of $1,130,405 as of December 31, 2009. A full valuation allowance of $384,338 has been provided against the deferred tax asset as of December 31, 2009.

Bright Stand was incorporated in the British Virgin Islands and is not subject to income taxes under the current laws of the British Virgin Islands.

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

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

The Company 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. Taihong has a net operating loss carry forward and temporary difference, which resulted in deferred tax asset of $12,691 and $5,075, respectively, as of December 31, 2009.  The Company realized the deferred tax assets as of December 31, 2009 as there has been sufficient positive evidence existing to support reversal of the valuation allowance previously recognized.

F-29

---

 

YUHE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

 

18.	Income tax - continued

The provision for income taxes consists of the following:

		For The Year Ended
		December 31,
		2009				2008
PRC (current)		$	-			$	-
Deferred tax
-Deferred tax benefit			(17,756	)			-
Income Tax (Benefit)		$	(17,756	)		$	-

Actual income tax expenses reported in the consolidated statements of income and comprehensive income differ from the amounts computed by applying the PRC statutory income tax rate of 25% to income before income taxes for the years ended December 31, 2009 and 2008 for the following reasons:

		For The Year Ended
		December 31,
		2009				2008
Income before income taxes		$	12,776,365			$	10,524,885
Computed  “expected” income tax expense at 25%			3,194,091				2,631,221
Tax effect on permanent differences			(32,746	)			-
Change in valuation allowance			(51,203	)			(60,204	)
Parent company losses for which no benefit has been recognized			432,941				258,236
Effect of tax holiday			(3,560,839	)			(2,829,253	)
Income Tax (Benefit)		$	(17,756	)		$	-

F-30

---

 

 

YUHE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

 

18.	Income tax - continued

The tax effects of temporary differences and carryforwards that give rise to significant portions of deferred tax assets at December 31, 2009 and 2008, were as follows:

		For The Year Ended
		December 31,
Deferred tax assets		2009				2008
Net operating loss carryforwards		$	12,691			$	46,041
Bad debt allowance			5,075				5,062
			17,766				51,103
Valuation Allowance			-				(51,103	)
Total deferred tax assets		$	17,766			$	-

On January 1, 2008, the Company adopted FASB ASC 740.10, which prescribes a more-likely-than-not threshold for financial statement recognition and measurement of a tax position taken in the tax return. This interpretation also provides guidance on de-recognition of income tax assets and liabilities, classification of current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, accounting for income taxes in interim periods and income tax disclosures.

Through December 31, 2009, the management considered that the Company had no uncertain tax positions which affected its consolidated financial position and results of operations or cash flow, and will continue to evaluate for the uncertain position in future. There are no estimated interest costs and penalties provided in the Company’s financial statements for the years ended December 31, 2009 and 2008.

Cumulative undistributed earnings of foreign subsidiaries, for which no U.S. income or foreign withholding taxes have been recorded, approximated $21.9 million at December 31, 2009.  As the company intends to indefinitely reinvest all such earnings, no provision has been made for income taxes that may become payable upon distribution of such earnings as allowed under ASC 740.30, “Accounting for Income Taxes-Other considerations or special areas”.  

F-31

---

 

YUHE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

 

19.	Fair value of financial instruments

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

20.	Common stock and warrants

(a)  Common Stock

On March 12, 2008, the Company issued 8,626,320 shares of its common stock (all share information has been adjusted pursuant to the reverse stock split), par value $0.001 per share, to the sole stockholder of Bright Stand to effect the Reverse Merger Acquisition. At the same time, the Company issued 5,829,018 shares of common stock to the investors for gross proceeds of $18 million in the private placement.

The Company's issued and outstanding number of common stock immediately prior to the Reverse merger Acquisition is 1,087,994 shares.

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

After the reverse acquisition, the total common stock issued and outstanding of the Company is 15,543,330 shares.

F-32

---

 

YUHE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

20.	Common stock and warrants – continued

(b)  Warrants

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

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 year ended December 31, 2009 and 2008 were as follows:

		Year Ended December 31, 2009 and 2008
Risk free interest rate			3	%
Expected volatility			109	%
Expected life (years)			3

On October 27, 2008, the Company issued 178,848 of common shares to Roth Capital Partners, LLC based on its cashless exercise of 333,198 warrants issued to it.  The total number of warrants outstanding as at December 31, 2009 and 2008 was 142,816.

 

F-33

---

 

YUHE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

 

20.	Common stock and warrants – continued

(c)  Additional paid-in capital

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

The terms of outstanding warrants as of December 31, 2009 are as follows:

		Warrants outstanding												Warrants exercisable
Range of exercise prices		Number outstanding				Weighted average remaining contractual life (years)				Weighted average exercise price				Number exercisable				Weighted average remaining contractual life (years)				Weighted average exercise price
$3.706			142,816				1.19			$	3.706				142,816				1.19			$	3.706

 

21.	Stock options

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

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

F-34

---

 

YUHE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

 

21.	Stock options– continued

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

As at December 31, 2009, the total number of stock options outstanding was 383,151 shares.  The Company recognizes compensation expense, net of estimated forfeitures, over the requisite service period, which is the period during which the grantee is required to provide services in exchange for the award.  The Company has elected to recognize compensation cost for awards with only a service condition that has a graded vesting schedule on a straight-line basis over the requisite service period for the entire award.

The Company uses the Black-Scholes option pricing model to calculate the grant-date fair value of an award, with the following assumptions: no dividend yield, expected volatility of 109.40%, and a risk-free interest rate of 3.00%. In determining volatility of the Company’s options, the Company used the average volatility of the Company’s stock. Fair value per the Black-Scholes model is $2,186,499. In accordance with FASB ASC 718, the Company has recorded stock-based compensation expense during the years ended December 31, 2009 and 2008 of $728,833 and $401,359, respectively, in connection with the issuance of this option.

The weighted average grant date fair value of options granted was $5.71 per share.  The weighted average exercise price of these options was $3.708 per share.  The total number of stock options outstanding as at December 31, 2009 and December 31, 2008 was 383,151 shares.

Following is a summary of the status of options outstanding at December 31, 2009:

		Options outstanding												Options exercisable
Range of exercise prices		Number outstanding				Weighted average remaining contractual life (years)				Weighted average exercise price				Number exercisable				Weighted average remaining contractual life (years)				Weighted average exercise price
$3.708			383,151				3.45			$	3.708				127,589				3.45			$	3.708

F-35

---

 

 

YUHE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

22.	Earnings per share

 

Basic earnings per share is computed on the basis of the weighted average number of shares of common stock outstanding during the period.  Diluted earnings per share is computed on the basis of the weighted average number of shares of common stock plus the effect of dilutive potential common shares outstanding during the period.  The following table sets forth the computation of basic and diluted net income per share:

		For The Year Ended
		December 31,
		2009				2008
Net income attributable to the common stockholders		$	12,794,121			$	10,524,885
Weighted average outstanding shares of common stock			15,722,180				14,233,268
Dilutive effect of options, warrants, and contingently issuable shares			70,360				243,236
Common stock and common stock equivalents			15,792,540				14,476,504
Earnings per share:
Basic		$	0.81			$	0.74
Diluted		$	0.81			$	0.73

23.	Significant concentrations and risk

(a)  Customer Concentrations

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

		For The Year Ended
		December 31,
		2009				2008
Wei Yunchao			10.71	%			*

 

* Constitute less than 10% of the Company’s gross sales.

The Company 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.

 

F-36

---

 

YUHE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

 

23.	Significant concentrations and risk - continued

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

 

 

		For The Year Ended
		December 31,
		2009				2008
Ma Zhuping			*				27.60	%
Wang  Jianbo			10.99	%			*

 

* Constitute less than 10% of the Company’s purchase.

(b)  Credit Risk

Financial instruments that potentially subject the Company to significant concentration of credit risk consist primarily of cash and cash equivalents.  As of December 31, 2009, substantially all of the Company’s cash and cash equivalents were held by major financial institutions located in the PRC, which management believes are of high credit quality.

(c)  Company’s operations are in China

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

F-37

---

YUHE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

 

24.	Business and geographical segments

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

Reportable Segments

		For The Year Ended December 31, 2009												For The Year Ended December 31, 2008												For The Year Ended December 31,
		Production of chicks				Production of feed				Corporate				Production of chicks				Production of feed				Corporate				Total
																										2009				2008
External revenue		$	46,920,680			$	325,078			$	-			$	34,166,334			$	459,948			$	-			$	47,245,758				34,626,282
Intersegment revenue			-				9,270,123				-				-				11,885,562				-				9,270,123				11,885,562
Interest income			229				8				-				245,573				34				4,131				237				249,738
Interest expense			-				(608,789	)			-				(33,739	)			(668,834	)			-				(608,789	)			(702,573	)
Depreciation and amortization			(1,971,067	)			(127,815	)			-				(1,611,941	)			(115,327	)			-				(2,098,882	)			(1,727,268	)
Net profit/(loss) after tax			14,243,358				282,527				(1,731,764	)			11,317,014				240,818				(1,032,947	)			12,794,121				10,524,885
Expenditures for long-lived assets			8,830,361				69,539				-				12,582,823				108,771				-				8,899,900				12,691,594

Note: Intersegment revenue of $9,270,123 was eliminated in consolidation.

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

 

F-38

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YUHE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

 

25.	Commitments and contingencies

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

As of December 31,
2010		$	70,380
2011			70,380
2012			70,380
2013			70,380
2014			70,380
Thereafter			1,251,869
Total minimum lease payments			1,603,769

During the years ended December 31, 2009 and 2008, rental expenses were $165,269 and $155,349 respectively.

F-39

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YUHE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

 

25.	Commitments and contingencies - continued

		Total Considera- tion				Total Amount Paid as of December 31, 2009				Remaining Balance as of December 31, 2009				Expected Date of Payment				Starting Date of Project			Date / Expected Date of Completion		Notes
Constructions of:
Breeding Farm No. 1 and No. 28		$	6,120,000			$	4,500,000			$	1,620,000			Progressively from May 2010				May 2005			Set up by the end of February 2010		-
Breeding Farm No. 2, 3, 5, 6 and 7			380,000				292,250				87,750			March 31, 2010				December 6, 2008			Completed by October 31, 2009			-
Steel Structural Surface for Hatchery No. 3			570,410				277,890				292,520			July 31, 2010				December 10, 2008			May 2010			-
Breeding Farm and Steel Structural Surface			1,755,120				1,532,790				222,330			End of March 2010				June 23, 2009			December 31, 2009			-
Acquisition of 13 Breeder Farms			15,191,891				12,139,472				3,052,419			End of May 2010					-		Acquired on December 24, 2009		Expected to spend $2.49m for renovation
Purchase of Land Use Right, Building and Facilities:
Land Use Rights			2,632,657				2,632,657				-				-				-		Acquired on December 26, 2009		The land use rights is for 50 years of a 5.3 hectare (80 mu) and a building and other facilities within the area
Building and Facilities			292,517				292,517				-				-				-		Acquired on December 26, 2009
Construction of Breeding Farm and Equipment			2,486,000				-				2,486,000			Progressively from May 2010				May 2010			January 2011			-
Total		$	29,428,595			$	21,667,576			$	7,761,019

 

F-40

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YUHE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

 

25.	Commitments and contingencies - continued

Construction of Breeding Farm No. 1

On August 15, 2008, PRC Yuhe completed construction work and facilities to set up the southern farm of breeding farm No 1.  On August 30, 2008, PRC Yuhe purchased 100,000 sets of parent breeders and began to feed.  By the end of December 2008, PRC Yuhe has spent RMB 29 million, approximately equivalent to $4.5 million, to build breeding farm No 1.  The breeding farm can be split into the southern and the northern regions.  The northern farm construction work and facilities have been set up by the end of February 2010.  The capacity of the northern factory is 130,000 sets of parent broilers.  The residual payment is RMB 6 million, approximately equivalent to $0.9 million, for the building and facilities; and RMB 4.9 million, approximately equivalent to $0.72 million, in machinery and is scheduled to be paid progressively from May 2010.

Construction of Breeding Farm No. 2, 3, 5, 6, and 7

On December 6, 2008, PRC Yuhe entered into a construction agreement with a contractor to build and renovate five of its breeding farms for a total consideration of RMB2.6 million, approximately equivalent to $380,000. The construction has been completed at the end of October 2009.  The residual scheduled payment is RMB600,000, approximately equivalent to $87,750 and is scheduled to be paid by the end of March 2010.

F-41

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YUHE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

25.	Commitments and contingencies - continued

Construction of Steel Structural Surface for Hatchery No. 3

On December 10, 2008, PRC Yuhe entered into a construction agreement with a contractor to build the steel structure for its hatchery farm No. 3 for a total consideration of RMB3.9 million, approximately equivalent to $570,410. The estimated completion date of construction is postponed to May 2010 because of the cold weather and construction will start once the weather is getting warm.  The residual scheduled payment is RMB2 million, approximately equivalent to $292,520 and is scheduled to be paid two months after completion of construction.

Construction of Breeding Farm and Steel Structural Surface

On June 23, 2009, PRC Yuhe entered into two construction agreements with contractors to build part of the above breeding farms and construct the steel structure for a total consideration of RMB 6,112,300, approximately equivalent to $893,980, and RMB5,887,800, approximately equivalent to $861,140, respectively.  The constructions have been completed as of December 31, 2009.  As of December 31, 2009, the Company has paid RMB5,340,000, approximately equivalent to $781,020, and RMB5,140,000, approximately equivalent to $751,770, respectively to these two suppliers.  The residual scheduled payments are RMB772,300, approximately equivalent to $112,960, and RMB747,800, approximately equivalent to $109,370, and are scheduled to be paid in March 2010.

Acquisition of 13 Breeder Farms

On December 24, 2009, PRC Yuhe entered into an agreement to purchase thirteen breeder farms at a total consideration of RMB103,870,000, approximately equivalent to $15,191,891.  As of December 31, 2009, PRC Yuhe has paid 80% of the total consideration, or RMB 83,000,000, approximately equivalent to $12,139,472. The remaining balance will be paid within two months after formal delivery of the farms, expected in early March 2010. The farms cover a total area of 37 hectares (560 mu), for which PRC Yuhe acquired all the ground buildings as well as the land use rights for 36 years. The purchase price also includes in-house breeding facilities which supply feed, water and air to the parent breeders. PRC Yuhe expects to spend RMB17,000,000, approximately equivalent to $2,490,000 for renovation.

Purchase of Land Use Right, Building and Facilities

On December 26, 2009, PRC Yuhe entered into an agreement with Yejiazhuangzi Villagers Commission to purchase the land use rights for 50 years of a 5.3 hectare (80 mu) parcel of land for RMB18.0 million, approximately equivalent to $2,632,657, which was paid at the end of 2009. PRC Yuhe also paid an additional RMB2 million, approximately equivalent to $292,517 for a building and other facilities within the area. The construction of this new breeder farm commenced in February 2010 and is expected to finish by the second quarter of 2010. The total capital expenditure for construction and equipment is expected to be approximately RMB17 million, approximately equivalent to $2,486,000.

F-42

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YUHE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

25.	Commitments and contingencies - continued

Construction of Breeding Farm No. 28

On March 1, 2010, PRC Yuhe completed construction work and facilities of breeding farm no. 28.  This breeder farm covers an area of 20.6 acres (125 mu) and has capacity for 130,000 parent breeders.

26.	Equipment Leasing and Rental Arrangement

On November 11, 2008, PRC Yuhe entered into equipment leasing agreement and property rental agreement, collectively, the “Agreements”, with Shandong Nongbiao Purina Feed Co., Ltd., “Shandong Nongbiao Purina”. Shandong Nongbiao Purina will construct a feed production facility on a property leased from PRC Yuhe and become the exclusive feed supplier for PRC Yuhe. Pursuant to the terms and conditions of the Agreements, Shandong Nongbiao Purina will lease certain equipment for feed production from, and install them at the premises owned by PRC Yuhe. The lease term for both the equipment leasing agreement and property rental agreement is 10 years. After completion of the feed production facility, the lease term commenced on July, 2009 when the production began.  Shandong Nongbiao Purina shall pay to PRC Yuhe an annual rental payment for the leased land, premises and facilities of RMB 1,500,000, approximately equivalent to $219,390.  As at December 31, 2009, rental payment of $109,695, approximately equivalent to RMB750,000, has been received from Shandong Nongbiao Purina.  The rent payable by Shandong Nongbiao Purina under the rental agreement will be offset against the prepaid equipment rental costs of RMB10,000,000, approximately equivalent to $1,462,290.  As at December 31, 2009, Shandong Nongbiao Purina advanced $1,040,340, approximately equivalent to RMB7,113,000, to PRC Yuhe as rental payment and was recorded as advances from customers.

In connection with the execution of the Agreements, Shandong Yuhe Food Group Co., Ltd., “Yuhe Group”, a PRC company based in Shandong Province, would be the guarantor of PRC Yuhe for RMB 4,500,000, approximately equivalent to $658,000, for the first five years and for RMB 3,000,000, approximately equivalent to $439,000, for the next five years. No guarantee fee is required according to the above Agreements.

The leasing arrangement with Purina is accounted for as operating lease with the exception of the lease of equipment.  The equipment leased to Purina are accounted for as direct financing lease because the equipment has economic useful life of 10 years and the term of the equipment lease is for 10 years.

The following lists the components of the net investment in direct financing as of December 31:

F-43

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YUHE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

 

26.	Equipment Leasing and Rental Arrangement -continued

		2009				2008
Minimum lease payments receivable		$	544,903			$	-
Less: Unearned income			(162,161	)			-
Net investment in direct financing lease		$	382,742			$	-

As of December 31, 2009, future minimum lease payments to be received for each of the five succeeding fiscal years are as follows, $0 in 2010 to 2013 and $25,611 in 2015.  There were no minimum lease payments to be received in 2010 to 2013 because Purina has advanced $551,379 for the equipment rental as of December 31, 2009.

There are no contingent rentals included in income for the years ended December 31, 2009 and 2008.

27.	Make Good Escrow Agreements

On March 12, 2008, the Company’s majority stockholder, Mr. Yamamoto, entered into an escrow agreement with the private placement investors. Mr. Yamamoto will deliver a certain number of shares of the Company’s common stock owned by him to the investors pro-rata in accordance with their respective investment amount for no additional consideration if:

(i)  the Company’s after tax net income for its fiscal year ending on December 31, 2008 is less than $9,000,000 and fiscal year ending on December 31, 2009 is less than 95% of $13,000,000; and

(ii)  the Company’s 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 3,359,889 shares of common stock, “Make Good Shares”, into an escrow account pursuant to the terms of the Make Good Escrow Agreement by and among the Company, Mr. Yamamoto, the Investors and the escrow agent named therein. In the event the Company does 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.

According to the Consolidated Statements of Income and Comprehensive Income of the Company in its Form 10-K for the fiscal year ended December 31, 2008 filed by the Company with the Securities and Exchange Commission on March 31, 2009, the Company’s After Tax Net Income for the fiscal year ended December 31, 2008 was reported as $10,524,885, which has exceeded the 2008 Guaranteed After Tax Net Income, as agreed in the Make Good Escrow Agreements described below.

F-44

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YUHE INTERNATIONAL, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Stated in US Dollars)

27.	Make Good Escrow Agreements -continued

On July 31, 2009, Roth Capital instructed the Escrow Agent to release 1,679,992 shares of common stock, the 2008 Make Good Shares, to Mr. Kunio Yamamoto.  In August, 2009, 1,679,992 shares of the Company’s common stock were released to Mr. Kunio Yamamoto.

The Company entered into a separate Make Good Escrow Agreement, dated March 12, 2008, with Mr. Kunio Yamamoto, Interwest Transfer Company, Inc., the “Escrow Agent”, and HFG International Limited, “HFG”.  HFG has executed a Form of Release to release 235,196 shares of the Company’s common stock to Mr. Kunio Yamamoto.  On or about April 27, 2009, 235,196 shares of the Company’s common stock were released by HFG to Mr. Kunio Yamamoto. 

28.	Subsequent events

The Company evaluated subsequent events through the date the accompanying financial statements were issued, which was March 31, 2010.

Cashless exercise of warrants

In March 2010, the Company issued 87,383 of common shares to WLT Brothers Capital, Inc based on its cashless exercise of 142,816 warrants issued to it.

Due from related companies

Subsequent to December 31, 2009, the Company has made payment approximately aggregated to $2,998,000 (RMB20,500,000) to Weifang Hexing Breeding Co., Ltd., of which $2,691,000 (RMB18,400,000) had been paid subsequently to the Company’s suppliers in January and February, 2010.  The residue part, $307,000 (RMB2,100,000) has been paid back to the Company by February 2010.

F-45

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YUHE INTERNATIONAL, INC.

UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

 

 

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F-46

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YUHE INTERNATIONAL, INC.

UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS

Basis of Presentation

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

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

The unaudited pro forma consolidated statement of operations reflects the results of operations of the company had the merger consummated on January 1, 2008. These pro forma consolidated statements of operations have been prepared for comparative purposes only and do not purport to be indicative of the results of operations which actually would have resulted had the transaction occurred on the date indicated and are not necessarily indicative of the results that may be expected in the future.

Due to the fact that there was not any trading and shareholding relationship between Yuhe International, Inc. with Bright Stand International Co. Ltd. before the share exchange, in the opinion of management, no pro forma adjustment directly attributable to the share exchange contemplated by the Agreement is to be made to the unaudited pro forma consolidated statements of operations of Yuhe International, Inc.

F-47

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YUHE INTERNATIONAL, INC.

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS

		Pro forma for the period from January 1, 2008 to January 31, 2008				As reported from February 1, 2008 to December 31, 2008			Pro forma adjustment		2008 Pro forma Total
Net revenue		$	1,491,329			$	34,626,282		$		$	36,117,611
Cost of revenue			(1,337,438	)			(21,572,722	)				(22,910,160	)
Gross profit			153,891				13,053,560					13,207,451
Operating expenses
Selling			(28,997	)			(425,460	)				(454,457	)
General and administrative			(122,695	)			(2,538,590	)				(2,661,285	)
Bad debts recovery			219,893				813,000					1,032,893
Total operating income (expenses)			68,201				(2,151,050	)				(2,082,849	)
Income from operations			222,092				10,902,510					11,124,602
Non-operating income (expense)
Interest income			5				249,738					249,743
Other income			5,604				96,914					102,518
Interest expenses			(86,167	)			(702,573	)				(788,740	)
Other expenses			-				(21,704	)				(21,704	)
Total other income (expense)			(80,558	)			(377,625	)				(458,183	)
Net Income before income tax			141,534				10,524,885					10,666,419
Income Tax			-				-					-
Net income		$	141,534			$	10,524,885		$		$	10,666,419
Earnings per share
Basic		$	0.02			$	0.74		$		$	0.74
Diluted		$	0.02			$	0.73		$		$	0.73
Weighted average shares outstanding
Basic			8,626,318				14,233,268					14,233,268
Diluted			8,626,318				14,476,504					14,476,504

 

F-48

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Exhibit Index

Exhibit Number		Description of Document
3.1		Articles of Incorporation of the registrant as filed with the Secretary of State of Nevada, as amended to date. [Incorporated by reference to Exhibit 3.1 to the registrant’s current report on Form 8-K filed on April 10, 2007]
4.1		Registration Rights Agreement dated March 12, 2008 by and among First Growth Investors, Inc., and certain investors. [Incorporated by reference to Exhibit 10.4 to the registrant’s current report on Form 8-K filed on March 17, 2008]
5.1		Opinion of Thomas G. Kimble & Associates, PC as to the legality of the shares. [Incorporated by reference to exhibit 5.1 to the registrant’s Registration Statement on Form S-1 filed on May 12, 2008]
5.2		Opinion of Long An Law Firm. [Incorporated by reference to exhibit 5.2 to the registrant’s Registration Statement on Form S-1 filed on May 12, 2008]
10.1		Stock Purchase Agreement dated November 6, 2007 between First Growth Investors, Inc. and Halter Financial Investments, L.P. [Incorporated by reference to Exhibit 10.1 to the registrant’s current report on Form 8-K filed on November 6, 2007]
10.2		Equity Transfer Agreement dated March 12, 2008 between First Growth Investors, Inc. and Kunio Yamamoto. [Incorporated by reference to Exhibit 10.2 to the registrant’s current report on Form 8-K filed on March 17, 2008]
10.3		Securities Purchase Agreement dated March 12, 2008 by and among First Growth Investors, Inc., Bright Stand International Limited, Weifang Yuhe Poultry Co., Ltd., Kunio Yamamoto and certain investors. [Incorporated by reference to Exhibit 10.3 to the registrant’s current report on Form 8-K filed on March 17, 2008]
10.4		Make Good Escrow Agreement dated March 12, 2008 by and among First Growth Investors, Inc., Kunio Yamamoto, certain investors, Roth Capital Partners, LLC and Tri-State Title and Escrow, LLC. [Incorporated by reference to Exhibit 10.5 to the registrant’s current report on Form 8-K filed on March 17, 2008]
10.5		Holdback Escrow Agreement dated March 12, 2008 by and among First Growth Investors, Inc., certain investors, and Tri-State Title and Escrow, LLC. [Incorporated by reference to Exhibit 10.6 to the registrant’s current report on Form 8-K filed on March 17, 2008]
10.6		Warrant dated Mach 12, 2008 issued by First Growth Investors, Inc. to Roth Capital Partners, LLC [Incorporated by reference to Exhibit 10.7 to the registrant’s current report on Form 8-K filed on March 17, 2008]

 

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10.7		Make Good Escrow Agreement dated March 12, 2008 by and among First Growth Investors, Inc., Kunio Yamamoto, HFG International, Limited, and Interwest Transfer Company, Inc. [Incorporated by reference to Exhibit 10.8 to the registrant’s current report on Form 8-K filed on March 17, 2008]
10.8		Lock-up Agreement dated March 12, 2008 between Kunio Yamamoto and First Growth Investors, Inc. [Incorporated by reference to Exhibit 10.9 to the registrant’s current report on Form 8-K filed on March 17, 2008]
10.09		Labour Contract dated July 15, 2000 entered into between Weifang Taihong Feed Co., Ltd. and Gao Aiping.  [Incorporated by reference to Exhibit 10.12 to the registrant’s Registration Statement on Form S-1/A filed on December 19, 2008]
10.10		Labour Contract dated December 25, 2000 entered into between Weifang Taihong Feed Co., Ltd. and Wang Jianbo.  [Incorporated by reference to Exhibit 10.13 to the registrant’s Registration Statement on Form S-1/A filed on December 19, 2008]
10.11		Labour Contract dated July 10, 2001 entered into between Weifang Yuhe Poultry Co. Ltd. and Zhao Beijing.  [Incorporated by reference to Exhibit 10.14 to the registrant’s Registration Statement on Form S-1/A filed on December 19, 2008]
10.12		Commitment to Product Quality and Customer Services Agreement dated February 12, 2004 entered for and on behalf of Weifang Yuhe Poultry Co. Ltd.  [Incorporated by reference to Exhibit 10.15 to the registrant’s Registration Statement on Form S-1/A filed on December 19, 2008]
10.13		Contract of land dated April 12, 2005 entered into between Yejiazhuang Village, Dabucum Village and Weifang Yuhe Poultry Co., Ltd.  [Incorporated by reference to Exhibit 10.16 to the registrant’s Registration Statement on Form S-1/A filed on December 19, 2008]
10.14		Lease Agreement dated June 25, 2005 entered into between Standing Weifang Farm and Weifang Yuhe Poultry Co., Ltd.  [Incorporated by reference to Exhibit 10.17 to the registrant’s Registration Statement on Form S-1/A filed on December 19, 2008]

 

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10.15		Labour Contract dated July 11, 2005 entered into between Weifang Yuhe Poultry Co. Ltd. and Ding Wengui.  [Incorporated by reference to Exhibit 10.18 to the registrant’s Registration Statement on Form S-1/A filed on December 19, 2008]
10.16		Labour Contract dated October 15, 2005 entered into between Weifang Yuhe Poultry Co. Ltd. and Jiang Yingjun.  [Incorporated by reference to Exhibit 10.19 to the registrant’s Registration Statement on Form S-1/A filed on December 19, 2008]
10.17		Summary of loan agreements with Nansun Rural Credit in respect of loan agreement dated November 28, 2005.  [Incorporated by reference to Exhibit 10.20 to the registrant’s Registration Statement on Form S-1/A filed on December 19, 2008]
10.18		Feed Purchase Contract dated January 1, 2006 entered into between Weifang Taihong Feed Co., Ltd. and Weifang Yuhe Poultry Co., Ltd.  [Incorporated by reference to Exhibit 10.21 to the registrant’s Registration Statement on Form S-1/A filed on December 19, 2008]
10.19		Labour Contract dated March 10, 2006 entered into between Weifang Yuhe Poultry Co., Ltd. and Tan Yi. [Incorporated by reference to Exhibit 10.22 to the registrant’s Registration Statement on Form S-1/A filed on December 19, 2008]
10.20		Summary of Loan Agreement dated November 10, 2006 with Hanting Rural Credit Cooperative. [Incorporated by reference to Exhibit 10.23 to the registrant’s Registration Statement on Form S-1/A filed on December 19, 2008]
10.21		Summary of Loan Agreement dated May 12, 2007 with Shuangyang Rural Credit. [Incorporated by reference to Exhibit 10.24 to the registrant’s Registration Statement on Form S-1/A filed on December 19, 2008]
10.22		Summary of Loan Agreement dated July 1, 2007 with Hanting Kaiyuan Rural Credit Cooperative. [Incorporated by reference to Exhibit 10.25 to the registrant’s Registration Statement on Form S-1/A filed on December 19, 2008]
10.23		Labour Contract dated December 1, 1998 entered into between Weifang Yuhe Poultry Co. Ltd. and Han Chengxiang.  [Incorporated by reference to Exhibit 10.26 to the registrant’s Registration Statement on Form S-1/A filed on December 19, 2008]
10.24		Labour Contract dated June 13, 2008 entered into between Yuhe International, Inc. and Han Chengxiang.  [Incorporated by reference to Exhibit 10.27 to the registrant’s Registration Statement on Form S-1/A filed on December 19, 2008]
10.25		Labour Contract dated June 13, 2008 entered into between Yuhe International, Inc. and Jiang Yingjun. [Incorporated by reference to Exhibit 10.12 to the registrant’s Registration Statement on Form S-1/A filed on December 19, 2008]

 

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10.26		Employment Agreement dated June 13, 2008 entered into between Yuhe International, Inc. and Gao Zhentao [Incorporated by reference to Exhibit 10.1 to the registrant’s current report on Form 8-K filed on June 13, 2008]
10.27		Employment Agreement dated June 13, 2008 entered into between Yuhe International, Inc. and Hu Gang [Incorporated by reference to Exhibit 10.2 to the registrant’s current report on Form 8-K filed on June 13, 2008]
10.28		Supplemental Feed Purchase Agreement dated August 5, 2008 entered into between Weifang Taihong Feed Co., Ltd. and Weifang Yuhe Poultry Co., Ltd.  [Incorporated by reference to Exhibit 10.12 to the registrant’s Registration Statement on Form S-1/A filed on December 19, 2008]

 

10.29		Form of Stock Option Agreement [Incorporated by reference to Exhibit 10.1 to the registrant’s quarterly report on Form 10-Q filed on August 14, 2008]
10.30		Summaries of Oral Loan Agreements as disclosed under section “Transactions with Related Persons”.  [Incorporated by reference to Exhibit 10.33 to the registrant’s Registration Statement on Form S-1/A filed on December 19, 2008]
10.31		Capital Transfer Agreement dated November 28, 2007.  [Incorporated by reference to Exhibit 10.12 to the registrant’s Registration Statement on Form S-1/A filed on December 19, 2008]
10.32		Translation of the Equipment Leasing Agreement dated November 11, 2008 in English. [Incorporated by reference to Exhibit 99.1 to the registrant’s 8-K filed on November 21, 2008]
10.33		Translation of the Tenancy Agreement dated November 11, 2008 in English. [Incorporated by reference to Exhibit 99.2 to the registrant’s 8-K filed on November 21, 2008]
14.1		Code of Ethics. [Incorporated by reference to Exhibit 14.1 to the registrant's 2008 10-K filed on March 31, 2009]
23.1		Consent of Thomas G. Kimble and Associates, PC, included in Exhibit 5.1.[Incorporated by reference to Exhibit 23.2 to the registrant’s Registration Statement S-1 filed on May 12, 2008]
23.2		Consent of Long An Law Firm.[Incorporated by reference to Exhibit 23.3 to the registrant’s Registration Statement on Form S-1 filed on May 12, 2008]
*24.1		Power of Attorney (included on the signature page of this registration statement).

 

*31.1		Certification of the Chief Executive Officer pursuant to Rules 13a-14(a) and 15(d)-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
*31.2		Certification of the Chief Financial Officer pursuant to Rules 13a-14(a) and 15(d)-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
*32.1		Certification of the Chief Executive Officer 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 the Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

 

*   Filed herewith

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