Unassociated Document

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨ .

		Page

PART I – FINANCIAL INFORMATION:

Item 1.	Financial Statements:	3

	Unaudited Balance Sheets as of June 30, 2010 and December 31, 2009	4

	Unaudited Statements of Operations and Comprehensive Income for the Three and Six Months Ended June 30, 2010 and 2009	5

	Unaudited Statements of Cash Flows for the Six Months Ended June 30, 2010 and 2009	6

	Notes to Financial Statements (unaudited)	7

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	28

Item 4T.	Controls and Procedures	28

PART II – OTHER INFORMATION:

Item 1.	Legal Proceedings	29

Item 1A.	Risk Factors	29

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	29

Item 3.	Defaults Upon Senior Securities	29

Item 4.	Submission of Matters to a Vote of Security Holders	29

Item 5.	Other Information	29

Item 6.	Exhibits	29

	Signatures	30

Statements made in this Form 10-Q (the "Quarterly Report") that are not historical or current facts are "forward-looking statements" made pursuant to the safe harbor provisions of Section 27A of the Securities Act of 1933, as amended (the "Act"), and Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). These statements often can be identified by the use of terms such as "may", "will", "expect", "believe", "anticipate", "estimate", "approximate", or "continue", or the negative thereof. Forex365, Inc. (the "Company") intends that such forward-looking statements be subject to the safe harbors for such statements. The Company wishes to caution readers not to place undue reliance on any such forward-looking statements, which speak only as of the date made. Any forward-looking statements represent management's best judgment as to what may occur in the future. However, forward-looking statements are subject to risks, uncertainties and important factors beyond the control of the Company that could cause actual results and events to differ materially from historical results of operations and events and those presently anticipated or projected. These factors include adverse economic conditions, entry of new and stronger competitors, inadequate capital and unexpected costs. The Company disclaims any obligation subsequently to revise any forward-looking statements to reflect events or circumstances after the date of such statement or to reflect the occurrence of anticipated or unanticipated events.

	June 30,		December 31,
	2010		2009
ASSETS
Current Assets
Cash and cash equivalents	$	15,885,217	$	155,425
Restricted cash		220,904		219,580
Trade receivables, net		3,525,243		2,066,430
Other receivables, net		109,767		383,817
Inventories		847,373		7,721,554
Advances to suppliers		332,541		2,670,374
Biological assets		42,047		-
Current portion of prepaid leases		27,561		-
Total Current Assets		20,990,653		13,217,180
				-
Property, plant and equipment, net		2,692,429		2,739,385
Intangibles, net		294,394		181,909
Prepaid leases		406,282		-
Total Assets	$	24,383,758	$	16,138,474

LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Short term debt	$	1,248,421	$	2,193,881
Accounts payable and accrued expenses		659,673		504,965
Advances from customers		34,608		303,669
Other payables		84,633		-
Income tax payable		984,705		596,026
Total Liabilities		3,012,040		3,598,541

SHAREHOLDERS' EQUITY
Common stock, $0.001 par value; 20,000,000 shares authorized, 12,958,000 shares issued and outstanding, and 11,550,392 shares outstanding as of June 30, 2010 and December 31, 2009, respectively.		12,958		11,550
Additional paid in capital		7,045,195		4,547,903
Statutory reserves		1,751,456		1,112,119
Retained earnings		11,414,608		5,797,827
Accumulated other comprehensive income		1,147,502		1,070,534
Total Shareholders' Equity		21,371,718		12,539,933
Total Liabilities and Shareholders' Equity	$	24,383,758	$	16,138,474

	For the Three Months Ended						For the Six Months Ended
	June 30,			June 30,			June 30,			June 30,
	2010			2009			2010			2009

Sales	$	3,633,913		$	1,787,099		$	18,943,542		$	14,000,414
Cost of goods sold		2,081,809			1,103,594			11,073,852			8,208,669
Gross profit		1,552,104			683,505			7,869,690			5,791,745

Operating and administrative expenses:
Sales and marketing		143,626			31,881			266,677			91,414
General and administrative		436,580			182,145			721,618			365,713
Operating and administrative expenses		580,206			214,026			988,295			457,127

Income from operations		971,898			469,479			6,881,395			5,334,618

Other income (expenses):
Interest income		6,038			6,135			7,803			11,357
Interest expense		(28,406	)		(25,289	)		(56,445	)		(59,070	)
Other income, net		(23,914	)		(14,812	)		(23,910	)		(14,805	)
Non operating income (expenses)		464,431			(1,374	)		500,922			(6,312	)
Other income (expenses)		418,149			(35,340	)		428,370			(68,830	)

Income before income tax		1,390,047			434,139			7,309,765			5,265,788
Income tax expenses		166,552			108,535			1,053,648			1,317,725
Net income		1,223,495			325,604			6,256,117			3,948,063

Other comprehensive income:
Foreign currency translation adjustments		75,010			(324	)		76,968			12,174
Comprehensive income	$	1,298,505		$	325,280		$	6,333,085		$	3,960,237

Earnings per share
Basic	$	0.10		$	0.03		$	0.52		$	0.34
Diluted	$	0.10		$	0.03		$	0.50		$	0.34

Weighted average number of shares issued and outstanding
Basic		12,095,881			11,550,392			12,017,939			11,550,392
Diluted		12,611,797			11,550,392			12,533,856			11,550,392

	For the Six Months Ended June 30,
	2010			2009

Cash flow from operating activities:
Net income	$	6,256,117		$	3,948,063

Adjustments to reconcile net income to net cash used in operating activities
Depreciation		102,779			107,356
Amortization		11,851			5,115
Loss from disposal of long term assets		-			4,880
Non operating income		(425,134	)		-
Changes in current assets and liabilities
Restricted cash		(400	)		(367	)
Trade receivables		(1,444,586	)		(843,920	)
Other receivables		274,608			(206,347	)
Inventories		6,880,200			4,958,211
Advances to suppliers		2,340,067			(372,677	)
Biological assets		(48,707	)		-
Accounts payable and accrued expenses		151,639			420,956
Advances from customers		(269,304	)		292,283
Other payables		83,105			-
Income tax payables		809,833			805,816
Net cash provided by operating activities		14,722,068			9,119,369

Cash flow from investing activities:
Purchase of property plant and equipment		(44,540	)		(28,819	)
Proceeds from disposal of property and equipment		-			292
Purchase of intangible assets		(124,365	)		(23,625	)
Increase in prepaid leases		(439,047	)		-
Net cash used in investing activities		(607,952	)		(52,152	)

Cash flow from financing activities:
Proceeds from issuance of common stock		2,500,000			-
Repayment of short term loans		(951,024	)		(1,022,909	)
Net cash provided by (used in) financing activities		1,548,976			(1,022,909	)

Foreign exchange rate translation adjustment		66,700			1,961
Net increase in cash and cash equivalents		15,729,792			8,049,269

Cash and cash equivalents - beginning of periods		155,425			2,772,020

Cash and cash equivalents – end of periods	$	15,885,217		$	10,818,289

Supplemental disclosure of cash flow information
Interest paid	$	56,257		$	59,046
Income taxes paid	$	243,815		$	511,909

The consolidated financial statements include the financial statements of Forex365, Inc. (referred to herein as “Forex365”), its subsidiaries, and variable interest entity (“VIE”), where Forex365 is deemed the primary beneficiary. Forex365, its consolidated subsidiaries and VIEs are collectively referred to herein as the “Company”, “we” and “us”.

On June 16, 2010, Forex365, Inc. (the “Forex365”), a company incorporated in Nevada on February 8, 1984, entered into a Share Exchange Agreement (the “Exchange Agreement”) with China Golden Holdings, Ltd., a company organized under the laws of the British Virgin Islands (“China Golden”), the shareholders of China Golden (the “Shareholders”), who together owned shares constituting 100% of the issued and outstanding common shares of China Golden (the “China Golden Shares”). Pursuant to the terms of the Exchange Agreement, the Shareholders transferred to the Company all of the China Golden Shares in exchange for the issuance of 11,550,392 shares (the “Shares”) of our common stock (the “Share Exchange”). As a result of the Share Exchange, China Golden became our wholly-owned subsidiary and the Shareholders acquired approximately 96.47% of our issued and outstanding stock.

The effect of the Share Exchange is such that effectively a reorganization of the entities has occurred for accounting purposes and is deemed to be a reverse acquisition. Subsequent to the Share Exchange the financial statements presented are those of a combined China Golden and its subsidiaries, including their VIE, as if the Share Exchange had been in effect retroactively for all periods presented.

China Golden was incorporated in the British Virgin Island on November 30, 2009 as a limited liability company (a BVI company). China Golden is engaged in the business of production and distribution of corn seeds, rice seeds, soybean seeds, humic fertilizer and plant additives. It’s wholly owned subsidiary, Qiqihar Deli Enterprise Management Consultancy Co., Ltd. (“Deli”) was incorporated in Heilongjiang, People’s Republic of China (“PRC”) on February 10, 2010 as a limited liability company. Other than the equity interest in Deli, China Golden does not own any assets or conduct any operations.

Qiqihar Fuer Agronomy Inc. (“Fuer”) was incorporated in the Heilongjiang Province, in the PRC on March 18, 2003. Fuer is a provider of corn seeds, rice seeds, soybean seeds, humic fertilizer and plant additives that distribute products through 1094 distributors to farmers located primarily in the PRC provinces of Heilongjiang, Jilin, Inner Mongolia and other provinces of PRC. Fuer breeds its proprietary seeds through farmers under contractual agreements. Fuer also sells to their customers of humic fertilizer, plant additives as well as pesticides, germicides and herbicides. Deli through a series of contractual arrangements has the ability to substantially influence the daily operations and financial affairs of Fuer, in addition to being able to appoint Fuer’s senior executives and approve all matters requiring stockholder approval. The structures of the contractual arrangements are such that Fuer is effectively a variable interest entity (“VIE”) of Deli. Accordingly, China Golden through its wholly-owned subsidiary Deli consolidates Fuer’s results of operation, assets and liabilities in their financial statements. Hereafter, Forex365 China Golden, Deli and Fuer are collectively referred to as the “Company” unless specific reference is made to an individual entity.

Name	Domicile and Date of Incorporation	Paid-in Capital		Percentage of Effective Ownership	Principal Activities
Forex365, Inc.	February 8, 1984, Nevada	USD	12,958	56.55% owned by Oriental Agriculture Inc., 43.45% owned by other institutional and individual investors.	Investment Holding

China Golden Holdings, Ltd.	November 30, 2009, British Virgin Island	USD	50,000	100% owned by Forex365, Inc.	Investment Holding

Qiqihar Deli Enterprise Management Consultancy Co., Ltd.	February 10, 2010, PRC	USD	2,100,000	100% owned by China Golden	Advisory

Qiqihar Fuer Agronomy Inc.	March 18, 2003, PRC	RMB	35,100,000	100% owned by Zhang Li and Liu Yuhua	Production and distribution of seeds, fertilizers and distribution of pesticides, germicides and herbicides

On March 25, 2010, the Company entered into aforementioned contractual agreements (the “Contractual Agreements”) with Fuer, which entitles Deli to receive all of the residual returns of Fuer. An Exclusive Business Cooperation Agreement provides full guarantee for the performance of such contracts, agreements or transactions entered into by Fuer. As a result of the agreement, Deli will absorb 100% of the expected losses and gains of Fuer, which results in Deli being the primary beneficiary of Fuer.

Based on these exclusive agreements, the Company consolidates the variable interest entity (“VIE”), Fuer, as required by generally accepted accounting principles in the United States (“US GAAP”), because the Company is the primary beneficiary of the VIE. The profits and losses of the Company are allocated based upon the Exclusive Business Cooperation Agreement

Exclusive Business Cooperation Agreement. Pursuant to the exclusive business cooperation agreement between Deli and Fuer, Deli has the exclusive right to provide to Fuer general business operation services, including advice and strategic planning, as well as consulting services related to the technological research and development of the Fuer’s products (the “Services”). Under this agreement, Deli owns the intellectual property rights developed or discovered through research and development, in the course of providing the Services, or derived from the provision of the Services. Fuer shall pay consulting service fees in Renminbi (“RMB”) to Deli that is equal to all of Fuer’s profits as defined in the Equity Pledge Agreement. The Agreement is valid for 10 years. Termination or renewal of the agreement is determined by Deli and shall have binding force upon Fuer.

Equity Pledge Agreement. Under the equity pledge agreement between Fuer’s shareholders and Deli, Fuer’s Shareholders pledged all of their equity interests in Fuer to Deli to guarantee Fuer’s performance of its obligations under the consulting services agreement. If Fuer or Fuer’s Shareholders breaches their respective contractual obligations, Deli, as pledgee, will be entitled to certain rights, including the right to sell the pledged equity interests. Fuer’s Shareholders also agreed that upon occurrence of any event of default, Deli shall be granted an exclusive, irrevocable power of attorney to take actions in the place and stead of the Fuer’s Shareholders to carry out the security provisions of the equity pledge agreement and take any action and execute any instrument that Deli may deem necessary or advisable to accomplish the purposes of the equity pledge agreement. Fuer’s Shareholders agreed not to dispose of the pledged equity interests or take any actions that would undermine Deli’s interest. The equity pledge agreement will expire unless all payments due under the Exclusive Business Cooperation Agreement have been fulfilled.

Option Agreement. Under the option agreement between Fuer’s Shareholders and Deli, Fuer’s Shareholders irrevocably granted Deli or its designated person an exclusive option to purchase, to the extent permitted under PRC law, all or part of the equity interests in Fuer for the cost of the initial contributions to the registered capital of Fuer or the minimum amount of consideration permitted by applicable PRC law. Deli or its designated person has sole discretion to decide when to exercise the option, whether in part or in full. The term of this agreement shall last for 10 years, and shall be renewed at Deli’s election, unless terminated in accordance with this agreement.

Loan Agreement. Under the Loan Agreement, the shareholders of Fuer shall borrow RMB 10,000,000 from Deli, only for purpose of increasing the paid-in capital of Fuer. In addition, shareholders of Fuer agree to (1) enter into the aforementioned contractual agreements with Deli; (2) appoint directors as nominated by Deli; (3) keep the value of its assets. Also included in this agreement, unless consented by Deli, Fuer should not: (1) purchase and dispose of any assets; enter into any material agreements with any third party within its operating activities; (3) declare any dividends to its shareholders.

The accounts of Fuer are consolidated in the accompanying consolidated financial statements pursuant to Accounting Standards Codification Topic 810, “Consolidation” As a VIE, Fuer’s sales are included in the Company’s total sales, its income from operations is consolidated with the Company’s, and the Company’s net income includes all of Fuer’s net income. The Company does not have any non-controlling interest and accordingly, did not subtract any net income in calculating the net income attributable to the Company.

The accompanying consolidated financial statements as of June 30, 2010 and December 31, 2009 and for the three and six months periods ended June 30, 2010 and 2009 are unaudited. In the opinion of management, all necessary adjustments (which include only normal recurring adjustments) have been made to present fairly the financial position, results of operations and cash flows for the periods presented. Certain information and footnote disclosure normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted. However, The Company believes that the disclosures are adequate to make the information presented not misleading. These consolidated financial statements should be read in conjunction with the consolidated financial statements, and notes thereto, of China Golden included in their years ended December 31, 2009 and 2008 financial statements, as filed on Form 8-K subsequent to the June 16, 2010 Exchange Agreement. The results of operations for the six months periods ended June 30, 2010 and 2009 are not necessarily indicative of the operating results to be expected for the full year ended December 31, 2010, or that have been achieved, with respect to China Golden’s consolidated operating results for the year ended December 31, 2009.

The balance sheet as of December 31, 2009 is the unaudited consolidated balance sheet of Forex365, China Golden, all their subsidiaries, and VIE's as of December 31, 2009. The balance sheet as of December 31, 2009, reflects the effects of the June 16, 2010 Exchange Agreement and Share Exchage, which is reflected as a reorganization of the entities and for accounting purpose is deemed a reverse acquisition, accordingly the Exchange Agreement and Share Exchange are reflected as of and for all periods in the accompanying financial statements inclusive of the Company's balance sheet as of December 31, 2009.

Based on various VIE agreements, the Company is able to excise control over the Fuer; and has the exclusive right to obtain all of the financial interests of Fuer, such as obtaining periodic income through Exclusive Business Cooperation Agreements and obtaining the net assets of Fuer through agreement to purchase of their equity at essentially a no cost basis. The amount of non-controlling interest of the original shareholders of Fuer holding shares of both Fuer for the Company is zero.

The preparation of the combined financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, expenses, and the related disclosures at the date of the financial statements and during the reporting period. Actual results could materially differ from these estimates. Significant estimates in the reported interim financial statements include the allowance for doubtful accounts and the useful life of property and equipment.

Translation from RMB into United States dollars (“USD” or “$”) for reporting purposes is performed by translating the results of operations denominated in foreign currency at the weighted average rates of exchange during the reporting periods. Assets and liabilities denominated in foreign currencies at the balance sheet dates are translated at the market rate of exchange in effect at that date. The registered equity capital denominated in the functional currency is translated at the historical rate of exchange at the time of capital contribution. All translation adjustments resulting from the translation of the financial statements into USD are reported as a component of accumulated other comprehensive income in shareholders’ equity. The exchange rates used in translation from RMB to USD amount was published by People’s Bank of the People’s Republic of China

	For the periods ended June 30, 2010		For the periods ended June 30, 2009
	three months	six months	three months	six months
Balance sheet items, except for the registered and paid-up capital and retained earnings, as of June 30, 2010 and 2009	US$1=RMB6.8335	US$1=RMB6.8347	US$1=RMB6.8448	US$1=RMB6.8448

Statements of operations and statements of cash flows for the three and six months ended June 30, 2010 and 2009	US$1=RMB6.8086	US$1=RMB6.8086	US$1=RMB6.8399	US$1=RMB6.8432

The Company adopted the guidance of Accounting Standards Codification (“ASC”) 820 “Fair Value Measurement and Disclosure” for fair value measurements which clarifies the definition of fair value, prescribes methods for measuring fair value, and establishes a fair value hierarchy to classify the inputs used in measuring fair value as follows:

ASC 825-10 “Financial Instruments”, allows entities to voluntarily choose to measure certain financial assets and liabilities at fair value (fair value option). The fair value option may be elected on an instrument-by-instrument basis and is irrevocable, unless a new election date occurs. If the fair value option is elected for an instrument, unrealized gains and losses for that instrument should be reported in earnings at each subsequent reporting date. The Company did not elect to apply the fair value option to any outstanding instruments.

The Company's operations are carried out in the PRC. Accordingly, the Company's business, financial condition and results of operations may be influenced by the political, economic and legal environment in the PRC, and by the general state of the PRC's economy. The Company's operations in the PRC are subject to specific considerations and significant risks not typically associated with companies in North America. The Company's results may be adversely affected by changes in governmental policies with respect to laws and regulations, anti-inflationary measures, currency conversion and remittance abroad, and rates and methods of taxation, among other things.

Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash and trade accounts receivable. Substantially all of the Company’s cash is maintained with state-owned banks within the PRC, and no deposits are covered by insurance. The Company has not experienced any losses in such accounts and believes it is not exposed to any risks on its cash in bank accounts.

Accounts receivable are presented net of an allowance for doubtful accounts. The Company maintains allowances for doubtful accounts for estimated losses. The Company reviews the accounts receivable on a periodic basis and makes general and specific allowances when there is doubt as to the collectability of individual balances. In evaluating the collectability of individual receivable balances, the Company considers many factors, including the age of the balance, customer’s historical payment history, its current credit-worthiness and current economic trends. Accounts are written off after exhaustive efforts at collection. As of June 30, 2010 and December 31, 2009, the Company had an allowance for doubtful accounts of $333,261 and $331,867, respectively.

Inventories, consisting of finished goods acquired from third party vendors, are stated at the lower of cost, determined on a weighted average basis, or net realizable value. Costs of finished goods are composed of direct materials, direct labor and an attributable portion of manufacturing overhead. Net realizable value is the estimated selling price, in the ordinary course of business, less estimated costs to complete and dispose. The management also regularly evaluates the composition of its inventories to identify slow-moving and obsolete inventories to determine if valuation allowance is required. The Company has not recorded an inventory reserve at June 30, 2010 and December 31, 2009.

Biological assets are crops planted to provide seeds for the commercial distribution which are to be harvested within one year. Book value of the biological assets includes cost of input seeds, fertilizers, and other materials, direct overhead and amortization of prepaid leases of land used. As of June 30, 2010 and December 31, 2009, biological assets are totaled $42,047 and $0, respectively.

Property, plant and equipment are carried at cost and are depreciated on a straight-line basis over the estimated useful lives of the assets. The cost of repairs and maintenance is expensed as incurred; major replacements and improvements are capitalized. When assets are retired or disposed of, the cost and accumulated depreciation are removed from the accounts, and any resulting gains or losses are included in income in the year of disposition. The Company examines the possibility of decreases in the value of fixed assets when events or changes in circumstances reflect the fact that their recorded value may not be recoverable. Depreciation of property and equipment is provided using the straight-line method for substantially all assets with estimated lives as follows:

The Company states intangible assets at cost less accumulated amortization. The Company’s intangible assets as of June 30, 2010 include seed patents purchased from local or state universities or institutions of agriculture. The patents are amortized on straight line method over 10 years. The amortization expense of intangible assets for the three months ended June 30, 2010 and 2009 amounted to $5,927 and $2,559, respectively. The amortization expense of intangible assets for the six months ended June 30, 2010 and 2009 amounted to $11,851 and $5,115, respectively.

The Company states prepaid leases at net realizable value. As China’s regulation prohibit companies from acquisition of land use right, the Company entered into long term agreement with certain people to rent land. The rentals for the whole contract period are prepaid at effective date of the leases. The rentals are recorded as prepaid expenses and are amortized with the straight line method during the contract period. Prepaid leases that are to be amortized within one year post the balance sheet date are recorded as current portion of prepaid leases in the current assets of the balance sheets.

The Company reviews, long-lived assets for impairment on an annual basis, or whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable. The Company recognizes an impairment loss when the sum of expected undiscounted future cash flows is less than the carrying amount of the asset. The amount of impairment is measured as the difference between the asset’s estimated fair value and its book value. The Company did not record any impairment charges for the three and six months ended June 30, 2010 and 2009, respectively.

The Company is governed by the Income Tax Law and associated legislations of the People’s Republic of China. Income taxes are accounted for under Accounting Standard Codification Topic 740 (ASC 740), “Income Taxes”, which is an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in the Company's financial statements or tax returns.

According to ASC 740, the evaluation of a tax position is a two-step process. The first step is to determine whether it is more likely than not that a tax position will be sustained upon examination, including the resolution of any related appeals or litigation based on the technical merits of that position. The second step is to measure a tax position that meets the more-likely-than-not threshold to determine the amount of benefit to be recognized in the financial statements. A tax position is measured at the largest amount of benefit that is greater than 50% likelihood of being realized upon ultimate settlement. Tax positions that previously failed to meet the more-likely-than-not recognition threshold should be recognized in the first subsequent period in which the threshold is met. Previously recognized tax positions that no longer meet the more-likely-than-not criteria should be de-recognized in the first subsequent financial reporting period in which the threshold is no longer met. ASC 740 also provides guidance on de-recognition, classification, interest and penalties, accounting in interim periods, disclosures, and transition.

The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the purchase price is fixed or determinable and collectability is reasonably assured. The Company recognizes revenues from the sale of seeds, fertilizers, pesticides, germicides and herbicides upon shipment and transfer of title.

The Company’s operations and employees are all located in the PRC. The Company makes mandatory contributions to the PRC government’s health, retirement benefit and unemployment funds in accordance with the relevant Chinese social security laws, which is approximately 25% of salaries. For the three months ended June 30, 2010 and 2009, the costs of these payments are charged to general and administrative expenses in the same period as the related salary costs and amounted to $58,446 and $47,136, respectively. The payment for the six months ended June 30, 2010 and 2009 was $115,360 and $94,332, respectively

Advertising is expensed as incurred and is included in selling and marketing expenses on the accompanying combined statement of operations. For the three months ended June 30, 2010 and 2009, advertising expense was amounted to $81,373 and $132, respectively. For the six months ended June 30, 2010 and 2009, advertising expense was totaled $110,134 and $519, respectively.

Comprehensive income is comprised of net income and all changes to the statements of shareholders’ equity, except those due to investments by shareholders, changes in paid-in capital and distributions to shareholders. For the Company, comprehensive income for the three and six months periods ended June 30, 2010 and 2009 included net income and unrealized gains from foreign currency translation adjustments. As of June 30, 2010 and 2009, accumulated other comprehensive income was totaled $1,147,502 and $1,070,534.

Parties are considered to be related to the Company if the parties that, directly or indirectly, through one or more intermediaries, control, are controlled by, or are under common control with the Company. Related parties also include principal owners of the Company, its management, members of the immediate families of principal owners of the Company and its management and other parties with which the Company may deal if one party controls or can significantly influence the management or operating policies of the other to an extent that one of the transacting parties might be prevented from fully pursuing its own separate interests. The Company discloses all related party transactions. All transactions are recorded at fair value of the goods or services exchanged. Property purchased from a related party is recorded at the cost to the related party and any payment to or on behalf of the related party in excess of the cost is reflected as a distribution to related party.

In January 2010, the FASB issued ASU No. 2010-06, Fair Value Measurements and Disclosures: Improving Disclosures about Fair Value Measurements. ASU 2010-06 amends ASC 820 to require a number of additional disclosures regarding (1) the different classes of assets and liabilities measured at fair value, (2) the valuation techniques and inputs used, (3) the activity in Level 3 fair value measurements, and (4) the transfers between Levels 1, 2, and 3. The new disclosures and clarifications of existing disclosures are effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measurements. Those disclosures are effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years. The Company does not expect that the adoption of ASU 2010-06 will have a material impact on its consolidated financial statements.

On March 5, 2010, the FASB issued authoritative guidance to clarify the type of embedded credit derivative that is exempt from embedded derivative bifurcation requirements. Specifically, only one form of embedded credit derivative qualifies for the exemption – one that is related only to the subordination of one financial instrument to another. As a result, entities that have contracts containing an embedded credit derivative feature in a form other than such subordination may need to separately account for the embedded credit derivative feature. This guidance also has transition provisions, which permit entities to make a special one-time election to apply the fair value option to any investment in a beneficial interest in securitized financial assets, regardless of whether such investments contain embedded derivative features. This guidance is effective on the first day of the first fiscal quarter beginning after June 15, 2010. Early adoption is permitted at the beginning of any fiscal quarter beginning after March 5, 2010. This amendment is not expected to have a material impact on the Company’s financial statements

In March 2010, FASB issued an authoritative pronouncement regarding the effect of denominating the exercise price of a share-based payment awards in the currency of the market in which the underlying equity securities trades and that currency is different from (1) entity’s functional currency, (2) functional currency of the foreign operation for which the employee provides services, and (3) payroll currency of the employee. The guidance clarifies that an employee share-based payment award with an exercise price denominated in the currency of a market in which a substantial portion of the entity’s equity securities trades should be considered an equity award assuming all other criteria for equity classification are met. The pronouncement will be effective for interim and annual periods beginning on or after December 15, 2010, and will be applied prospectively. Affected entities will be required to record a cumulative catch-up adjustment for all awards outstanding as of the beginning of the annual period in which the guidance is adopted. This amendment is not expected to have a material impact on the Company’s financial statements.

In April 2010, the FASB issued Update No. 2010-17, or ASU 2010-17, Revenue Recognition—Milestone Method, which updates the guidance currently included under topic 605, Revenue Recognition. ASU 2010-17 provides guidance on defining the milestone and determining when the use of the milestone method of revenue recognition for research or development transactions is appropriate. It provides criteria for evaluating if the milestone is substantive and clarifies that a vendor can recognize consideration that is contingent upon achievement of a milestone as revenue in the period in which the milestone is achieved, if the milestone meets all the criteria to be considered substantive. ASU 2010-17 is effective for milestones achieved in fiscal years, and interim periods within those years, beginning after June 15, 2010 and should be applied prospectively. Early adoption is permitted. The Company is currently evaluating the potential impact, if any, of the new accounting guidance on its consolidated financial statements.

In April 2010, the FASB issued an authoritative pronouncement on effect of denominating the exercise price of a share-based payment award in the currency of the market in which the underlying equity securities trades and that currency is different from (1) entity's functional currency, (2) functional currency of the foreign operation for which the employee provides services, and (3) payroll currency of the employee. The pronouncement clarifies that an employee share-based payment award with an exercise price denominated in the currency of a market in which a substantial portion of the entity's equity securities trades should not be considered to contain a condition that is not a market, performance, or service condition, and therefore should be considered an equity award assuming all other criteria for equity classification are met. The pronouncement is for interim and annual periods beginning on or after December 15, 2010, and will be applied prospectively. Affected companies will be required to record a cumulative catch-up adjustment for all awards outstanding as of the beginning of the annual period in which the guidance is adopted. This amendment is not expected to have a material impact on the Company’s financial statements.

Accumulated depreciation as of June 30, 2010 and December 31, 2009 was $839,614 and $733,360, respectively. Depreciation expense for the three months ended June 30, 2010 and 2009 was $51,142 and $53,082, respectively. Depreciation for the six months ended June 30, 2010 and 2009 was $102,779 and $107,356, respectively. Loss from disposal of assets was $0 and $4,880 June 30, 2010 and 2009 respectively.

The Company's intangible assets are purchased intellectual property on seed varieties and prepaid leases for lands. At June 30, 2010 and December 31, 2009, the balances of net intangible assets were $294,394 and $181,909, respectively. Accumulated amortization of the intangible assets as of June 30, 2010 and December 31, 2009 was $68,388 and $55,029, respectively. Amortization expenses of intangible assets for the three months ended June 30, 2010 and 2009 was $5,927 and $2,559, respectively. Amortization expenses for the six months ended June 30, 2010 and 2009 was $11,851 and $5,115, respectively

In January, 2010, the Company was certified as national high tech enterprise. As a result, the Company will enjoy favorable enterprise income tax rate of 15% for 3 years, starting from the beginning of year 2010. With regards to the Company’s US parent Forex365, under IRC section 382, certain loss carryforward amounts may be limited due to the more than 50% change in ownership. The Company’s management believes that such a change of ownership could have occurred with respect to the Exchange Agreement and Share exchange that occurred on June 16, 2010, accordingly, any deferred tax asset associated with these net operating loss carryforwards were fully reserved as of June 30, 2010.

On June 17, 2010, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with Allied Merit International Investment Inc. (the “Investor”) for the sale of an aggregate of 1,018,868 common shares (the “Investor Shares”), and warrants to purchase 873,315 common shares of the Company, for aggregate net proceeds equal to $2,500,000 (the “Offering”) which was accounted for as additional paid in capital. The warrants are exercisable at $2.58 per common share, have a three year life time and a cashless exercise feature. In connection with the Offering, the Company also entered into a registration rights agreement (the “Registration Rights Agreement”) with the Investor, in which we agreed to file a registration statement (the “Registration Statement”) with the Securities and Exchange Commission (the “SEC”) within 60 calendar days of the Closing Date of the Offering to register for resale the Investor Shares and the shares underlying the warrants, and to have the Registration Statement become effective within 150 days of the Closing Date of the Offering.

The Company is required to make appropriations to reserve funds by the ended of each calendar year, comprising the statutory surplus reserve and statutory public welfare fund, based on after-tax net income determined in accordance with generally accepted accounting principles of the PRC (the “PRC GAAP”). Appropriation to the statutory surplus reserve should be at least 10% of the after tax net income determined in accordance with the PRC GAAP until the reserve is equal to 50% of the entities’ registered capital or members’ equity. Appropriations to the statutory public welfare fund are at a minimum of 5% of the after tax net income determined in accordance with PRC GAAP. Commencing on January 1, 2006, the new PRC regulations waived the requirement for appropriating retained earnings to a welfare fund. Statutory reserves were $1,751,456 and $1,112,119 as of June 30, 2010 and December 31, 2009, respectively.

The Company entered into five lease agreements in March, 2010 for establishment of its wholly owned stores, including four agreements for one year and an agreement for 2 years. Rentals were prepaid at commencement of the leasing period. The Company has paid refundable security deposits of $439 for 2 stores. No such deposits were required under the other 3 lease agreements.

On March 30, 2010, the Company entered into an agreement to lease farm land of 23.06 acres from local farmers for five years starting from March 30, 2010. Subject to the agreement, five years of future rent totaling $34,856 was required upon the commencement of the lease, the 2010 year rental, which was paid as of March 31, 2010 and is accounted for as prepaid lease as of June 30, 2010 for the unexpensed portion of the prepayment. In April 2010, the Company rented farmland of 247.11 acre for 20 years. Total rental of $440,733 was prepaid at inception of the leasing period. The prepayments are recorded in prepaid leases and amortized during the leasing period on the straight line method. Expected amortization of prepaid leases is as follows as of June 30, 2010:

Certain statements made in this report may constitute “forward-looking statements on our current expectations and projections about future events.” These forward-looking statements involve known or unknown risks, uncertainties and other factors that may cause our actual results, performance, or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. In some cases you can identify forward-looking statements by terminology such as “may,” “should,” “potential,” “continue,” “expects,” “anticipates,” “intends,” “plans,” “believes,” “estimates,” and similar expressions. These statements are based on our current beliefs, expectations, and assumptions and are subject to a number of risks and uncertainties. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. These forward-looking statements are made as of the date of this report, and we assume no obligation to update these forward-looking statements whether as a result of new information, future events, or otherwise, other than as required by law. In light of these assumptions, risks, and uncertainties, the forward-looking events discussed in this report might not occur and actual results and events may vary significantly from those discussed in the forward-looking statements.

We are a leading Chinese agricultural material company providing quality hybrid corn seeds, soybean seeds, rice seeds and fertilizer product to farmers in the northeastern China, which is the most important agriculture region in the country. Through our 1,094 distributors, over 3,430 outlets and 5 direct owned chain stores, we distribute our products to 58 million farmers located in Heilongjiang, Jilin, and northeastern Inner Mongolia and to the rest of China. Our seed products are breed with our exclusively contracted breeders in Heilongjiang, Jilin, and northeastern Inner Mongolia.

China is facing great stress upon its food supply. Arable land in China is shrinking as a result of construction of buildings and basic facilities, desertification, soil pollution, and urbanization. Nevertheless, Chinese population is expecting to keep rising until 2033, reaching 1.5 billion people. China has to lean on extensive use of fertilizer and high yield hybrid grain seeds to maintain sufficient food supply.

Farmers in China use a great portion of seeds from the output of previous year for the need in the next year. According to National Bureau of Statistics of China, in 2008, only 38.5% of seeds used were supplied by seeds companies, compared to world average of 70% and over 90% in developed countries, which creates a market of $4 billion. Additionally, seeds price in China are generally 5 to 8 times the grain price, compared to 15 to 25 times in the developed countries.

At present, the seed products are supplied by over 7,000 seeds providers, a great majority of which are low scale and do not control up to date seed patents. Seeds market concentration is far below the developed countries. Historically, the government of China has raised entrance barrier for seeds companies by means of registered capital threshold. The movement has created great merger and acquisition opportunities. We believe this trend will continue in the future.

Though years have passed since genetic modification technique were adopted in seed production, safety of genetically modified grain is still unproved. It is estimated that cultivation of genetically modified plant would impact gene stability of surrounding natural plants, and the health of creatures that eat them. At present, both the EU and the United States have not approved genetically modified crops edible for humans. Though 2 varieties of genetically modified corn seed was granted Safety Certificates from Committee of food safety of the Ministry of Agriculture of the PRC, they still await for further approvals for commercial selling, as clarified by the state authority. It still takes years for genetically modified grain to be accepted by customers.

In China, urban residents consume more meat products than rural residents per capita. With urbanization in the past decade, meat output has increased with compound annual growth rate of 1.17% from 2000 to 2007. Corn is the most widely used among grains for feeding poultry and livestock, for it accumulates more carbohydrate with more efficient photosynthesis process. Therefore grain production increased with compound annual growth rate of 4.63% in the same period. It is reasonable that corn cultivation will continue growing in the future as China’s urbanization rate and disposable income grow.

Subject to the cultivation seasonality, we purchases raw seeds from our contracted seed breeders from late November till next January, and produce our seed product in the same period. Sales of the seed product to our distributors are from late December until the next March or April. Our fertilizer, pesticides, germicides and herbicides products are sold from late March until June. We start our production of fertilizers and forward our orders for pesticides, germicides and herbicides one month before the sales period.

	For the three month Ended June 30,					For the six months ended June 30,
	2010		2009			2010		2009
	Unaudited		Unaudited			Unaudited		Unaudited
	($ in thousands)					($ in thousands)
Statements of Operations Data
Sales	$	3,634	$	1,787		$	18,944	$	14,000
Cost of goods sold		2,082		1,104			11,074		8,208
Gross profit		1,552		683			7,870		5,792
General and administrative		436		192			722		366
Sales and marketing		144		32			267		91
Operating and administrative expenses		580		214			989		457
Income from continuing operations		972		469			6,881		5,335
Other income (expenses)		418		(35	)		428		(69	)
Income tax expenses		167		109			1,053		1,318
Net income	$	1,223	$	325		$	6,256	$	3,948

Our sales consist primarily of revenues generated from sales of corn seeds, rice seeds, soybean seeds, fertilizers and agricultural chemical products. Sales increased by approximately $1.85 million, or 103.34%, from approximately $1.79 million in 2009 to approximately $3.63 million in 2010. This increase was primarily attributable to increase in sales of fertilizers due to expanding our market areas and distribution network throughout Northeastern China and increased demand for replanting crops that destroyed by freezing temperature.

	For the three months ended June 30, 2010							For the three months ended June 30, 2009
	Quantity		Amount		% of			Quantity		Amount		% of
Product name	(Kg’000)		($’000)		Sales			(Kg’000)		($’000)		Sales
Corn Seeds		1,203	$	1,239		34	%		34	$	34	2	%
Soybean Seeds		158	$	165		5	%		12	$	9	1	%
Rice Seeds		60	$	50		1	%		4	$	3	-
Vegetable Seeds		-	$	-		-			215	$	309	7	%
Fertilizers		2,325	$	1,688		46	%		2607	$	1,246	17	%
Plant Regulators		81	$	44		2	%		131	$	68	70	%
Herbiicides, Pesticides and Germicides		121	$	448		12	%		237	$	118	3	%

Price increase of your seed products during the three months ended June 30, 2010 as compared with the same period in 2009 was primarily due to the increase in the market price for seeds of field crops, including corn, rice and soybean. The increase in average price of fertilizer mainly resulted from the increase in sales volume of our premier fertilizer products, and distribution through our direct owned stores.

We rely on our production of germicides, pesticides and herbicides products on our Original Equipment Manufacturer (“OEM”), Qingdao Fuer Agronomy Pesticides Ltd. (“Qingdao Fuer”). During the second quarter, Qingdao Fuer completed its facility reformation and produces only an updated premium herbicide product. The new premium herbicide was more efficient and less toxic compared with traditional herbicides, and could be widely applied to cultivation of field crops. The Company distributed only the new herbicide in the three months ended June 30, 2010, which led to the increase in the average selling price of such product category.

	Average Price Per Kilogram for the second quarter				Percentage Change
Product	2010		2009
Corn Seeds	$	1.03	$	0.98	5	%
Soybean Seeds	$	1.04	$	0.75	39	%
Rice Seeds	$	0.83	$	0.75	11	%
Vegetable Seeds	$	-	$	1.44	n/m
Fertilizers	$	0.73	$	0.48	52	%
Plant Regulators	$	0.54	$	0.52	5	%
Germicides, Pesticides and Herbicides	$	3.70	$	0.50	644	%

Our costs of goods sold consist primarily of direct and indirect manufacturing costs, including production overhead costs, shipping and handling costs for the products sold. Cost of goods sold increased approximately $0.98 million, or 88.64%, from approximately $1.10 million for the three months ended June 30, 2009 to approximately $2.08 million for the three months ended June 30, 2010. This increase was primarily attributable to the increase in sales volume of corn seeds which resulted from the fact that sales season for seeds is extended as the weather in April are colder than average year.

Our total operating and administrative expenses consist primarily of sales and marketing expenses and general and administrative expenses. Our total operating expenses increased by approximately $0.37 million, or 171.09%, from approximately $0.21 million for the three months ended June 30, 2009 to approximately $0.58 million for the three months ended June 30, 2010.

Sales and Marketing. Our sales and marketing expenses consist primarily of transportation expenses, advertising expenses, year-end bonus for sales team, and other overhead expenses incurred by the Company’s sales and marketing personnel. Sales and marketing expenses increased approximately $0.11 million, or 350.51%, from approximately $0.03 million for the three months ended June 30, 2009 to approximately $0.14 million for the three months ended June 30, 2010. This increase was primarily attributable to (i) an increase of approximately $0.08 million in advertisement expenses to promote our brand awareness, (ii) an increase of approximately $0.01 million in traveling expense of our sales people as we intensified our promotion effort and connection with our distributors and end users.

General and Administrative. Our general and administrative expenses consist primarily of salary, and allowances for receivables, and professional service fees. General and administrative expenses increased approximately $0.25 million, or 139.69%, from approximately $0.19 million for the three months ended June 30, 2010 to approximately $0.44 million for the three months ended June 30, 2010. This increase was primarily attributable to: i) approximately $0.13 million for the legal services for the reverse merger, ii) approximately $0.06 million for trial cultivation of corns for the target of enhancing our seed quality, and iii) approximately $0.02 million for increase participation in industry wide conferences and academic conferences to indentify research and cooperation opportunities. General and administrative expenses are likely to increase as we continue to expand our production, sourcing capacity, and distribution capacity throughout northeastern China.

Our other income (expenses) consists primarily of interest income, interest and finance costs, subsidy from government and other income and expense accounts. Other income increased approximately by $0.46 million, from other expense of approximately $0.04 million for the three months ended June 30, 2009 to other income of approximately $0.42 million for the three months ended June 30, 2010, which is attribute to deduction of tax payable of approximately 0.42 million from approval of retrospective adjustment on tax payable of 2009 in line with our favorable income tax rate of 15%.

We are subject to PRC enterprise income taxes. Our income tax expenses increased by approximately $0.06 million, or 53.46%, from approximately $0.11 million for the three months ended June 30, 2009 to approximately $0.17 million for the three months ended June 30, 2010. The increase was primarily attributable to increases in our income subject to PRC tax.

	For the six months ended June 30, 2010							For the six months ended June 30, 2009
	Quantity		Amount		% of			Quantity		Amount		% of
Product name	(Kg’000)		($’000)		Sales			(Kg’000)		($’000)		Sales
Corn Seeds		7,319	$	8,896		47	%		9,877	$	9,653	69	%
Soybean Seeds		3,941	$	3,729		20	%		1,353	$	1,236	9	%
Rice Seeds		4,772	$	3,604		19	%		1,211	$	919	7	%
Vegetable Seeds		-	$	-		-			284	$	405	3	%
Fertilizers		2,961	$	1,997		11	%		3,023	$	1,429	10	%
Plant Regulators		520	$	270		1	%		370	$	196	1	%
Herbicides, Pesticides and Germicides		121	$	448		2	%		268	$	162	1	%

	Average Price Per Kilogram for the six months ended June 30,				Percentage Change
Product	2010		2009
Corn Seeds	$	1.22	$	0.98	24	%
Soybean Seeds	$	0.95	$	0.91	4	%
Rice Seeds	$	0.76	$	0.76	0	%
Vegetable Seeds	$	-	$	1.43	n/m
Fertilizers	$	0.67	$	0.47	43	%
Plant Regulators	$	0.52	$	0.53	(2	)%
Germicides, Pesticides and Herbicides	$	3.70	$	0.60	514	%

Our costs of goods sold consist primarily of direct and indirect manufacturing costs, including production overhead costs, shipping and handling costs for the products sold. Cost of goods sold increased approximately $2.87 million, or 34.90%, from approximately $8.21 million for the six months ended June 30, 2009 to approximately $11.07 million for the six months ended June 30, 2010. This increase was primarily attributable to the increase in sales volume resulted from our marketing efforts, expanded distribution network and prolonged credit period.

Our total operating and administrative expenses consist primarily of sales and marketing expenses and general and administrative expenses. Our total operating expenses increased by approximately $0.53 million, or 116.20%, from approximately $0.46 million for the six months ended June 30, 2009 to approximately $0.99 million for the six months ended June 30, 2010.

Sales and Marketing. Our sales and marketing expenses consist primarily of transportation expenses, advertising expenses, year-end bonus for sales team, and other overhead expenses incurred by the Company’s sales and marketing personnel. Sales and marketing expenses increased approximately $0.18 million, or 191.72%, from approximately $0.09 million for the six months ended June 30, 2009 to approximately $0.27 million for the six months ended June 30, 2010. This increase was primarily attributable to (i) an increase of approximately $0.11 million in advertisement expenses to promote our brand awareness, (ii) an increase of approximately $0.02 million in transportation expenses as our sales volume inflates, and (iii) approximately $0.03 million spent for our direct stores.

General and Administrative. Our general and administrative expenses consist primarily of salary, and allowances for receivables, and professional service fees. General and administrative expenses increased approximately $0.36 million, or 97.32%, from approximately $0.37 million for the six months ended June 30, 2010 to approximately $0.73 million for the six months ended June 30, 2010. This increase was primarily attributable to: i) approximately $0.13 million for the legal services for the reverse merger, ii) approximately $0.06 million for trial cultivation of corns for the target of enhancing our seed quality, iii) approximately $0.07 million paid for accounting and auditing services, and iii) approximately $0.04 million for increase participation in industry wide conferences and academic conferences to indentify research and cooperation opportunities. General and administrative expenses are likely to increase as we continue to expand our production, sourcing capacity, and distribution capacity throughout northeastern China.

Our other income (expenses) consists primarily of interest income, interest and finance costs, subsidy from government and other income and expense accounts. Other income increased approximately by $0.5 million, from other expense of approximately $0.07 million for the six months ended June 30, 2009 to other income of approximately $0.43 million for the six months ended June 30, 2010, which is attribute to deduction of tax payable of approximately 0.42 million from approval of retrospective adjustment on tax payable of 2009 in line with our favorable income tax rate of 15%.

We are subject to PRC enterprise income taxes. Our income tax expenses decreased by approximately $0.26 million, or 20.04%, from approximately $1.32 million for the six months ended June 30, 2009 to approximately $1.05 million for the six months ended June 30, 2010. The increase was primarily attributable to favorite income tax rate we obtained in 2010.

As of June 30, 2010, we had cash and cash equivalents of approximately $15.89 million, total current assets of approximately $20.99 million, and a working capital surplus of approximately $17.98 million. We have financed our activities to date principally from cash derived from operating activities. Our cash balances are affected by sales seasonality for our products. We believe our current cash balances and expected collection of most of our receivables will be sufficient to sustain our operation.

For the six months periods, net cash used in investing activities increased approximately $0.55 million, from approximately $0.06 million for the six months ended June 30, 2009 to approximately $0.61 million for the six months ended June 30, 2010. This increase was primarily attributable to the prepayments of leases and purchases of seeds patents as stated above. Net cash used in investing activities primarily relates to expenditures associated with our construction and acquisition of new facilities and expenditures for leasing lands and purchase of new seed patents.

Net cash provided by financing activities increased by approximately $2.58 million, from a net outflow of $1.02 million for the six months ended 2009 to an inflow of 1.55 million for the six months ended June 30, 2010. This increase was primarily attributable to proceeds from the issuance of common shares and warrants as discussed above. We will improve our cash flow by obtaining bank loans and obtaining financing from capital markets

On June 17, 2010, the Company entered into a securities purchase agreement (the “Purchase Agreement”) with Allied Merit International Investment Inc. (the “Investor”) for the sale of an aggregate of 1,018,868 common shares (the “Investor Shares”), and warrants to purchase 873,315 common shares of the Company, for aggregate gross proceeds equal to $2,500,000 (the “Offering”). The warrants are exercisable at $2.58 per common share, have a three year life time and a cashless exercise feature. In connection with the Offering, the Company also entered into a registration rights agreement (the “Registration Rights Agreement”) with the Investor, in which we agreed to file a registration statement (the “Registration Statement”) with the Securities and Exchange Commission (the “SEC”) within 60 calendar days of the Closing Date of the Offering to register for resale the Investor Shares and the shares underlying the warrants, and to have the Registration Statement become effective within 150 days of the Closing Date of the Offering.

As the parties in the abovementioned transaction were not related, the total amount of the proceeds was deemed as the fair value of the common shares and warrants issued. Common shares issued were valued at total proceeds minus the fair value of the warrants. Management is responsible for determining the fair value of the warrant, as of the grant date. The fair value of the warrants issued are estimated on the date of grant using the Black-Scholes option valuation model to be $849,852.

In January 2010, we were identified as a High-tech Enterprise by the PRC Government. This honor entitled us to a favorable enterprise income tax rate of 15% for the years 2010 and 2011, and an gain from a retrospective adjustment over tax payable for the year 2009 according to the favored tax rate. At the same time, we were granted an exemption from interest on the loans we borrowed from a certain bank for three years. We believe the subsidy and tax favor will enhance our profitability and cash flow, and boost our expansion.

Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company’s management and legal counsel assess such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company’s legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought.

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, would be disclosed. Loss contingencies considered to be remote by management are generally not disclosed unless they involve guarantees, in which case the guarantee would be disclosed.

The consolidated financial statements include the financial statements of us and our subsidiaries. All transactions and balances among us and our subsidiaries have been eliminated upon consolidation. Certain amounts included in or affecting our consolidated financial statements and related disclosures must be estimated, requiring us to make certain assumptions with respect to values or conditions that cannot be known with certainty at the time the financial statements are prepared. These estimates and assumptions affect the amounts we report for assets and liabilities and our disclosure of contingent assets and liabilities at the date of our financial statements. We routinely evaluate these estimates, utilizing historical experience, consulting with experts and other methods we consider reasonable in the particular circumstances. Nevertheless, actual results may differ significantly from our estimates. Any effects on our business, financial position or results of operations resulting from revisions to these estimates are recorded in the period in which the facts that give rise to the revision become known.

Estimates of allowances for receivables – We must periodically review our trade and other receivables to determine if all are collectible or whether an allowance is required for possible uncollectible balances. A number of factors are considered when determining the allowances, including the length of time the receivable is past due, past loss history, the counter party’s current ability to pay and the general condition of the economy and industry. We perform this review semi-annually, events could occur that would require us to increase our allowance in the future.

Estimate of the useful lives of property and equipment and biological assets – We must estimate the useful lives and residual values of our property and equipment. We must also review property and equipment and biological assets for possible impairment whenever events and circumstances indicate that the carrying value of those assets may not be recovered from the estimated future cash flows expected to result from their use and eventual disposition. We recognized no impairments in the three and six month periods ended June 30, 2010 and 2009.

Estimate of the useful lives of intangible assets - Intangible assets, which are purchased seeds variety rights, are amortized using the straight-line method over their estimated period of benefit, normally 10 years. We must review the marketability of the seed varieties for possible impairment whenever events and circumstances imply that carrying value of such assets may not be recovered from the estimated future cash flow result from sales of such seeds products or possible disposition. We recognized no impairments in the in the three and six month periods ended June 30, 2010 and 2009.

Inventory – We value inventories at the lower of cost or market value. We determine the cost of inventories using the weighted average cost method and include any related production overhead costs incurred in bringing the inventories to their present location and condition. We must determine whether we have any excessive, slow moving, obsolete or impaired inventory. We perform this review quarterly, which requires management to estimate the future demand of our products and market conditions. We make provisions on the value of inventories at period end equal to the difference between the cost and the estimated market value. If actual market conditions change, additional provisions may be required. In addition, we may write off some provisions if we later sell some of the subject inventory.

Revenue recognition – Revenue from the sale of goods is recognized on the transfer of risks and rewards of ownership, which generally coincides with the time when the goods are shipped to customers and the title has passed. We render neither sales returns nor rebates to our customers, thus revenue would reflect the actual sales we are entitled to.

In accordance with the laws and regulations of the PRC, after payments of the PRC income taxes, a wholly-owned Foreign Invested Enterprises income, shall be allocated to the statutory reserves since January 1, 2006. The public welfare fund reserve was limited to 50 percent of the registered capital. Statutory Reserve funds are restricted for offset against losses, expansion of production and operation or increase in registered capital of the respective company, which is made by the end of each calendar year. This reserve is not transferable to the Company in the form of cash dividends, loans or advances. These reserves are therefore not available for distribution except in liquidation. Commencing on January 1, 2006, the new PRC regulations waived the requirements for appropriating retained earnings to the public welfare fund. As of June 30, 2010 and December 31, 2009, the statutory reserves were $1,751,465 and $1,112,119, respectively.

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports filed pursuant to the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules, regulations and related forms, and that such information is accumulated and communicated to our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

As of June 30, 2010, we carried out an evaluation, under the supervision and with the participation of our principal executive officer and our principal financial officer of the effectiveness of the design and operation of our disclosure controls and procedures. Based on this evaluation, our principal executive officer and our principal financial officer concluded that our disclosure controls and procedures were not effective as of the end of the period covered by this report because the Company has only one officer or employee and therefore it is not possible to have appropriate segregation of duties. Once the Company becomes an operating company it expects that it will increase its personnel in order to have effective internal controls.

As a “smaller reporting company” as defined by Item 10 of Regulation S-K, the Company is not required to provide information required by this Item. See the Company’s Form 8-K filed with the Securities and Exchange Commission on June 22, 2010 (“Form 8-K”), which identifies and discloses certain risks and uncertainties including, without limitation, those “Risk Factors” included in Item 501 of the Form 8-K.

Exhibit Number		Exhibit Description

31.1		Chief Executive Officer Certification pursuant to Rule13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934

31.2		Chief Financial Officer Certification pursuant to Rule13a-14(a) or 15d-14(a) of the Securities Exchange Act of 1934

32.1		Chief Executive Officer Certification pursuant to 18 U.S.C. Section 1350

32.2		Chief Financial Officer Certification pursuant to 18 U.S.C. Section 1350

Nevada		84-0290243
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

Large accelerated filer ¨		Accelerated filer ¨
Non-accelerated filer ¨	(do not check if a smaller reporting company)	Smaller reporting company þ

Buildings	20 years
Operating equipment	5 -10 years
Office equipment	3 years
Vehicles	4 years

	June 30,		December 31,
	2010		2009
	(Unaudited)		(Unaudited)
Materials	$	717,898	$	2,903,920
Goods in transit		9,420		4,817,634
Finished goods		120,055		-
Total	$	847,373	$	7,721,554

	June 30,			December 31,
	2010			2009
	(Unaudited)			(Unaudited)
Property and Plant	$	2,724,946		$	2,713,547
Operation Equipment		616,316			605,576
Office Equipment		62,644			54,684
Vehicle		128,137			98,938
		3,532,043			3,472,745
Accumulated Depreciation		(839,614	)		(733,360	)
Total	$	2,692,429		$	2,739,385

For the remainder of fiscal 2010	$	18,138
2011		36,278
2012		36,278
2013		35,543
2014		31,871
Thereafter		136,286
	$	294,394

	June 30		December 31,
	2010		2009
	(Unaudited)		(Unaudited)
Accounts payable	$	539,632	$	494,927
Salary payable		6,169		-
Welfare payable		113,872		-
Due to related parties		-		10,038
	$	659,673	$	504,965

For the remainder of fiscal 2010	$	13,783
2011		27,561
2012		27,561
2013		27,561
2014		27,561
Thereafter		309,816
Total	$	433,843

	For the six months ended June 30, 2009,
	2010			2009
	Unaudited			Unaudited
Net cash provided by (used in):	($ in thousands)
Operating activities	$	14,722		$	9,119
Investing activities	$	(608	)	$	(52	)
Financing activities	$	1,549		$	(1,023	)

Dated: August 13, 2010		FOREX365, INC.

	By:	/s/ Zhang Li
		Zhang Li
		Chief Executive Officer