We extract components t 1 and u 1 from X and Y, respectively. T 1 is the linear combination of X 1. PLSR will be applied on the regression of t 1, t 2,, t m for Y. After a merger/acquisition, firms should integrate and restructure their resources. Second, Chinese pharmaceutical industry is still in the early stage of its lifecycle.

1. Mergers And Acquisitions Process
2. Applied Mergers And Acquisitions Rar Extractor Mac
3. Mergers And Acquisitions Definition
4. Applied Mergers And Acquisitions Cd-rom
5. Applied Mergers And Acquisitions Bruner
6. Mergers And Acquisitions Process

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U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

Artificial intelligence and analytics are transforming M&A. Wrap: Bristol-Meyers, Fortis, GI Partners. Search goes here Opinion How to extract more value from M&A by using artificial intelligence and analytics. Independent and authoritative analysis and perspective for every segment of mergers and acquisitions. >>> MF RBD 184 New Slave Island 9th Chapter Proof Of Friendship Serina Hayakawa And Akina Ishiki S vodafone K3770 Z driver download.rar. Future Loops Total India MULTiFORMAT.rar email extractor v3.6.1. Applied mergers and acquisitions [Extra quality] Fettes Brot - Amnesie (2002).

(MARK ONE)

For the Fiscal Year Ended December 31, 2011

OR

For the Transition Period from _______________ to _________________

Commission file number: 001-34712

KAIBO FOODS COMPANY LIMITED

(Exact name of Registrant as Specified inIts Charter)

Registrant’s telephone number, includingarea code:

(852) 2412-2208

SECURITIES REGISTERED PURSUANT TO SECTION12 (B) OF THE ACT:

COMMON STOCK, PAR VALUE $0.001 PER SHARE

SECURITIES REGISTERED PURSUANT TO SECTION12 (G) OF THE ACT: NONE

Name of each exchange on which registered:The OTC Bulletin Board

Indicateby check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. o Yes x No

Indicateby check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. o Yes x No

Indicateby check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Actof 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. x Yes o No

Indicateby check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every InteractiveData File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§229.405 of this chapter) during thepreceding 12 months (or for such shorter period that the registrant was required to submit and post such files). xYes o No

Indicateby check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405) is not contained herein,and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporatedby reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

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

Indicateby check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). o Yes x No

Theaggregate market value of the shares of common stock, par value $0.001 per share, of the registrant held by non-affiliates onJune 30, 2011 was $4,530,285, which was computed based upon the closing price on that date.

Therewere 24,003,750 shares of common stock of the registrant outstanding as of April 9, 2012.

TABLE OF CONTENTS

Introductory Note

Except as otherwise indicated by the context, references inthis Annual Report on Form 10-K (this “Form 10-K”) to the “Company,” “Kaibo Foods,” “we,”“us” or “our” are references to the combined business of Kaibo Foods Company Limited and its consolidatedsubsidiaries. References to “Waibo” are references to our wholly owned subsidiary, Hong Kong Wai Bo InternationalLimited, a Hong Kong company; references to “Yunnan WeiLi” are to Waibo’s wholly owned subsidiary, Yunnan ZhaoyangWeili Starch Co., Ltd., a PRC wholly foreign owned enterprise; references to “Guizhou WeiLi” are to Waibo’s whollyowned subsidiary, Guizhou Province Weining Weili Starch Co., Ltd., a PRC wholly foreign owned enterprise; references to “GansuWeiBao” are to Waibo’s wholly owned subsidiary, Gansu Weibao Starch Co., Ltd, a PRC wholly foreign owned enterprise;and references to “Yunnan WeiBao” are to Waibo’s wholly owned subsidiary, Yunnan WeiBao Modified Starch Limited,a PRC wholly foreign owned enterprise. References to “China” or “PRC” are references to thePeople’s Republic of China. References to “RMB” are to Renminbi, the legal currency of China, andall references to “$” and dollar are to the U.S. dollar, the legal currency of the United States.

Special Note Regarding Forward-Looking Statements

This report contains forward-looking statements and informationrelating to Kaibo Foods that are based on the beliefs of our management as well as assumptions made by and information currentlyavailable to us. Such statements should not be unduly relied upon. When used in this Form 10-K, forward-lookingstatements include, but are not limited to, the words “anticipate,” “believe,” “estimate,”“expect,” “intend,” “plan” and similar expressions, as well as statements regarding new andexisting products, technologies and opportunities, statements regarding market and industry segment growth and demand and acceptanceof new and existing products, any projections of sales, earnings, revenue, margins or other financial items, any statements ofthe plans, strategies and objectives of management for future operations, any statements regarding future economic conditions orperformance, uncertainties related to conducting business in China, any statements of belief or intention, and any statements orassumptions underlying any of the foregoing. These statements reflect our current view concerning future events andare subject to risks, uncertainties and assumptions. There are important factors that could cause actual results tovary materially from those described in this Form 10-K as anticipated, estimated or expected, including, but not limited to: competitionin the industry in which we operate and the impact of such competition on pricing, revenues and margins, volatility in the securitiesmarket due to the general economic downturn; Securities and Exchange Commission (the “SEC”) regulations which affecttrading in the securities of “penny stocks,” and other risks and uncertainties. Except as required by law,we assume no obligation to update any forward-looking statements publicly, or to update the reasons actual results could differmaterially from those anticipated in any forward- looking statements, even if new information becomes available in the future. Dependingon the market for our stock and other conditional tests, a specific safe harbor under the Private Securities Litigation ReformAct of 1995 may be available. Notwithstanding the above, Section 27A of the Securities Act of 1933, as amended (the“Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)expressly state that the safe harbor for forward-looking statements does not apply to companies that issue penny stock. Becausewe may from time to time be considered to be an issuer of penny stock, the safe harbor for forward-looking statements may not applyto us at certain times.

PART I

Description of Business

We are a leading PRC producer of high quality potato starch,a value added and functional ingredient in many different types of packaged and processed foods. Our corporate headquartersare in Hong Kong and our operational headquarters are in Kunming city, Yunnan province. Our factories are in Yunnan, Guizhou andGansu provinces in China. Our potato starch is sold under the “Wei Bao” and ”Jiabao” brandsand we believe that our products are well known for their consistency, purity, quality and white color.

Potato starch is a functional food additive, offering strongadhesion without chemicals. Potato starch is also a cost effective thickener, which does not interfere with taste. In addition,our premium potato starch is white in color and thus can be added to many foods without affecting product color.Our potato starch is used by makers of noodles, instant noodles, dumplings, fishballs, shrimp balls, meatballs, and many othermainstream Chinese foods.

We believe that we are among the top five makers of premiumnative potato starch in the PRC and that our manufacturing presence in Yunnan, Guizhou and Gansu makes us the single largest producerin these provinces. Our current overall production capacity is 111,500 metric tons per year. Our nativepotato starch has consistently received the government’s highest rating, which affords it a premium price in the PRC marketplace. We sell our products to distributors and food processing companies. In 2011, wesold to more than 50 customers, with only one customer comprising more than 5% of our annual total sales.

China’s modernization has brought about significant changesto its food industry. With increasing urbanization, the use of supermarkets and consumption of prepared and processed foods havegrown rapidly. According to a July 2010 report of the United States Department of Agriculture, the PRC now has over 500,000 manufacturersof frozen and processed foods, with a total annual output of RMB 4.5 trillion in 2009. The potato starch market in the PRCis currently estimated at over 900,000 metric tons (China Potato Starch-Specialized Society 2009).

We benefit from favorable government policies in the PRC. SinceJanuary 1, 2008, we have enjoyed a full income tax exemption that has no expiration date for most of our business due to governmentpolicies aimed at providing extra incentive to rural food businesses involved in the PRC’s primary food supply. In addition,we have a successful track record at working with local governments to increase rural income levels through increased potato production.This is important to our business because obtaining high and steady quantities of premium potato resource is the key challengefacing large scale potato starch production.

We provide farmer education and assistance to enable betteryields and higher starch potatoes, and we were selected in 2009 by the Ministry of Agriculture to establish the National R&DCenter for Potato Processing. We are building new production lines that will expand our business into whole potato starch,which is used in the fast food industry, as well as modified potato starch, which is used in non food industries including paper,textiles, and building materials.

Company Background

Our History and Corporate Structure

Prior to October 21, 2010, we were a “shell company”(as such term is defined in Rule 12b-2 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)). TheCompany was originally incorporated in the State of Nevada on December 10, 2007 to assist companies in their need for CFO’sand CFO related services. As a result of our former sole officer and director, Norman LeBoeuf, only devoting limited timeto our operations, our efforts to establish and develop business operations in our originally intended line of business were unsuccessfuland by the middle of 2010, it became evident to the Board of Directors that it would not be possible to continue with the then-currentbusiness model.

As a result of an introduction by Millennium Group, Inc. inearly October of 2010, the Board of Directors became aware of a company with operations in China manufacturing potato starch thatwas seeking to effect a “reverse merger” with a public company in the United States. After reviewing the potatostarch company’s business plan and U.S. GAAP financial statements, the members of the board authorized Neville Pearson tonegotiate the terms of an Agreement and Plan of Reorganization regarding the acquisition of Waibo (the “Exchange Agreement”),which Exchange Agreement was executed on October 21, 2010. As a result of the attractive terms offered by the founders ofWaibo, our Board of Directors did not obtain a formal appraisal of the business operations of Waibo, but reviewed the audited financialstatements provided by such founders and the other corporate documents relating to the business in reaching the decision to proceedwith the Exchange Agreement.

On October 21, 2010 (the “Closing Date”), CFO Consultants,a U.S. public shell company (now known as the Company) completed a stock exchange transaction (the “Share Exchange”)with the stockholders of Hong Kong Waibo International Limited (“Waibo”), whereby 22,493,475 shares of CFO Consultants’common stock were agreed to be issued to stockholders of Waibo in exchange for 100% of their outstanding capital stock in Waibo,equal to 96% of all of the Company’s outstanding common stock, after giving effect to the conversion of an outstanding convertiblenote of the Company held by Millennium Group, Inc. (“Millennium”), in the principal amount of $25,000. Thenote was convertible into 586,804 shares of the Company’s common stock.

On the Closing Date, CFO Consultants did not have sufficientauthorized shares to complete the issuance of the entire amount of these shares, therefore only 2,361,716 shares were issued tothe designee of the shareholders of Waibo at the Closing Date, and no shares were issued to Millennium. After the ClosingDate, these shares represented approximately 87% of the total issued and outstanding shares of the Company. On March 10, 2011 theCompany increased the total number of authorized shares of common stock. On May 27, 2011 the Company issued the remaining20,131,759 shares of common stock issuable pursuant to the stock exchange transaction to the designee of the former shareholdersof Waibo and issued 586,804 shares of common stock to Millennium in full satisfaction of the convertible note.

On the Closing Date, Waibo became a wholly-owned subsidiaryof the Company. The Share Exchange has been accounted for as a reverse acquisition and recapitalization whereby Waibo is deemedto be the accounting acquirer (legal acquiree) and the Company is deemed to be the accounting acquiree (legal acquirer). Accordingly,Waibo’s historical financial statements for the periods prior to the reverse acquisition became those of the Company retroactivelyrestated for, and giving effect to, the number of shares received in the Share Exchange. The assets and liabilities,and revenues and expenses of the Company are included in the accompanying financial statements effective from the Closing Date. Thetotal net liabilities assumed by Waibo as of the Closing Date were $25,000. The Company is deemed to be a continuationof the business of Waibo.

On March 10, 2011, the Company filed a Certificate of Amendmentto its Articles of Incorporation (the “Amendment”) with the Secretary of State of the State of Nevada for the purposeaffecting a 1 for 16.09 reverse stock split (the “Reverse Stock Split”). In addition to setting forth theterms of the Reverse Stock Split, the Amendment also (i) increased the total number of authorized shares of capital stock of theCompany from 75,000,000 to 600,000,000 shares of common stock; (ii) provided for a class of 2,000,000 shares of blank check preferredstock; (iii) elected for the Company not to be governed by the business combination statute under the Nevada Private CorporationsLaw; and (iv) changed the name of the Company to “Kaibo Foods Company Limited”. All shares and per share amounts forperiods prior to March 10, 2011 in these financial statements have been given effect to the Reverse Stock Split.

As a result of the transactions contemplated by the ExchangeAgreement, Waibo became our wholly owned subsidiary and we are in the business of producing potato starch.

Our current corporate structure is set forth below:

Industry Overview

Starch is a carbohydrate consisting of a large number of glucoseunits joined together by glycosidic bonds. This polysaccharide is produced by all green plants as an energy store. It is the mostimportant carbohydrate in the human diet and is contained in such staple foods as potatoes, wheat, maize (corn) and rice. Potatostarch is starch extracted from potatoes and is a very refined starch, containing minimal amount of protein or fat. Native potatostarch is a white powder with a neutral taste and high adhesive properties. This functional additive is widely used in many typesof Chinese processed foods including instant noodles, dumplings, sauces, meatballs and sausages.

Market Overview

The potato starch industry in China is relatively young. Accordingto an August 2010 report of the United States Department of Agriculture, approximately 90% of the potato starch factories categorizedin China are characterized as small. We believe that Waibo, with 111,500 metric tons of annual capacity, already ranksamong the top 5 producers in the PRC. We believe that premium potato starch usage will grow in step with the overallgrowth in processed and prepared foods. In addition, we expect that premium potato starch will increasingly be usedas a value added substitute for corn starch as well as chemical thickeners and stabilizers. We believe that allnatural additives like premium potato starch will be more sought after by food makers that are increasingly concerned about theuse of chemical stabilizers and additives and by consumers who prefer more nutritious ingredients.

Increased Urbanization and Consumer Purchasing Power

Over the last thirty years, China has experienced rapid urbanizationdue to the increasingly limited capacity of rural areas to provide adequate economic support for a large agrarian population, theincreasing disparity in disposable incomes between rural and urban dwellers and the easing of restrictions, which historicallylimited rural to urban migration from rural areas to towns and cities. According to the Annual Report on Urban Development of Chinain 2009, the population of Chinese cities by the end of 2009 exceeded 621 million people, representing an increase of 410 millionsince 1982. It is further estimated that China’s urban population will expand to 926 million by 2025 and hit theone billion mark by 2030.

Per capita incomes in urban centers have risen greatly in recentlydecades, from RMB 1,516 in 1990 to RMB 16,180 in 2008. As of 2008, there were over 34,000 (The National Bureau of Statisticsof China Yearbook 2009) supermarkets in the PRC. By comparison, the US has over 35,000 supermarkets (U.S. Census Bureau,Food Marketing Institute 2009).

Increased demand for prepared and processed foods

Consumption of prepared and processed foods in the PRC has grownin step with the country’s urbanization trend. As people’s lives become busier, the traditional custom ofmaking daily purchases of fresh raw produce from small farmers’ markets has increasingly given way to less frequent visitsto supermarkets to buy prepared, packaged and processed foods. According to a July 2010 report of the United States Departmentof Agriculture, the prepared and processed food industry in China reached RMB 4.5 trillion (2009), representing a 20% increasefrom 2008. The industry remains highly fragmented with many thousands of different food makers and tens of thousandsof products. The instant noodle market towers over most with demand reaching RMB 59 billion in 2009 (Noodles in China, Euromonitor,2009).

Advantage Over Corn Starch

Corn starch is also used as a thickening agent, stabilizer,and emulsifier. Corn starch is approximately half the cost of potato starch and currently in greater supply in the PRC.According to a May 2009 report of the United States Department of Agriculture, there are over 160 corn-processing companies inChina, with annual processing capacity estimated at 63.93 million metric tons. However, as food producers become moreconcerned about food-safety, potato starch is increasingly viewed as a superior alternative. Corn starch also has alower melting point than potato starch and it can affect product color. It must therefore receive significant bleaching and modificationto match the whiteness and temperature attributes of potato starch.

Raw Material Sourcing

Many potato starch manufacturers are beset with inconsistentpotato supply channels. They typically find that potatoes cannot be bought in sufficient quantities from major farms or farmers’markets to run a large potato starch production factory. Moreover, potato strains have been adapted to various soil and climateconditions over centuries of cultivation. These differences will produce varying degrees of starch content and whiteness.

The high fragmentation and disparities in product quality placea premium on locating potato starch factories in the high end regions around a concentration of small growers and soliciting activelocal government support.

Additional Potato Starch Varieties and Usages

Modified potato starch, which is similar to native potato starchin appearance, is composed mainly of native potato starch and other starch varieties. It is primarily used in many non-foodindustries, the largest which is the paper industry. A typical sheet of copy paper may have as much as 8% starch content(North Carolina State University report). Modified potato starch is also used for corrugated board adhesives as well as glue productsused in a wide variety of applications including bookbinding, wall paper, paper sacks and other forms of paper bonding. Potatostarch is also used in the construction products industry for gypsum board. Furthermore, modified potato starch is applied forbiotechnical raw material, fabrics and textiles, pharmaceuticals and cosmetics and detergents.

Whole potato starch is the dehydrated part of fresh potatoes,except the potato skins. It is typically used in products such as French fries and processed mashed potatoes. It is used to addboth texture and flavor to processed foods. Approximately 90% of our native potato starch is used by the food industry,while the rest is used in a variety of different food related industries.

Competitive Strengths

We believe we have the following competitive advantages:

Factories Built in Top Potato Producing Regions

We have located our factories in regions of China with moderatetemperatures and long growing seasons, where potatoes can be grown to large sizes with smooth skins that are less contaminatedwith impregnated soil and gravel. In addition, we build our factories in rural regions where potato farming can bringimportant added benefit to low-income rural populations. Many of our competitors are state-owned and have positionedtheir production facilities primarily to serve local growers without much consideration to starch content or product quality.

Strong Brand Equity known for High Quality Product

Our “Wei Bao” and “Jiabao” brands arestrongly associated with our commitment to quality, which has been supported over the years with numerous awards and certifications. TheGeneral Administration of Quality Supervision, Inspection and Quarantine of the PRC issues grades for the quality of potato starch:passed, first grade and excellent. Approximately 99% of our products received the “excellent” rating andapproximately 1% the “first grade” rating.

Our production facilities have implemented stringent qualitycontrol procedures, from the procurement of raw materials to the delivery of our finished products. This includes active supervisionand training assistance provided to our local farm suppliers.

Positioned in High Growth Industry Segment

In 2009, the food processing industry recorded a record highoutput of $662 billion (July 2010 report of the United States Department of Agriculture). We believe there are significant opportunitiesto increase sales of premium potato starch for processed foods, given its many benefits versus traditional food additives. Participantsin many non-food industries are now actively using or exploring the use of potato starch. These include paper, bio-plastic, biotechnicalraw materials, fabrics and textiles, pharmaceuticals and cosmetics and detergents.

Potato Starch Industry is the Beneficiary of Strong GovernmentSupport

Two main policy goals are to better assist rural low-incomepopulations while developing and improving the country’s massive food needs. Our production facilities in Yunnan,Gansu and Guizhou provinces are beneficiaries of these initiatives. For example, in 2007 China implemented a 5-year anti-dumpingtax on EU imports of potato starch of 17%, 18% or 35% depending on the original manufacturer (PRC Ministry of Commerce). The Ministryof Finance and State Administration of Taxation has also implemented beneficial tax policies to spur development of both agricultureand the downstream food-processing industry. We have successfully obtained a full exemption on Enterprise Income Tax (“EIT”)since 2008.

Business Strategies

We plan to increase our market presence and build on our corecompetitive strengths by implementing the following strategies:

Increase Production Capacity in Existing and New Locations

We plan to increase our production capacity by building facilitiesin strategic locations as well as pursuing mergers and acquisitions for growth. We are currently building a modified starch factorywith an annual production capacity of 20,000 metric tons in Zhaotong City, Yunnan province and expect this to be completed by June2012.

Our current expansion strategy is to build 4 new productionfacilities in the next 3 years, with an aggregate capacity of 118,000 metric tons of a variety of potato starch products. Weplan to build native potato starch factories in Guizhou and Yunnan provinces. The Guizhou facility is expected to haveproduction capacity of 30,000 metric tons and we expect it to be operational by September 2012. The 2Yunnan facilities will have total production capacity of 73,000 metric tons and areexpected to be operational by September 2012 and May 2014, respectively.

We plan to build a whole potato starch facility in Guizhou,with a production capacity of approximately 15,000 metric tons, which we expect to be operational by May 2014. We evaluate facilitylocations based on land fertility, water availability and railway proximity. We also aim to identify those areas withadequate farm acreage that are amenable to our quality standards.

We expect that the total capital expenditures for the expansionplans referred to above in the next three years is approximately $118 million, which we expect to be financed by net proceeds receivedfrom future equity offerings and from cash generated from continuing operating activities.

We also believe there are opportunities to acquire existingstate-owned potato-starch production facilities by leveraging our reputation for operating successful facilities and producinga premium product.

Penetrate New Markets with Expanded Product Offerings

We currently produce native potato starch and plan to beginproduction of modified potato starch by June 2012. Modified potato starch is used in various industries such as food processing,paper manufacturing, medical supplies, industrial chemicals and wood and furniture production. Modified starch tends to have higherprofit margins and wider usages than native potato starch.

We also plan to produce whole potato starch, which is primarilyused for food processing. Whole potato starch is the dehydrated part of fresh potatoes, except the potato skins. Popular productssuch as French fries are typically made using whole potato starch. It is used to add both texture and flavor to processed foods.

Maintain and Expand Our Customer Base

We plan to continue to build on our current customer relationshipsas well as enter new markets. We believe our diverse and wide customer base provides us beneficial word of mouth exposure, in additionto stabilizing product demand. Our customer base also gives us built in product demand as we increase our production capabilities. Weintend to continue to increase our customer base to allow us to gain increased market presence in new and emerging markets in China.

R&D Efforts

In 2009, we were chosen by The Ministry of Agriculture to bethe National R&D Center for Potato Processing . This cooperation with the government promotes open exchangeof cultivation techniques and production technologies. Currently, the government provides minimal financial support for this award. However,we believe that our cooperation with the government gives us early access to the government’s most recent R&D achievementsin our industry. We also anticipate the government will increase funding with the increasing significance of processedpotato products in the PRC. We believe that it is important to have excellent R&D capabilities and have plans to build a newR&D center in Kunming in 2015. We believe this facility can serve as a center for innovation and new ideas that promotes usas a market leader.

Brands and Products

Product brand

We market our products using the “Wei Bao” and “Jiabao”brand names. Our Wei Bao brand is used primarily in the food processing industry while our Jiabao brand is used in therestaurant industry. The two separate brands allow us to better focus on two segments’ different purchasing criteria. Wefocus on building brand names known for high quality. In 2006, we registered our trademark for the Wei Bao brand nameand in 2010 we registered our trademark for the Jiabao brand name. These trademarks are effective for 10 years and aretypically renewable.

In 2011, approximately 98% of our revenue came from productssold under Wei Bao brand name and the ““ logo.

The Jiaobao brand is represented by the “ “logo and accounted for approximately 2% of our revenue in 2011.

Products

We produce native potato starch, which is primarily used inthe food processing industry. Native potato starch is known for its thickening, adhesive and emulsifying properties, used in manyprocessed foods including include ham, sausage, frozen foods, meatballs, prawn balls, starch strips, instant noodles, jelly, biscuits,cake, ice cream, yogurt, canned foods and candy. It is manufactured as white colored powder and has a shelf life of up to two years.

We plan to expand our product offerings to include modifiedstarch and whole potato starch. We are currently building a production facility for modified starch factory in Zhaotongcity, Yunnan province with a production capacity of approximately 20,000 tons. We anticipate this factory to be completed by June2012. We anticipate our modified starch will be suitable for food processing, paper manufacturing, medical suppliesand industrial chemicals. We also plan to produce whole potato starch. This type of starch typically usedfor food processing and adds flavor and the body for the processed food it is used for.

Research and Development

Our research and development center wasestablished in 2003 in Yunnan province. In 2009, we were chosen by The Ministry of Agriculture to be the National R&D Centerfor Potato Processing. We collaborate with the government on developing new species of potatoes, increasing the crop yield of potatoes,raising starch content and developing potatoes resistant to diseases and pests. We receive minimum funding from thegovernment as result of being selected for this position. However, we believe this cooperation gives us early accessto recent governmental R&D developments, allowing us early implementation of the most current agricultural techniquesand potato varieties.

We also have informal cooperation with the Agricultural TechnologyUniversity and the Research Institute of Agriculture both of which are located in Kunming city. We plan to build a newresearch and development center in Kunming by 2015. The focus of this center will be on developing different types ofmodified starch. We incurred insignificant expenses on R&D during the 2011, 2010 and 2009 fiscal years.

Production Process

We manufacture potato starch at four different production facilities in China. In 2011, we produced 24,551, 23,392 and 50,450 metric tons of starch at our production faculties located in Yunnan (1 facility), Guizhou (1 facility) and Gansu (2 facilities), respectively. Our total annual production capacity as of December 31, 2011 was 111,500 metric tons of native potato starch. However, the lease of one of our facilities in Gansu was terminated after December 31, 2011 and our production capacity reduced to 91,500 metric tons of native potato starch. By June 2012, we anticipate completion of an additional facility in Zhaotong City, Yunnan Province, capable of annually producing 20,000 metric tons of modified potato starch.

Native Potato Starch Processing

Our purchasing department buys potatoes from farmers locatednear our production facilities. We establish potato quality requirements at the outset and closely examine them forweight and texture. We have designated potato storage areas with man-made water channels in the center. High-pressure water gunspush our potatoes into the water channels, which transports the naturally buoyant potatoes into our production facilities whilebeginning the cleansing process.

The potatoes enter our production facility and first undergocleaning. They enter our tumbling machine which uses high-pressure water to remove dirt and any other unwanted particles. Theclean potatoes are then transferred to a temporary storage container before the grinding process.

The grinding machines turn the potatoes into a pulp-like sludge,which results in dissolution of the potato cells and the release of the potato starch content. We separate the potatodreg, which is procured from the potato sludge using an extrication filter. The result is a thick, milky potato paste.

The potato paste is transferred into a high-speed centrifugalsieve to remove the potato fiber. The paste passes through a series of filters to remove tiny sand particles and water. Theend result of this process is unfiltered starch. This starch is then run through an 18-layer filter device to furtherremove impurities and then placed into a refining container. The concentration of the potato starch is measured during this process.

Thestarch is then taken from the refining container and run through a vacuum hydro-extractor to reduce the water content to 40%. Thestarch then undergoes hot air drying and sterilization at temperatures of 140 °C and gradually cooled to approximately 45-50 °C. This process reduces the water content to 18-20%. We send this air-dried potato starch to cyclonic silosto separate the air from the starch. The potato starch powder is then sent to a vibrating sifter to produce a more refinedand consistent product - high quality, pure white starch powder. We then package and store the finished potato starch product fordelivery.

Production process chart

The following diagram illustrates the production process forpotato starch.

Procurement

The primary raw material is potatoes, which we procure frommore than 100,000 mostly small-sized local farms. We typically go to nearby villages and come to an oral agreement with the leadingpotato farmer in that region. This particular farmer acts as our main supplier and will coordinate with the other potato farmersin his village and collect their potatoes. We currently have a total of 270 such main suppliers.

Our production facility in Yunnan province has arrangementswith 98 suppliers for a total of 154,000 tons of potatoes. Our production facility in Guizhou has arrangements with83 suppliers, for approximately 155,000 tons of potatoes and our production facilities in Gansu have arrangements with 89 suppliersfor approximately 266,000 tons of potatoes.

We have strict selection criteria for our raw material suppliers. Firstand foremost, they need to be located in ideal potato cultivating areas with high crop yields and long harvest seasons. Generally,the local government will help the farmers select the ideal potato types for regional production.

Typically, potatoes have one growing season that starts in March. Thepotatoes are harvested from July to December. We also set the quality requirements for our potatoes such as the starch content.

Potato farmers are highly fragmented with limited productioncapabilities. We typically rely on current market trends and historical prices during supplier negotiations. Pricesare generally stable from year to year. We do not sign a formal contract with our suppliers. We negotiateprices yearly and pay cash on delivery.

Inventory Control and Management

We typically maintain raw material inventory equal to 3-5 daysof production to maintain freshness. Towards the end of harvesting season, we can preserve the potatoes by storing them in cellars,extending their usability for several months.

The raw materials are weighed upon delivery to confirm the orderedamount before settling with cash. Because we are currently producing at near full capacity, we tend to make daily orders of constantquantities. Our finished goods warehouses hold approximately 200-300 metric tons of products, which are weighed before storage.We typically ship our finished goods within 1-3 days.

Quality Control

We have received all necessary governmental licenses and permitsfor potato processing, which include the Food Hygiene License, National Industrial Product Manufacture License and an “excellent”rating from the General Administration of Quality Supervision, Inspection and Quarantine. We have also obtained ISO9001:2000 Quality Management System certification, ISO 22000:2005 Food Safety Management System certification, and Hazard Analysisand Critical Control Points certification (HACCP).

Raw materials quality control

We set potato quality standards with our suppliers before ordering,foremost of which is a minimum 15% starch content. Most potato species can only be cultivated for approximately 3 years beforetheir starch content lowers to unacceptable levels. However, we know of more than 100 different suitable species thatour nearby potato farmers could use, thus ensuring a constant supply. The local government agricultural bureau alsoworks with the farmers to help pick the species of potatoes consistent with our product quality specifications.

During the cultivation process, we send quality assurance teamsto selected farms in our potato producing regions to perform a visual inspection on site and test a random sample of potatoes forstarch content. Only if the potatoes meet our requirements will we accept delivery. Additional visual examinationsand tests for starch content are performed upon delivery.

Production process quality control

We pay particular attention to four key steps in the productionprocess that will largely determine the quality of the finished product: grinding, centrifugal sieving, 18-layer filtering andhot air drying.

Finished products quality control

We perform a visual inspection, a smell test and laboratorytesting on our finished goods. The General Administration of Quality Supervision, Inspection and Quarantine of the PRCperforms a national standard test on our finished goods, which entails examinations of the chemical and physical properties everysix months. Our quality assurance staff ensures that our potato starch meets the national standard every ten minutesduring the production process. The finished goods also undergo semi-annual testing by the Measure for Quality Supervision and Administrationof Food. This department is entrusted with upholding the national food safety standards and grants us the right to usea “Quality Safety Label” (QS label) on our products.

Sales and Customer Relations

Each of our sales offices in Kunming, Yunnan province has twosales staff. This is sufficient for present capacity levels to maintain customer relationships and process customerorders and will be expanded as required.

We have approximately 67 customers in industries such as foodprocessing, food distribution and retail food sales. We select our customers based on creditworthiness, market share in respectiveindustry, growth potential and product demand. We have grown a diversified customer base with evenly distributed salespatterns to reduce concentration risk and provide leverage during pricing negotiations.

Our customers are located in 12 provinces and four municipalitiesin China. We have a strong market share in Guangdong, Fujian and Shandong provinces.

The following map illustrates the geographical coverage of oursales and distribution network in the PRC:

Our customers use our potato starch in hundreds of differentprocessed foods, including ham, sausage, frozen foods, meatballs, prawn balls, starch strips, instant noodles, jelly, biscuits,cake, ice cream, yogurt, canned foods, and candy.

Our customers sign bi-annual sales contracts for fixed productvolumes. We deliver our products to our customers on a regular basis as defined by the sales contracts. Wetypically accumulate orders of shipment amounts up to shipment amounts of 60 tons, the capacity of a single rail car, for economicaldelivery. We typically only pay for transferring our goods to a railway station located near our facilities. We extendcredit terms of up to 90 days from delivery for our top customers.

Seasonality

We typically stop our production process from May through Julyfor our Yunnan and Guizhou production facilities. The potato-planting season typically begins in March and the potatoes are deliveredto our facilities from August until the end of December. The harvested potatoes can typically be stored up to 4 months in cellarsallowing us to expand our production period to April.

Our factories in Gansu are in a colder region in China and typicallyhalt production from January to February. During these months, we store potatoes for production from March through May. OurGansu factory will then close for production from June to July and resume production in August. During the off-season,we spend time performing routine production line maintenance.

Pricing

We price our products based on market trends, raw material costsand competitors’ prices. Our raw materials constitute approximately 80% of production costs. The prices of potatoes haveincreased by 66% over the past 5 years. Whereas, the market price for potato starch has increased by 47% over the past 5 years. Thefollowing table shows our price trends for potatoes and potato starch for the past five years.

Competition

The potato starch market is highly fragmented, with more than50 medium-sized enterprises and more than 1,000 small-sized enterprises. According to the CPSSS, in 2007, there were11 enterprises with an annual capacity of 10,000 - 28,200 metric tons, 20 enterprises with an annual capacity of 2,000-8,000 metrictons, and 10 enterprises with an annual capacity of 300 - 1,800 metric tons.

We believe we are one of the top 5 potato starch producers inthe PRC. Our main competitors include the following:

Employees

Our production staff operates the production lines 24 hoursa day in three eight-hour shifts, 6 days a week. All of our staff are full-time employees. The chart belowdescribes the number of employees per department as of December 31, 2011.

We have made employee retirement fund contributions. We believewe are in material compliance with all applicable labor and safety laws and regulations in the PRC, including the PRC Labor ContractLaw, the PRC Production Safety Law, the PRC Regulation for Insurance for Labor Injury, the PRC Unemployment Insurance Law, thePRC Provisional Insurance Measures for Maternity of Employees, PRC Interim Provisions on Registration of Social Insurance, thePRC Interim Regulation on the Collection and Payment of Social Insurance Premiums and other related regulations, as well as rulesand provisions issued by the relevant governmental authorities from time to time.

According to the PRC Labor Contract Law, we are required toenter into labor contracts with our employees. We are required to pay no less than local minimum wages to our employees. We arealso required to provide employees with labor safety and sanitation conditions meeting PRC government laws and regulations andcarry out regular health examinations of our employees engaged in hazardous occupations.

Intellectual Property Rights

We registered the “Wei Bao” and “Jiabao”brand trademarks on August 14, 2006 and January 21, 2010 respectively. These trademarks are effective and renewable after 10 years.We have a registered PRC design patent for package bags under the patent number ZL 200930129068.x with a valid term of ten yearscommencing from September 29, 2009.

Insurance

We believe that we maintain insurance in line with industrystandards. Our insurance covers 100% of the net book value of our property, plant and equipment and inventories.

Legal Proceedings

We are not engaged in any material litigation, arbitration orclaim, and no material litigation, arbitration or claim is known by our management to be pending or threatened by or against usthat would have a material adverse effect on our results from operations or financial condition.

PRC Government Regulations

Our operations are subject to numerous laws, regulations, rules and specifications of the PRC relating to various aspects. We are in compliance in all material respects with such laws,regulations, rules, specifications and have obtained all material permits, approvals and registrations relating to human healthand safety, the environment, taxation, foreign exchange administration, financial and auditing, and labor and employments. We makecapital expenditures from time to time to stay in compliance with applicable laws and regulations. Below we set forth a summaryof the most significant PRC regulations or requirements that may affect our business activities operated in the PRC or our shareholders’right to receive dividends and other distributions of profits from our PRC subsidiaries.

Business license

Any company that conducts business in the PRC must have a businesslicense that covers a particular type of work. The business license of each of our PRC subsidiaries covers its present businessof production and deep processing of potato starch. Prior to expanding any of our PRC subsidiaries’ business beyond thatof its business license, we are required to apply and receive approval from the PRC government.

Annual Inspection

In accordance with relevant PRC laws, all types of enterprisesincorporated under the PRC laws are required to conduct annual inspections with the State Administration for Industry and Commerceof the PRC or its local branches. In addition, foreign-invested enterprises are also subject to annual inspectionsconducted by PRC government authorities. In order to reduce enterprises’ burden of submitting inspection documentation todifferent government authorities, the Measures on Implementing Joint Annual Inspection issued by the PRC Ministry of Commercetogether with other six ministries in 1998 stipulated that foreign-invested enterprises shall participate in a joint annual inspectionjointly conducted by all relevant PRC government authorities. Our PRC subsidiaries, as foreign-invested enterprises, have participatedand passed all such annual inspections since their establishment.

Employment laws

We are subject to laws and regulations governing our relationshipwith our employees, including: wage and hour requirements, working and safety conditions, citizenship requirements, work permitsand travel restrictions. These include local labor laws and regulations, which may require substantial resources forcompliance.

China’s National Labor Law , which became effectiveon January 1, 1995, and China’s National Labor Contract Law , which became effective on January 1, 2008, permit workersin both state and private enterprises in China to bargain collectively. The National Labor Law and the National LaborContract Law provide for collective contracts to be developed through collaboration between the labor union (or worker representativesin the absence of a union) and management that specify such matters as working conditions, wage scales, and hours of work. Thelaws also permit workers and employers in all types of enterprises to sign individual contracts, which are to be drawn up in accordancewith the collective contract.

Foreign Investment in PRC Operating Companies

The Catalogue for the Guidance of Foreign Investment Industriesjointly issued by the Ministry of Commerce, or the MOFCOM, and the National Development and Reform Commission, or the NDRC, in2007 classified various industries/businesses into three different categories: (i) encouraged for foreign investment; (ii) restrictedto foreign investment; and (iii) prohibited from foreign investment. For any industry/business not covered by any of these threecategories, they will be deemed industries/businesses permitted to have foreign investment. Except for those expressly providedrestrictions, encouraged and permitted industries/businesses are usually 100% open to foreign investment and ownership. With regardto those industries/businesses restricted to or prohibited from foreign investment, there is always a limitation on foreign investmentand ownership. Our PRC subsidiaries’ business does not fall under the industry categories that are restricted to, or prohibitedfrom foreign investment and is not subject to limitation on foreign investment and ownership.

Regulation of Foreign Currency Exchange

Foreign currency exchange in the PRC is governed by a seriesof regulations, including the Foreign Currency Administrative Rules (1996), as amended, and the Administrative RegulationsRegarding Settlement, Sale and Payment of Foreign Exchange (1996), as amended. Under these regulations, the Renminbi is freelyconvertible for trade and service-related foreign exchange transactions, but not for direct investment, loans or investments insecurities outside the PRC without the prior approval of the State Administration of Foreign Exchange, or SAFE. Pursuant to theAdministrative Regulations Regarding Settlement, Sale and Payment of Foreign Exchange (1996), Foreign Invested Enterprises,or FIEs, may purchase foreign exchange without the approval of the SAFE for trade and service-related foreign exchange transactionsby providing commercial documents evidencing these transactions. They may also retain foreign exchange, subject to a cap approvedby SAFE, to satisfy foreign exchange liabilities or to pay dividends. However, the relevant Chinese government authorities maylimit or eliminate the ability of FIEs to purchase and retain foreign currencies in the future. In addition, foreign exchange transactionsfor direct investment, loan and investment in securities outside the PRC are still subject to limitations and require approvalsfrom the SAFE.

Regulation of FIEs’ Dividend Distribution

The principal laws and regulations in the PRC governing distributionof dividends by FIEs include:

Under these regulations, FIEs in the PRC may pay dividends onlyout of their accumulated profits, if any, determined in accordance with Chinese accounting standards and regulations. In addition,foreign-invested enterprises in the PRC are required to set aside at least 10% of their respective accumulated profits each year,if any, to fund certain reserve funds unless such reserve funds have reached 50% of their respective registered capital. Thesereserves are not distributable as cash dividends. The board of directors of a FIE has the discretion to allocate a portion of itsafter-tax profits to staff welfare and bonus funds, which may not be distributed to equity owners except in the event of liquidation.

Regulation of a Foreign Currency’s Conversion intoRMB and Investment by FIEs

On August 29, 2008, the SAFE issued a Notice of the GeneralAffairs Department of the State Administration of Foreign Exchange on the Relevant Operating Issues concerning the Improvementof the Administration of Payment and Settlement of Foreign Currency Capital of Foreign-Invested Enterprises or Notice 142, to furtherregulate the foreign exchange of FIEs. According to the Notice 142, FIEs shall obtain a verification report from a local accountingfirm before converting its registered capital of foreign currency into Renminbi, and the converted Renminbi shall be used for thebusiness within its permitted business scope. The Notice 142 explicitly prohibits FIEs from using RMB converted from foreign capitalto make equity investments in the PRC, unless the domestic equity investment is within the approved business scope of the FIE andhas been approved by SAFE in advance.

Regulation of Foreign Exchange in Certain Onshore and OffshoreTransactions

In October 2005, the SAFE issued the Notice on Issues Relatingto the Administration of Foreign Exchange in Fund-raising and Return Investment Activities of Domestic Residents Conducted viaOffshore Special Purpose Companies, or SAFE Notice 75, which became effective as of November 1, 2005, and was further supplementedby two implementation notices issued by the SAFE on November 24, 2005 and May 29, 2007, respectively. SAFE Notice 75 states thatPRC residents, whether natural or legal persons, must register with the relevant local SAFE branch prior to establishing or takingcontrol of an offshore entity established for the purpose of overseas equity financing involving onshore assets or equity interestsheld by them. The term “PRC legal person residents” as used in SAFE Notice 75 refers to those entities with legal personstatus or other economic organizations established within the territory of the PRC. The term “PRC natural person residents”as used in SAFE Notice 75 includes all PRC citizens and all other natural persons, including foreigners, who habitually residein the PRC for economic benefit. The SAFE implementation notice of November 24, 2005 further clarifies that the term “PRCnatural person residents” as used under SAFE Notice 75 refers to those “PRC natural person residents” definedunder the relevant PRC tax laws and those natural persons who hold any interests in domestic entities that are classified as “domestic-funding”interests.

PRC residents are required to complete amended registrations with the local SAFE branch upon: (i) injectionof equity interests or assets of an onshore enterprise to the offshore entity, or (ii) subsequent overseas equity financing bysuch offshore entity. PRC residents are also required to complete amended registrations or filing with the local SAFE branch within30 days of any material change in the shareholding or capital of the offshore entity, such as changes in share capital, sharetransfers and long-term equity or debt investments or, providing security, and these changes do not relate to return investmentactivities. PRC residents who have already organized or gained control of offshore entities that have made onshore investmentsin the PRC before SAFE Notice 75 was promulgated must register their shareholdings in the offshore entities with the local SAFEbranch on or before March 31, 2006.

Under SAFE Notice 75, PRC residents are further required torepatriate into the PRC all of their dividends, profits or capital gains obtained from their shareholdings in the offshore entitywithin 180 days of their receipt of such dividends, profits or capital gains. The registration and filing procedures under SAFENotice 75 are prerequisites for other approval and registration procedures necessary for capital inflow from the offshore entity,such as inbound investments or shareholders loans, or capital outflow to the offshore entity, such as the payment of profits ordividends, liquidating distributions, equity sale proceeds, or the return of funds upon a capital reduction.

Government Regulations Relating to Taxation

On March 16, 2007, the National People’s Congress or theNPC, approved and promulgated the PRC Enterprise Income Tax Law , which we refer to as the New EIT Law. The New EIT Lawtook effect on January 1, 2008. Under the New EIT Law, FIEs and domestic companies are subject to a uniform tax rate of 25%. TheNew EIT Law provides a five-year transition period starting from its effective date for those enterprises which were establishedbefore the promulgation date of the New EIT Law and which were entitled to a preferential lower tax rate under the then-effectivetax laws or regulations.

On December 26, 2007, the State Council issued a Notice onImplementing Transitional Measures for Enterprise Income Tax , or the Notice, providing that the enterprises that have beenapproved to enjoy a low tax rate prior to the promulgation of the New EIT Law will be eligible for a five-year transition periodsince January 1, 2008, during which time the tax rate will be increased step by step to the 25% unified tax rate set out in theNew EIT Law. From January 1, 2008, for the enterprises whose applicable tax rate was 15% before the promulgation of the New EITLaw , the tax rate will be increased to 18% for year 2008, 20% for year 2009, 22% for year 2010, 24% for year 2011, 25% for year2012. For the enterprises whose applicable tax rate was 24%, the tax rate will be changed to 25% from January 1, 2008.

The New EIT Law provides that an income tax rate of 20% maybe applicable to dividends payable to non-PRC investors that are “non-resident enterprises”. Non-resident enterprisesrefer to enterprises which do not have an establishment or place of business in the PRC, or which have such establishment or placeof business in the PRC but the relevant income is not effectively connected with the establishment or place of business, to theextent such dividends are derived from sources within the PRC. The income tax for non-resident enterprises shall be subject towithholding at the income source, with the payor acting as the obligatory withholder under the New EIT Law, and therefore suchincome taxes generally called withholding tax in practice. The State Council of the PRC has reduced the withholding tax rate from20% to 10% through the Implementation Rules of the New EIT Law. It is currently unclear in what circumstances a source will beconsidered as located within the PRC. We are a U.S. holding company and substantially all of our income is derived from dividendswe receive from our subsidiaries located in the PRC. Thus, if we are considered as a “non-resident enterprise” underthe New EIT Law and the dividends paid to us by our subsidiary in the PRC are considered income sourced within the PRC, such dividendsmay be subject to a 10% withholding tax.

Such income tax may be exempted or reduced by the State Councilof the PRC or pursuant to a tax treaty between the PRC and the jurisdictions in which our non-PRC shareholders reside. For example,the 10% withholding tax is reduced to 5% pursuant to the Double Tax Avoidance Agreement Between Hong Kong and Mainland Chinaif the beneficial owner in Hong Kong owns more than 25% of the registered capital in a company in the PRC.

The new tax law provides only a framework of the enterprisetax provisions, leaving many details on the definitions of numerous terms as well as the interpretation and specific applicationsof various provisions unclear and unspecified. Any increase in the combined company’s tax rate in the future could have amaterial adverse effect on its financial conditions and results of operations.

In addition, according to the circular entitled Scope of PreliminaryProcessing of Agricultural Products Entitled to Preferential Enterprise Income Tax Policies (Trial Implementation) published byMinistry of Finance (“MOF”) and State Administrative of Taxation (“SAT”), our PRC subsidiaries are entitledto full exemption from the PRC corporate income tax beginning January 1, 2008. The exemption currently is not subjectto any limitations.

Regulations of Overseas Investments and Listings

On August 8, 2006, six PRC regulatory agencies, including theMOFCOM, the China Securities Regulatory Commission or the CSRC, the State Asset Supervision and Administration Commission or theSASAC, the State Administration of Taxation, or the SAT, the State Administration for Industry and Commerce or the SAIC and SAFE,amended and released the New M&A Rule, which took effect as of September 8, 2006. This regulation, among other things, includesprovisions that purport to require that an offshore special purpose vehicle (SPV) formed for purposes of overseas listing of equityinterest in PRC companies and controlled directly or indirectly by PRC companies or individuals obtain the approval of the CSRCprior to the listing and trading of such SPV’s securities on an overseas stock exchange.

On September 21, 2006, the CSRC published on its official websiteprocedures regarding its approval of overseas listings by SPVs. The CSRC approval procedures require the filing of a number ofdocuments with the CSRC. The application of the New M&A Rule with respect to overseas listings of SPVs remains unclear withno consensus currently existing among the leading PRC law firms regarding the scope of the applicability of the CSRC approval requirement.

Environmental Protection

Our manufacturing operations are subject to PRC environmentallaws and regulations on air emission, solid waste emission, sewage and waste water, discharge of waste and pollutants, and noisepollution. These laws and regulations include Law of the PRC on Environmental Protection, Law of the PRC on the Prevention andControl of Water Pollution, Law of the PRC on the Prevention and Control of Atmospheric Pollution, Law of the PRC on the Preventionand Control of Pollution from Environmental Noise and Law of the PRC on the Prevention and Control of Environmental Pollution ofSolid Waste. We are also subject to periodic monitoring by relevant local government environmental protection authorities.

According to these environmental laws and regulations, all businessoperations that may cause environmental pollution and other public hazards are required to incorporate environmental protectionmeasures into their operations and establish a reliable system for environmental protection. Such a system must adopt effectivemeasures to prevent and control pollution levels and harm caused to the environment in the form of waste gas, waste water and solidwaste, dust, malodorous gas, radioactive substance, noise, vibration and electromagnetic radiation generated in the course of production,construction or other activities. Companies in the PRC are also required to carry out an environment impact assessment before commencingconstruction of production facilities and the installation of pollution treatment facilities that meet the relevant environmentalstandards and treat pollutants before discharge. We carried out the required environment impact assessment before commencing constructionof our production facilities and have obtained all the required permits and environmental approvals for our production facilities.

The main environmental impact from our operations is the generationof wastewater and noise pollution from the operation of production machinery. In order to comply with the relevant environmentalprotection laws and regulations, we have implemented an environmental protection system to ensure the emissions from productionoperations meet the pollution indicators. In addition, our production plant is located in an open area, away from residential areasand equipped with an appropriate convection and ventilation system. In order to reduce the impact on the environment, we have enhancedthe convection and ventilation system at our production facilities to improve air quality and adopted various measures to preventand minimize the noise pollution from our production operations.

Health and Safety Matters

The PRC Production Safety Law (the “Production SafetyLaw”) requires that we maintain safe working conditions under the Production Safety Law and other relevant laws, administrativeregulations, national standards and industrial standards. We are required to offer education and training programs to our employeesregarding production safety. The design, manufacture, installation, use and maintenance of our safety equipment are required toconform to applicable national and industrial standards. In addition, we are required to provide employees with safety and protectiveequipment that meet national and industrial standards and to supervise and educate them to wear or use such equipment accordingto the prescribed rules.

We consider the safety of our employees to be a priority. Wehave implemented internal health and safety policies in the work place, available through our handbook on production safety andsecurity procedures, which incorporate safety laws and regulations in the PRC. We have implemented safety guidelines on productionprocedures for the safe operation of production equipment and machinery during each stage of the production process. We requireour employees to attend occupational safety education training courses on our safety policies and procedures to enhance their awarenessof safety issues. We provide and require our employees to wear suitable protective devices to ensure their safety. We also provideemployees with free annual medical check-ups.

As required under the Regulation of Insurance for Labor Injury,Provisional Insurance Measures for Maternity of Employees, Interim Regulation on the Collection and Payment of Social InsurancePremiums and Interim Provisions on Registration of Social Insurance, we provide our employees in the PRC with welfare schemes coveringpension insurance, unemployment insurance, maternity insurance, injury insurance and medical insurance.

We believe that we were in compliance with all applicable laborand safety laws and regulations in all-material respects, and implemented internal safety guidelines and operating procedures.

We believe that we are in compliance with the new PRC LaborContract Law, which came into effect on January 1, 2008, in all respects, and do not believe this new law will have any impacton our business and operations. Since the commencement of our business, none of our employees has been involved in any major accidentin the course of their employment and we have never been subject to disciplinary actions with respect to the labor protection issues.

Food Safety Regulations and Production Permit

Under previous legal regime, food producers and food processingcompanies are required to obtain both the food hygiene permit and food production permit for their operations. The NewFood Safety Law (“Food Safety Law”) issued by the Standing Committee of the National Peoples’ Congress (“NPC”)on February 28, 2009 repealed the Food Hygiene Law (issued by the Standing Committee of NPC in 1995) and as a result the producersengaged in the production or processing of food-related products are only required to obtain the production permits issued by thelocal office of the PRC General Administration of Quality Supervision, Inspection and Quarantine for their operations.

The PRC General Administration of Quality Supervision, Inspectionand Quarantine issued the Measures for Quality Supervision and Administration of the Food Production and Processing Enterprises(the “Measures”). According to the Measures, China establishes Food Safety and Market Entry System. Any food processingenterprises shall guarantee food safety and maintain requisite manufacturing conditions. Industrial Product Manufacture LicensingCertificate shall be obtained prior to the production of food and its entering into the market. The PRC General Administrationof Quality Supervision, Inspection and Quarantine is responsible for issuance of examination rules for the Product ManufactureLicensing Certificate for different kinds of food as well as the issuance of Food Product Manufacture Licensing Certificate.

The Examination Rules for Product Manufacture Licensing Certificateof Starch and Starch-Based Products issued by the PRC General Administration of Quality Supervision, Inspection and Quarantinefurther specified that the Product Manufacture Licensing Certificate is required for the production of starch and starch-basedproducts.

Corporate Information

Our principal executive offices are located at Rm. 2102 F &G, Nan Fung Centre, 264-298 Castle Peak Rd., Tsuen Wan, N.T., Hong Kong , Tel: (852) 2412-2208, Fax: (852) 2490 7876.

Item 1A.Risk Factors.

In addition to the other information in this Form 10-K, readersshould carefully consider the following important factors. These factors, among others, in some cases have affected, and in thefuture could affect, our financial condition and results of operations and could cause our future results to differ materiallyfrom those expressed or implied in any forward-looking statements that appear in this on Form 10-K or that we have made or willmake elsewhere.

Risks Relating to Our Business

Our plans to build new production facilities have beenand may be further delayed which would affect our business and financial performance.

Our plans to build new production facilities in the near futurehave been and could be further delayed hurting our financial performance. We may not be able to raise enough money in our financingto execute our expansion plans, resulting in a delay in building new production facilities. In addition, market volatilitycould limit our working capital, delaying us from building new production facilities. These delays could have a significanteffect on our financial performance.

Fluctuations in supply and commodity prices of potatoesmay affect our earnings.

Currently, all our raw materials are procured in China. Profitabilityin the potato starch industry is materially affected by the need to maintain a sufficient supply of potatoes at stable prices fromfarmers. These commodity prices are determined by supply and demand. While the potato starch industry has historically not beensubject to wide fluctuations and cycles, we cannot eliminate the risk of increased operating costs from potato price increases,and it is very difficult to predict when and if price spiral cycles will occur.

Various factors can affect the supply of potatoes. In particular,climate patterns and soil conditions, the level of supply inventories and demand, and the agricultural policies of the Chinesegovernment affect the supply of potatoes. Deteriorations in any of the above factors could result in increases in the price ofpotatoes which would affect our profitability if we are unable to pass such increases onto our customers.

Natural disasters and outbreaks of disease affecting potatocultivation may occur, which can significantly restrict our ability to conduct our operations.

Events beyond our control, such as the occurrence of droughts,floods, earthquakes or other natural disasters could result in a material potato shortage and may have an adverse effect on ourbusiness and results of operations. Similarly, an outbreak of disease may result in government restrictions on the sale ofpotatoes and therefore potato starch. This may result in the cancellation of orders by our customers and create adverse publicitythat may have a material adverse effect on our business, reputation and prospects.

Our failure to compete with other potato starch companies,especially companies with greater resources, may adversely affect our business, financial condition and results of operations.

The Chinese potato starch industry is highly competitive. Ingeneral, competitive factors in the industry include price, product quality, brand identification, breadth of product line andcustomer service. Our success depends in part on our ability to manage costs and be efficient in the highly competitive potatostarch industry. Some of our competitors have greater financial and marketing resources. As a result, we may not be able to successfullyincrease our market penetration or our overall share in the potato starch market.

Increased competition may result in price reductions, increasedsales incentive offerings, lower gross margins, sales expenses, marketing programs and expenditures to expand channels to market.Our competitors may offer products with better market acceptance, better price or better quality. Our business may be adverselyaffected if we are unable to maintain current product cost reductions, or achieve future product cost reductions. If we fail toaddress these competitive challenges, there may be a material adverse effect upon our business, consolidated results of operationsand financial condition.

Our sales revenue may be adversely affected by variousfactors, including demand for our products, sales price and general market conditions.

Demand for our products is highly affected by a number of factors,including the general demand for the products in the end markets that we serve and the sales prices of our products. A vast majorityof our sales is derived directly or indirectly from customers who are manufacturers of processed food. Any significant decreasein the demand for processed food may result in a decrease in our revenues and earnings. A variety of factors, including urbanization,consumer spending power and taste preferences may contribute to a slowdown in the demand for processed food.

Our potato supply is subject to various risks from thefarmers who supply the potatoes.

We have steady relations with local farmers to ensure a constantsupply of potatoes at our required quality standards. There is no assurance that we will be able to continue to renew such agreementswith the farmers who may determine to use the land for other cash crops or to sell their potatoes to other parties who can offera higher price. In such event, our business and results of operations will be adversely affected.

Failure to retain the services of key personnel or tohire and retain suitably experienced executives will affect our business and financial performance.

Our success to date is largely attributable to the contributionand experience of our key management personnel who are familiar with our business and understand our customers’ needs andrequirements. In particular, our Chairman, Joanny Kwok having 7 years of experience in the potato starch industry. ChairmanKwok is responsible for formulating and implementing our overall business strategy and corporate development and, together withour management team, has steered our growth and expansion. Our continued success is therefore dependent, to a large extent, onour ability to retain and motivate the services of our key management and operational personnel. The loss of the services of certainof our key management personnel, who may be affected by health or other reasons, without suitable and timely replacement will affectour business and results of operations.

We currently have no employment agreement with Ms. Kwok andMs. Kwok is not obligated to devote any specified number of hours to working for us. There can be no assurance that we willbe able to reach an agreement with either Ms. Kwok on terms favorable to us, if at all. If she ceases to be employed by us,we may have difficulty finding a suitable replacement with equal leadership and industry experience, and our business would sufferbecause we will not have the leadership needed to capitalize on market opportunities and to direct our growth, leading to a possibledecrease in revenues and inappropriate capital investments in projects that may not benefit our long-term growth. We donot maintain key-person insurance on any of our executive officers.

We may need additional capital and we may not be ableto obtain it on acceptable terms, or at all, which may be dilutive to our stockholders and could adversely affect our liquidityand financial position.

We may need additional cash resources due to changed businessconditions or other future developments. If these sources are insufficient to satisfy our cash requirements, we may seek to selladditional equity or debt securities, which may be dilutive to our current and future stockholders, or obtain a credit facility. Theincurrence of indebtedness would result in increased debt service obligations and could result in operating and financing covenantsthat would restrict our operations and liquidity.

Our ability to obtain additional capital on acceptable termsis subject to a variety of uncertainties, including, but not limited to:

We may seek to raise additional capital through public or privateequity offerings or debt financings. To the extent we raise additional capital by issuing equity securities, our stockholders mayexperience dilution. To the extent that we raise additional capital by issuing debt securities, we may incur substantial interestobligations, may be required to pledge assets as security for the debt and may be constrained by restrictive financial and/or operationalcovenants. Debt financing would also be superior to our stockholders’ interest in bankruptcy or liquidation.

We may face difficulties in protecting our intellectualproperty.

We have two trademarks and one design patent registered in thePRC (Please refer to the section entitled “Intellectual Property Rights” in this Annual Report). Although these intellectualproperties are protected through registration, enforcement of measures for the protection of intellectual property rights in thePRC is currently not as certain or effective as compared to some developed countries. We believe our trademarks are critical toour success and that the success of our business depends in part upon our continued ability to use or to further develop and increasebrand awareness. The infringement of our trademarks would diminish the value of our brand and its market acceptance, as well asour competitive advantages.

Monitoring and preventing the unauthorized use of our intellectualproperty is difficult. The measures we take to protect our brand, trade names, copyrights and other intellectual property rightsmay not be adequate to prevent their unauthorized use by third parties. Furthermore, application of laws governing intellectualproperty rights in China and abroad is uncertain and evolving, and could involve substantial risks to us. If we are unable to adequatelyprotect our brand, trademarks and other intellectual property rights, we may lose these rights and our business, results of operations,financial condition and prospects could be materially and adversely affected.

We may be adversely affected by any failure to maintainour existing or obtain future licenses, permits or approvals.

On July 18, 2003, the PRC General Administration of QualitySupervision, Inspection and Quarantine issued the Measure for Quality Supervision and Administration of the Food Production andProcessing Enterprises (the “Measure”). The Measure established the rules on the market access of the food industry.According to the Measure, food production enterprises shall pass the examination before mass production, and all finished productshall pass the requisite inspection before entering into the market. All finished products, which have passed the inspection, shallbe attached with a “Quality Safety Label” (QS Label). On December 23, 2004, the General Administration of Quality Supervision,Inspection and Quarantine issued a notice which required 13 more categories of food including starch and starch related productsto obtain the Food Production Certificate (the “Certificate”) before it may enter the market. Accordingly, our products,namely our potato starch and potato starch-based products are required to comply with the notice and obtain the Certificate. However,the deadline for the application for the Certificate has not been determined by the authorities. We have made an application forthe Certificate and approval from the local government is currently pending. When and if a deadline is imposed and if we fail toobtain the Certificate before such deadline, the Administration of Quality Supervision, Inspection and Quarantine may require usto cease our production and sales. In addition, we will be fined between 100% to 300% of the value of all the products we haveproduced after the deadline (including all sold and unsold products). All revenue earned from the sale of such products will alsobe confiscated. Any failure to maintain our existing or obtain future licenses, permits or approvals may have a materialadverse effect on our operations.

Disruptions to our production facilities will affect ourfinancial conditions and results of operations.

Our business will be affected by disruptions to our productionfacilities, such as water supply, fire, machine down time or the occurrence of power failure or power surge, which would resultin damage to our production equipment and facilities, or result in suspension of production or delay in our production process.In addition, our business may be interrupted or otherwise affected by natural disasters, such as floods, droughts and earthquakes,which could cause damage to our production facilities. In August 2010, a serious mud-rock flow broke out at Gongshan and Zhouquin Yunnan and Gansu Provinces respectively, near where our production facilities are located. We were not affected by the mud-rockflow in Yunnan and Gansu, but we cannot assure you that we would not be adversely affected by a similar natural disaster in thefuture. Any major disruption to our production facilities such as the foregoing could have a material adverse effect on our financialcondition and results of operations.

Our industry may be affected by the introduction of apotato-starch substitute product with similar or superior functionality at an attractive price point.

The main raw material for the production of our potato starchis potatoes, and potatoes are not the only source of starch. Other alternative sources of starch include corn andtapioca. If new technologies are developed, which can significantly increase starch output of alternative sources, or if the qualityof alternative sources of starch allows for a higher rate of production than that of starch and starch-based products which competewith our products, or if new production technologies are developed which render our production facilities obsolete, our businessoperations, profitability and prospects may be adversely affected. Similarly, alternative products may be developed which may renderour products uncompetitive. The production of such alternative products will adversely affect our business operations, financialperformance and prospects.

Our business is subject to environmental protection lawsand regulations.

We are required to comply with the environmental protectionlaws and regulations promulgated by the state and local governments of the PRC and the prescribed standards relating to the dischargeof waste water, solid wastes, effluent and gases. These regulations empower local governments to impose penalties on those companies,which do not comply with these laws and regulations. The nature of our business is such that waste water and materials are regularlydischarged from our production processes, including protein, sugars and minerals from potatoes, which we produce during the normalcourse of manufacturing our potato starch.

We have installed waste treatment facilities on certain of ourproduction facilities to treat such discharges. However, there can be no assurance that we will at all times be in full compliancewith the laws and regulations promulgated by the state and local governments of the PRC. Any failure by us to discharge the wastegenerated from our production processes in accordance with the relevant laws and regulations could subject us to warnings, finesor other penalties imposed by the environmental protection administration or the relevant government department with power to conductenvironmental supervision and management in the PRC. The amount of such fines to be imposed is at the discretion of the environmentalprotection administration or the relevant government department with power to conduct environmental supervision and managementin the PRC, who will determine such amount by taking into account factors such as the extent and seriousness of the pollution.Should the environmental protection administration or the relevant government department with power to conduct environmental supervisionand management in the PRC determine that the pollution caused is very severe, criminal penalties, such as a jail term, may alsobe imposed.

If our business operations result in environmental pollution,we will also be obliged to rectify the harm caused to the environment and pay compensation to the entity or individual that suffereddirect losses as a result of the pollution. Further, should our production facilities fail to meet other applicable environmentalprotection requirements from time to time, we may be subject to fines and be required to take remedial measures. This may havea negative effect on our business.

In addition to the above, the promulgation of any new environmentallaws or regulations, which require us to acquire equipment or incur additional capital expenditures would inevitably increase ourcosts and affect the profitability and prospects of our business.

We have incurred and will continue to incur increasedcosts as a result of being a public company.

As a public company, we have incurred and will continue to incursignificant legal, accounting and other expenses that we did not incur as a private company. In addition, the Sarbanes-Oxley Actof 2002, as well as rules subsequently implemented by the SEC, have required changes in corporate governance practices of publiccompanies. These rules and regulations have increased our legal, accounting and financial compliance costs and have made and willmake certain corporate activities more time-consuming and costly. In addition, we have incurred and will continue to incur additionalcosts associated with our public company reporting requirements. We are currently evaluating and monitoring developments with respectto these new rules, and we cannot predict or estimate the amount of additional costs will continue to incur or the timing of suchcosts.

Risks Associated with Doing Business in the PRC

Changes in political, economic and legal developmentsin the PRC may adversely affect our business.

As we derive substantially all of our revenues in the PRC andsubstantially all of our assets and operations are in China, our continued growth would depend heavily on the PRC’s generaleconomic condition. The PRC economy has grown significantly in recent years, especially after the PRC’s accession to theWorld Trade Organization in 2001. We, however, cannot assure you that the PRC economy will continue to grow, or that such growthwill be steady or in geographic regions or economic sectors that will benefit us. A downturn in the PRC’s economic growthor a decline in economic condition may have material adverse effects on our results of operations.

Further, we will continue to be affected by the political, socialand legal developments of the PRC. Since the late 1970s, the PRC government has introduced a series of economic and political reforms,including measures designed to effectuate the country’s transitioning from a planned economy to a more market-oriented economy.During such economic and political reforms, a comprehensive system of laws were promulgated, including many new laws and regulationsseeking to provide general guidance on economic and business practices in the PRC and to regulate foreign investment. Althoughthe PRC economy has been transitioning from a planned economy to a more market-oriented economy, a substantial portion of the productiveassets in the PRC are still owned by the PRC government. The continued control of these assets and other aspects of the nationaleconomy by the Chinese government could materially and adversely affect our business.

In the past twenty years, the growth of the PRC economy hasbeen uneven across different geographic regions and different economic sectors. In order to stabilize national economic growth,the PRC government adopted a series of macroeconomic policies. These policies include measures that restricted excessive growthand investment in specific sectors of the economy. More recently, on the other hand, the PRC government has implemented stimulusresponses to the global financial crisis. We cannot predict the future direction of economic reforms or the effects that any suchmeasures may have on our business, financial condition or results of operations.

The PRC government exerts substantial influence over themanner in which we must conduct our business activities.

The PRC only recently has permitted provincial and local economicautonomy and private economic activities. The PRC government has exercised and continues to exercise substantial control over virtuallyevery sector of the PRC economy through regulation and state ownership. Our ability to operate in the PRC may be harmed by changesin its laws and regulations, including those relating to taxation, import and export tariffs, environmental regulations, land userights, property and other matters. We believe that our operations in the PRC are in material compliance with all applicable legaland regulatory requirements. However, the central or local governments of these jurisdictions may impose new, stricter regulationsor interpretations of existing regulations that would require additional expenditures and efforts on our part to ensure our compliancewith such regulations or interpretations.

Accordingly, government actions in the future, including anydecision not to continue to support recent economic reforms and to return to a more centrally planned economy or regional or localvariations in the implementation of economic policies, could have a significant effect on economic conditions in the PRC or particularregions thereof, and could require us to divest ourselves of any interest we then hold in PRC properties or joint ventures.

Most of our revenues are denominated in Renminbi, whichis not freely convertible for capital account transactions and may be subject to exchange rate volatility.

We are exposed to the risks associated with foreign exchangecontrols and restrictions in the PRC, as our revenues are primarily denominated in Renminbi, which is currently not freely exchangeable.The PRC government imposes control over the convertibility between Renminbi and foreign currencies. Under the PRC foreign exchangeregulations, payments for “current account” transactions, including remittance of foreign currencies for payment ofdividends, profit distributions, interest and operation-related expenditures, may be made without prior approval but are subjectto procedural requirements. Strict foreign exchange control continues to apply to “capital account” transactions, suchas direct foreign investment and foreign currency loans. These capital account transactions must be approved by or registered withthe PRC State Administration of Foreign Exchange, or “SAFE.” Further, any capital contribution by an offshore shareholderto its PRC subsidiaries should be approved by the Ministry of Commerce, “MOFCOM,” in the PRC or its local counterparts.We cannot assure you that we are able to meet all of our foreign currency obligations to remit profits out of the PRC or to fundoperations in the PRC.

On August 29, 2008, SAFE promulgated the Circular on the RelevantOperating Issues concerning the Improvement of the Administration of Payment and Settlement of Foreign Currency Capital of Foreign-investedEnterprises, or “Circular 142”, to regulate the conversion by foreign invested enterprises, or FIEs, of foreign currencyinto Renminbi by restricting how the converted Renminbi may be used. Circular 142 requires that Renminbi converted from the foreigncurrency-dominated capital of a FIE may only be used for purposes within the business scope approved by the applicable governmentauthority and may not be used for equity investments within the PRC unless specifically provided for otherwise. In addition, SAFEstrengthened its oversight over the flow and use of Renminbi funds converted from the foreign currency-dominated capital of a FIE.The use of such Renminbi may not be changed without approval from SAFE, and may not be used to repay Renminbi loans if the proceedsof such loans have not yet been used.

We rely principally on dividends and other distributionson equity paid by our PRC subsidiaries, and limitations on its ability to pay dividends to us could have a material adverse effecton our business and results of operations.

We are a holding company and we rely principally on dividendsand other distributions on equity paid by our PRC subsidiaries, for our cash and financing requirements, including the funds necessaryto pay dividends and other cash distributions to our shareholders, service any debt we may incur and pay our operating expenses.If our PRC subsidiaries incur debt on their own behalf in the future, the instruments governing the debt may restrict their abilityto pay dividends or make other distributions to us.

Our PRC subsidiaries are subject to certain limitations withrespect to dividend payments. PRC regulations currently permit payment of dividends only out of accumulated profits as determinedin accordance with accounting standards and regulations in the PRC. Our PRC subsidiaries, as wholly foreign owned enterprises,may not distribute their after-tax profits to us if they have not already made contributions to their reserve fund, enterprisedevelopment fund and employee bonus and welfare fund at percentages that are decided by its board of directors. We had no restrictednet assets as of December 31, 2011. In addition, if any of our PRC subsidiaries incurs any debt on its own behalf inthe future, the instruments governing the debt may restrict their ability to pay dividends or make other distributions to us. Limitationson the ability of our PRC subsidiaries to pay dividends to us could adversely limit our ability to grow, make investments or acquisitionsthat could be beneficial to our businesses, pay dividends, or otherwise fund and conduct our business. Accordingly, if for anyof the above or other reasons, we do not receive dividends from our PRC subsidiaries, our liquidity, financial condition and abilityto make dividend distributions to our shareholders will be materially and adversely affected.

Fluctuation in the value of the Renminbi and of the U.S.dollar may have a material adverse effect on investments in our common stock.

Any significant revaluation of the Renminbi may have a materialadverse effect on the U.S. dollar equivalent amount of our revenues and financial condition as well as on the value of, and anydividends payable on, our common stock in foreign currency terms. For instance, a decrease in the value of Renminbi against theU.S. dollar could reduce the U.S. dollar equivalent amounts of our financial results, the value of your investment in our commonstock and the dividends we may pay in the future, if any, all of which may have a material adverse effect on the prices of ourcommon stock. As of December 31, 2011, we had cash denominated in U.S. dollars of approximately $419,000. Any further appreciationof Renminbi against U.S. dollars may result in significant exchange losses.

Prior to 1994, Renminbi experienced a significant net devaluationagainst most major currencies, and there was significant volatility in the exchange rate during certain periods. Upon the executionof the unitary managed floating rate system in 1994, the Renminbi was devalued by 50% against the U.S. dollar. Since 1994, theRenminbi to U.S. dollar exchange rate has largely stabilized. On July 21, 2005, the People’s Bank of China announced thatthe exchange rate of U.S. dollar to Renminbi would be adjusted from $1 to RMB8.27 to $1 to RMB8.11, and it ceased to peg the Renminbito the U.S. dollar. Instead, the Renminbi would be pegged to a basket of currencies, whose components would be adjusted based onchanges in market supply and demand under a set of systematic principles. On September 23, 2005, the PRC government widened thedaily trading band for Renminbi against non-U.S. dollar currencies from 1.5% to 3.0% to improve the flexibility of the new foreignexchange system. Since the adoption of these measures, the value of Renminbi against the U.S. dollar has fluctuated on a dailybasis within narrow ranges, but overall has further strengthened against the U.S. dollar. There remains significant internationalpressure on the PRC government to further liberalize its currency policy, which could result in a further and more significantappreciation in the value of the Renminbi against the U.S. dollar. The Renminbi may be revalued further against the U.S. dollaror other currencies, or may be permitted to enter into a full or limited free float, which may result in an appreciation or depreciationin the value of the Renminbi against the U.S. dollar or other currencies.

Adverse changes in PRC economic and political policiescould have a material adverse effect on the overall economic growth of China and that could increase inflation, which may reducethe demand for our products and materially and adversely affect our business.

Our PRC subsidiaries are based in China. As such, our business,financial condition, results of operations and prospects are affected significantly by economic, political and legal developmentsin China. China’s economy differs from the economies of most developed countries in many aspects, including:

While the Chinese economy has grown significantly in the pasttwo decades, the growth has been uneven geographically, among various sectors of the economy and during different periods. We cannotassure you that the Chinese economy will continue to grow or to do so at the pace that has prevailed in recent years, or that ifthere is growth, such growth will be steady and uniform. In addition, if there is a slowdown, such slowdown could have a negativeeffect on our business. For example, the Chinese economy experienced high inflation in the second half of 2007 and the first halfof 2008. China’s consumer price index increased by 7.0% during the nine months ended September 30, 2008 as compared to thesame period in 2007. To combat inflation and prevent the economy from overheating, the PRC government adopted a number of tighteningmacroeconomic measures and monetary policies. Due in part to the impact of the global crisis in financial services and credit marketsand other factors, the growth rate of China’s gross domestic product as measured against the same period of the previousyear decreased to 7.1% in the first half of 2009, down from 10.4% in the first half of 2008. Beginning in September 2008, amongother measures, the PRC government began to loosen macroeconomic measures and monetary policies, including reducing interest ratesand decreasing the statutory reserve rates for banks. In addition, in November 2008 the PRC government announced an economic stimuluspackage in the amount of $586 billion. It is uncertain whether the various macroeconomic measures, monetary policies and economicstimulus packages adopted by the PRC government will be effective in restoring or sustaining the fast growth rate of the Chineseeconomy. In addition, such measures, even if they benefit the overall Chinese economy in the long term, may have a negative effecton us. For example, our financial condition and results of operations may be materially and adversely affected by government controlover capital investments.

China’s legal system is different from those inmost other countries.

China is a civil law jurisdiction. Under the civil law system,prior court decisions may be cited as persuasive authority but do not have binding precedential effect. Although progress has beenmade in the promulgation of laws and regulations dealing with economic matters, such as corporate organization and governance,foreign investment, commerce, taxation and trade, China’s legal system remains less developed than the legal systems in manyother countries. Furthermore, because many laws, regulations and legal requirements have been recently adopted, their interpretationand enforcement by the courts and administrative agencies may involve uncertainties. Sometimes, different government departmentsmay have different interpretations. Licenses and permits issued or granted by one government authority may be revoked by a highergovernment authority at a later time. Government authorities may decline to take action against unlicensed operators, which maywork to the disadvantage of licensed operators, including us. The PRC legal system is based in part on government policies andinternal rules (some of which may not be published on a timely manner or at all) that may have a retroactive effect. We may evennot be aware of our violation of these policies and rules until sometime after the violation. Changes in China’s legal andregulatory framework, the promulgation of new laws and possible conflicts between national and provincial regulations could adverselyaffect our financial condition and results of operations. In addition, any litigation in China may result in substantial costsand diversion of resources and management attention.

Because our funds are held in banks in the PRC that donot provide insurance, the failure of any bank in which we deposit our funds could affect our ability to continue in business.

Banks and other financial institutions in the PRC do not provideinsurance for funds held on deposit. A significant portion of our assets are in the form of cash deposited with banks in the PRC,and in the event of a bank failure, we may not have access to our funds on deposit. Depending upon the amount of money we maintainin a bank that fails, our inability to have access to our cash could impair our operations, and, if we are not able to access fundsto pay our suppliers, employees and other creditors, we may be unable to continue in business.

PRC regulations relating to the establishment of offshorecompanies by PRC residents may subject our PRC resident shareholders to personal liability and limit our ability to inject capitalinto the PRC subsidiaries, limiting our PRC subsidiaries ability to distribute profits to us or otherwise adversely affect us.

SAFE issued the Notice on Issues Relating to the Administrationof Foreign Exchange in Fund-raising and Reverse Investment Activities of Domestic Residents Conducted via Offshore Special PurposeCompanies, or “Notice 75,” on October 21, 2005, which became effective as of November 1, 2005 and the operating proceduresin May 2007, collectively the SAFE Rules. According to the SAFE Rules, prior registration with the local SAFE branch is requiredfor PRC residents to establish or to control an offshore company for the purposes of financing that offshore company with assetsor equity interests in an onshore enterprise located in the PRC. An amendment to registration or filing with the local SAFE branchby such PRC resident is also required for the injection of equity interests or assets of an onshore enterprise in the offshorecompany or overseas funds raised by such offshore company, or any other material change involving a change in the capital of theoffshore company. Moreover, the SAFE Rules have retroactive effect. As a result, PRC residents who had established or acquiredcontrol of offshore companies that had made onshore investments in the PRC before promulgation of the SAFE Rules were requiredto complete the relevant registration procedures with the local SAFE branch by March 31, 2006. The SAFE rules define “PRCresidents” to include both legal persons and natural persons who either hold legal PRC identification documents, or who habituallyreside in the PRC due to economic interests or needs. If any PRC resident fails to file its SAFE registration for an existing offshoreenterprise, any dividends remitted by the onshore enterprise to its overseas parent after October 21, 2005 will be considered tobe an evasion of foreign exchange purchase rules, and the payment of the dividend will be illegal. As a result, both the onshoreenterprise and its actual controlling persons can be fined. In addition, failure to comply with the registration procedures mayresult in restrictions on the relevant onshore enterprise, including prohibitions on the payment of dividends and other distributionsto its offshore parent or affiliate and capital inflow from the offshore enterprise. The PRC resident shareholders of the offshoreenterprise may also be subject to penalties under PRC foreign exchange administration regulations.

Our shareholders of record are all non-PRC citizens; however,it is not clear whether any of our shareholders of record will be defined as a PRC resident under the Circular 75 and hence berequired to complete the individual SAFE registration. To date, we have not received any communications from, or had contactwith, the PRC government with respect to SAFE Rules. However, we cannot provide any assurance that whether any of the beneficialowners of our shares will be required by SAFE in the future to complete the SAFE registration and, if we are so requested, whetherall of our shareholders of record and such beneficial owners will comply with the request to make or obtain any applicable registrationsor comply with other requirements required by SAFE Rules. The failure or inability of our PRC resident shareholders or beneficialowners to make any required registrations or comply with other requirements may subject such shareholders or beneficial ownersto fines and legal sanctions and may also limit our ability to contribute additional capital into or provide loans to our PRC subsidiaries,limit the ability of our PRC subsidiaries to pay dividends or otherwise distribute profits to us, or otherwise adversely affectus.

In January 2007, SAFE promulgated the Detailed Rules for theImplementation of the Measures for the Administration of Individual Foreign Exchange, and the Operating Rules on the Foreign ExchangeAdministration of the Evolvement of Domestic Individuals in the Employee Stock Ownership Plans and Share Option Schemes of OverseasListed Companies, or “Circular 78.” Under Circular 78, where PRC domestic individuals are involved in the employeestock ownership plans or share option schemes of overseas listed companies, such plans or schemes must be submitted to competentforeign exchange administration authorities for approval, and the PRC employees shall entrust its agent or the affiliates or branchesof the overseas listed company to apply to competent authorities for purchasing certain amount of foreign exchange at certain timeseach year, in order to purchase the stock or exercise its option right under the employee stock ownership plans or the share optionschemes within the amounts approved by the authorities. In addition, the PRC employees involved must declare the progress of suchplans or schemes to the administration authorities periodically. All the proceeds obtained by such employees from the overseaslisted company through the employee stock ownership plans or the share option schemes, or from sale of the shares of such overseaslisted company, after deducting relevant fees and costs incurred overseas, shall be remitted to the domestic account of the employeesin full amount. As of the date of this Annual Report, no employee share option has been granted and is outstanding under the currentshare option scheme. All the options for the shares of our Company to be granted to and all the stock ownership plans to be madefor our PRC employees in the future, including exercise of the option rights and performance of such plans, would be subject toCircular 78 since we become an overseas listed company. If we or our PRC employees fail to comply with the provisions of Circular78, we and/or our PRC employees may be subject to fines and legal sanctions imposed by the SAFE or other PRC government authorities.If our PRC employees fail to obtain the approval from or make relevant registrations with SAFE or its local branches, it will preventus from conducting the share option schemes or the stock ownership plans for our PRC employees. In addition, it may impose coston us for obtaining the approval from SAFE or its local branches in connection with the foreign exchange registration.

In addition, the PRC employees involved in the Incentive Planmust be subject to approval by the competent foreign exchange administration authorities and make the registrations as requiredunder Circular 78. We cannot assure you that the administration authorities would approve the Incentive Plan, or permit such PRCemployees to go through the registration procedures. If this occurs, the management, operations and financial conditions of thelisted company may be adversely affected.

We may have limited legal recourse under PRC laws if disputesarise under our contracts with third parties.

The Chinese government has enacted laws and regulations dealingwith matters such as corporate organization and governance, foreign investment, commerce, taxation and trade. However, precedentand experience in implementing, interpreting and enforcing these laws and regulations is limited, and our ability to enforce commercialclaims or to resolve commercial disputes is unpredictable. The resolution of these matters may be subject to the exercise of considerable discretion by agencies of the Chinesegovernment, and forces unrelated to the legal merits of a particular matter or dispute may influence their determination. Any rightswe may have to specific performance, or to seek an injunction under PRC law, in either of these cases, are severely limited, andwithout a means of recourse by virtue of the Chinese legal system, we may be unable to prevent these situations from occurring.The occurrence of any such events could have a material adverse effect on our business, financial condition and results of operations.

We must comply with the Foreign Corrupt Practices Actwhile many of our competitors do not.

We are required to comply with the United States Foreign CorruptPractices Act, which prohibits U.S. companies from engaging in bribery or other prohibited payments to foreign officials for thepurpose of obtaining or retaining business. Foreign companies, including some of our competitors, are not subject to these prohibitions.Corruption, extortion, bribery, pay-offs, theft and other fraudulent practices occur from time-to-time in mainland China. If ourcompetitors engage in these practices, they may receive preferential treatment from personnel of some companies, giving our competitorsan advantage in securing business or from government officials who might give them priority in obtaining new licenses, which wouldput us at a disadvantage. Although we inform our personnel that such practices are illegal, we cannot assure you that our employeesor other agents will not engage in such conduct for which we might be held responsible. If our employees or other agents are foundto have engaged in such practices, we could suffer severe penalties.

We may not continue to receive the preferential tax treatmentwe currently enjoy under PRC law, and dividends paid to us from our operations in China may become subject to income tax underPRC law.

The rate of income tax on companies in China may vary dependingon the availability of preferential tax treatment or subsidies based on their industry or location. Based on the circularentitled Scope of Preliminary Processing of Agricultural Products Entitled to Preferential Enterprise Income Tax Policies (TrialImplementation) published by Ministry of Finance (“MOF”) and State Administrative of Taxation (“SAT”),our PRC subsidiaries are entitled to full exemption from the PRC corporate income tax beginning January 1, 2008. The exemptioncurrently is not subject to any limitations. We do not know how long this preferential tax treatment will continue or if any newlaw may change the preferential treatment granted to us. Any loss or substantial reduction of the tax benefits enjoyed by us wouldreduce our net profit.

Under the EIT Law, we and/or our HK holding company maybe classified as a “resident enterprise” of the PRC. Such classification could result in PRC tax consequences to usand our non-PRC shareholders and/or HK holding company.

Under the Enterprise Income Tax Law of the PRC (“EIT Law”),which became effective on January 1, 2008, an enterprise established outside of China with “de facto management bodies”within China is considered a “resident enterprise,” meaning that it can be treated in a manner similar to a Chineseenterprise for enterprise income tax purposes, although the dividends paid to one resident enterprise from another may qualifyas “tax-exempt income.” The implementing rules of the EIT Law define de facto management as “substantial andoverall management and control over the production and operations, personnel, accounting, and properties” of the enterprise.The EIT Law and its implementing rules are relatively new and ambiguous in terms of some definitions, requirements and detailedprocedures, and currently no official interpretation or application of this new “resident enterprise” classificationis available; therefore, it is unclear how tax authorities will determine tax residency based on the facts of each case.

If a HK holding company were treated as a PRC “non-residententerprise” under the EIT Law, then dividends that HK holding company receives from any of our PRC subsidiaries (assumingsuch dividends were considered sourced within the PRC) (i) may be subject to a 5% PRC withholding tax, provided that HK holdingcompany owns more than 25% of the registered capital of such PRC subsidiary continuously within 12 months immediately prior toobtaining such dividend from such PRC subsidiary, and the Arrangement between the Mainland of China and the Hong Kong Special AdministrativeRegion for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income, or the “PRC-HongKong Tax Treaty,” were otherwise applicable, or (ii) if such treaty does not apply (i.e., because the PRC tax authoritiesmay deem HK holding company to be a conduit not entitled to treaty benefits), may be subject to a 10% PRC withholding tax. Similarly,if US holding company were treated as a “non-resident enterprise” under the EIT Law and HK holding company were treatedas a “resident enterprise” under the EIT Law, then dividends US holding company receives from HK holding company (assumingsuch dividends were considered sourced within the PRC) may be subject to a 10% PRC withholding tax.

If a US holding company is determined to be a “residententerprise” under the EIT Law, this could result in a situation in which a 10% PRC tax is imposed on dividends Kaibo FoodsCompany Limited pays to its enterprise, but not individual, investors that are not tax residents of the PRC, or “non-residentinvestors” and gains derived by them from transferring US holding company’s shares or warrants, if such income is consideredPRC-sourced income by the relevant PRC tax authorities. In such event, US holding company may be required to withhold a 10% PRCtax on any dividends paid to its non-resident investors. US holding company’s non-resident investors also may be responsiblefor paying PRC tax at a rate of 10% on any gain derived by such investors from the sale or transfer of its shares or warrants incertain circumstances.

In January 2009, the State Administration of Taxation promulgatedthe Provisional Measures for the Administration of Withholding of Enterprise Income Tax for Non-resident Enterprises (“Measures”).Entities which have the direct obligation to make the following types of payments to a non-resident enterprise will be the relevanttax withholders for such a non-resident enterprise: income from equity investment (including dividends and other return on investment),interest, rent, royalties, and income from assignment of property as well as other income subject to enterprise income taxes receivedby non-resident enterprises in the PRC. Further, the Measures provide that in the case of an equity transfer between two non-residententerprises outside of the PRC, the non-resident enterprise which receives the equity transfer payment shall file a tax declarationwith the PRC tax authority located at the place of the PRC company whose equity has been transferred, and the PRC company whoseequity has been transferred shall assist the tax authorities to collect taxes from the relevant non-resident enterprise. However,it is unclear whether the Measures cover equity transfers of a non-resident enterprise, which is a direct, or an indirect shareholderof a PRC company. Given these Measures, there is a possibility that we may have an obligation to withhold income tax in respectof the dividends paid to non-resident enterprise investors.

Changes in PRC government policy on foreign investmentin China may adversely affect our business and results of operations.

Our PRC subsidiary is a foreign invested enterprise. As we conducta significant portion of our businesses through a foreign investment enterprise in the PRC, we are subject to restrictions on foreigninvestment policies imposed by the PRC law from time to time. Generally, foreign invested enterprises enjoy more favorable taxtreatment in the form of tax incentives and other preferential policies but are subject to more stringent restrictions in theirbusiness operations. If we cannot obtain approval from relevant approval authorities to engage in businesses that become restrictedor prohibited for foreign investors, we may be forced to sell or restructure the businesses that have become restricted or prohibitedfor foreign investment. If we are forced to adjust our business portfolio as a result of changes in government policy on foreigninvestment, our business, financial condition and results of operations would likely be materially adversely affected.

Changes in PRC laws and regulations on labor and employeebenefits may adversely affect our business and results of operations.

As we conduct a significant portion of our business throughour PRC subsidiaries, we are subject to PRC laws and regulations on labor and employee benefits. In recent years, the PRC governmenthas implemented policies to strengthen the protection of employees and obligate employers to provide more benefits to their employees.In addition, an employment contract law came into effect in the PRC on January 1, 2008. The PRC employment contract lawand related legislation require more benefits to be provided to employees, such as an increase in pay or compensation for terminationof employment contracts. As a result, we expect to incur higher labor costs, which would have an adverse impact on our businessand results of operations.

We may be unable to complete a business combination transactionefficiently or on favorable terms due to complicated merger and acquisition regulations that became effective on September 8, 2006.

On August 8, 2006, six PRC regulatory agencies promulgated theRegulation on Mergers and Acquisitions of Domestic Companies by Foreign Investors, which became effective on September 8, 2006.This new regulation, among other things, governs the approval process by which a PRC company may participate in an acquisitionof assets or equity interests. Depending on the structure of the transaction, the new regulation will require the PRC parties tomake a series of applications and supplemental applications to the government agencies. In some instances, the application processmay require the presentation of economic data concerning a transaction, including appraisals of the target business and evaluationsof the acquirer, which are designed to allow the government to assess the transaction. Government approvals will have expirationdates by which a transaction must be completed and reported to the government agencies. Compliance with the new regulations islikely to be more time consuming and expensive than in the past and the government can now exert more control over the combinationof two businesses. Accordingly, due to the new regulation, our ability to engage in business combination transactions has becomesignificantly more complicated, time consuming and expensive, and we may not be able to negotiate a transaction that is acceptableto our shareholders or sufficiently protect their interests in a transaction.

The new regulation allows PRC government agencies to assessthe economic terms of a business combination transaction. Parties to a business combination transaction may have to submit to MOFCOMand other relevant government agencies an appraisal report, an evaluation report and the acquisition agreement, all of which formpart of the application for approval, depending on the structure of the transaction. The regulations also prohibit a transactionat an acquisition price obviously lower than the appraised value of the PRC business or assets and in certain transaction structures,require that consideration must be paid within defined periods, generally not in excess of a year. The regulation also limits ourability to negotiate various terms of the acquisition, including aspects of the initial consideration, contingent consideration,holdback provisions, indemnification provisions and provisions relating to the assumption and allocation of assets and liabilities.Transaction structures involving trusts, nominees and similar entities are prohibited. Therefore, such regulation may impede ourability to negotiate and complete a business combination transaction on financial terms that satisfy our investors and protectour shareholders’ economic interests.

The approval of the China Securities Regulatory Commissionmay be required in connection with an offering of our securities under PRC regulations, and, if required, we cannot currently predictwhether we would be able to obtain such approval.

On August 8, 2006, six PRC regulatory agencies,including the China Securities Regulatory Commission, or “CSRC,” MOFCOM, the State-Owned Assets Supervision and AdministrationCommission, or “SASAC”, the State Administration of Taxation, or “SAT”, the State Administration for Industryand Commerce, or “SAIC” and SAFE jointly promulgated the Regulation on Mergers and Acquisitions of Domestic Companiesby Foreign Investors, which became effective on September 8, 2006 and was amended on June 22, 2009 (the “M&A Regulation”).This M&A Regulation, among other things, has certain provisions that purport to require offshore special purpose vehicles,or “SPVs”, formed for the purpose of listing of the equity interests in the PRC Companies on an overseas stock exchangeand directly or indirectly controlled by PRC individuals or companies to obtain approval from the CSRC prior to listing their securitieson an overseas stock exchange. We have been advised by our PRC counsel, since our PRC subsidiaries were established as greenfieldforeign-invested companies rather than by taking over existing PRC domestic companies, the M&A Regulation is not applicableto the formation of our PRC subsidiaries. However, the application of this M&A Regulation remains unclear with no consensuscurrently existing among the leading PRC law firms regarding the scope and applicability of the CSRC approval requirement. If theCSRC or another PRC regulatory agency subsequently were to determine that the CSRC approval is required for an offering, we couldface sanctions by the CSRC or other PRC regulatory agencies. If this happens, these regulatory agencies may impose fines and penaltieson our operations in the PRC, limit our operating privileges in the PRC, delay or restrict the repatriation of the proceeds fromthis transaction into the PRC, restrict or prohibit payment or remittance of dividends by its PRC subsidiaries, or take other actionsthat could have a material adverse effect on our business, financial condition, results of operations, reputation and prospects,as well as the trading price of our common stock. The CSRC or other PRC regulatory agencies may also take actions requiring oradvising us to halt such an offering.

If there are any adverse public health developments inChina, our business and operations may be severely disrupted.

Any prolonged occurrence of avian flu, severe acute respiratorysyndrome, or “SARS,” swine flu, or other adverse public health developments in the PRC or other regions where we havean operation or presence may have a material adverse effect on our business operations. These could include the ability of ourpersonnel to travel or to promote our services within the PRC or at other regions where we have an operation or presence, as wellas temporary closure of our facilities. In particular, there have been reports of occurrences of avian flu and swine flu in variousparts of the PRC in recent years, including confirmed human cases. In response, the PRC government has authorized local governmentsto impose quarantine and other restrictions on movements of people and goods in the event of an epidemic. Any closures or travelor other operational restrictions would severely disrupt our business operations and adversely affect our results of operations.We have not adopted any written preventive measures or contingency plans to combat any future outbreak of avian flu, SARS, swineflu, or any other epidemic.

You may experience difficulties in effecting service oflegal process, enforcing foreign judgments or bringing original actions in the PRC based on United States or other foreign lawsagainst us or our management.

We conduct substantially all of our operations in the PRCand substantially all of our assets are located in China. In addition, most of our directors and executive officers residewithin the PRC. As a result, it may not be possible to affect service of process within the United States or elsewhereoutside China upon some of our directors and senior executive officers, including with respect to matters arising under U.S.federal securities laws or applicable state securities laws. It would also be difficult for investors to bring an originallawsuit against us or our directors or executive officers before a PRC court based on U.S. federal securities laws orotherwise. Moreover, our PRC legal counsel has advised us that the PRC does not have treaties with the United States or manyother countries providing for the reciprocal recognition and enforcement of judgment of courts. As such, recognition andenforcement in China of judgments against us, our directors or executive officers obtained from a court in any of those jurisdictions may be difficult or impossible to enforce.

The PRC government could change its policies toward privateenterprise or even nationalize or expropriate private enterprises, which could result in the total loss of our investment in thatcountry.

Our business is subject to significant political and economicuncertainties and may be adversely affected by political, economic and social developments in the PRC. Over the past several years,the PRC government has pursued economic reform policies including the encouragement of private economic activity and greater economicdecentralization. The Chinese government may not continue to pursue these policies or may significantly alter them to our detrimentfrom time to time with little, if any, prior notice.

Changes in policies, laws and regulations or in their interpretationor the imposition of confiscatory taxation, restrictions on currency conversion, restrictions or prohibitions on dividend paymentsto shareholders, devaluations of currency or the nationalization or other expropriation of private enterprises could have a materialadverse effect on our business. Nationalization or expropriation could even result in the total loss of our investment in Chinaand in the total loss of your investment in us.

Contract drafting, interpretation and enforcement in Chinainvolves significant uncertainty, which could leave us vulnerable to legal disputes and challenges related to our contracts.

We have entered into numerous contracts governed by PRC law,many of which are material to our business. As compared with contracts in the United States, contracts governed by PRC law tendto contain less detail and are not as comprehensive in defining contracting parties’ rights and obligations. As a result,contracts in China are more vulnerable to disputes and legal challenges. In addition, contract interpretation and enforcement inChina is not as developed as in the United States, and the result of any contract dispute is subject to significant uncertainties.Therefore, we cannot assure you that we will not be subject to disputes under our material contracts, and if such disputes arise,we cannot assure you that we will prevail.

If any of our land use rights are revoked it would reduceor eliminate our operational capabilities.

Under Chinese law land is owned by the state or rural collectiveeconomic organizations. The state issues to the land users the land use right certificate. Land use rights can be revoked and theland users forced to vacate at any time when redevelopment of the land is in the public interest. The public interest rationaleis interpreted quite broadly and the process of land appropriation may be less than transparent. Each of our facilities rely onthese land use rights as the cornerstone of their operations, and the loss of any of these rights would have a material adverseeffect on us.

We could be liable for damages for defects in our productspursuant to the Tort Liability Law of the PRC.

The Tort Liability Law of the People’s Republic of China,which was passed during the 12th Session of the Standing Committee of the 11th National People’s Congress on December 26,2009, states that manufacturers are liable for damages caused by defects in their products and sellers are liable for damages attributableto their fault. If the defects are caused by the fault of third parties such as the transporter or storekeeper, manufacturers andsellers are entitled to claim for compensation from these third parties after paying the compensation amount.

We face uncertainty from China’s Circular on Strengtheningthe Administration of Enterprise Income Tax on Non-Resident Enterprises’ Share Transfer that was released in December 2009with retroactive effect from January 1, 2008.

The Chinese State Administration of Taxation, or “SAT,”released a circular (Guoshuihan No. 698, or “Circular 698”) on December 10, 2009 that addresses the transfer of sharesby nonresident companies. Circular 698, which is effective retroactively to January 1, 2008, may have a significant impacton many companies that use offshore holding companies to invest in China. Circular 698, which provides parties with a shortperiod of time to comply with its requirements, indirectly taxes foreign (non-PRC) companies, or foreign investors, on gains derivedfrom the indirect sale of a Chinese company. Where a foreign investor indirectly transfers equity interests in a Chineseresident enterprise by selling the shares in an offshore holding company, and the latter is located in a country or jurisdictionwhere the actual tax burden is less than 12.5% or where the offshore income of its residents is not taxable, the foreign investoris required to provide the tax authority in charge of that Chinese resident enterprise with certain relevant information within30 days of the execution of the equity transfer agreement. Moreover, where a foreign investor indirectly transfers equity interestsin a Chinese resident enterprise through an abuse of form of organization and there are no reasonable commercial purposes suchthat the corporate income tax liability is avoided, the PRC tax authority will have the power to re-assess the nature of the equitytransfer in accordance with PRC’s “substance-over-form” principle and deny the existence of the offshore holdingcompany that is used for tax planning purposes.

There is uncertainty as to the application of Circular 698. For example, while the term “indirectly transfer” is not defined, it is understood that the relevant PRC tax authoritieshave jurisdiction regarding requests for information over a wide range of foreign entities having no direct contact with China.Moreover, the relevant PRC taxing authority has not yet promulgated any formal provisions or formally declared or stated how tocalculate the actual tax burden in the country or jurisdiction of the offshore holding company and the extent of the disclosureto the tax authority in charge of the Chinese resident enterprise (or the process by which such disclosure should be made). In addition, there are not any formal declarations with regard to how to decide “abuse of form of organization” and“reasonable commercial purpose,” which can be utilized by us to determine if our company complies with Circular 698. As a result, we (or a foreign investor in us) may become at risk of being taxed under Circular 698 and we (or such foreign investor)may be required to expend valuable resources to comply with Circular 698 or to establish that we (or such foreign investor) shouldnot be taxed under Circular 698, which could have a material adverse effect on our financial condition and results of operations(or such foreign investor’s investment in us).

Our payments to the Employee Social Insurance and HousingFunds may be considered insufficient by the PRC government and further payments could be required.

According to PRC law and Chinese regulations for social insuranceand housing funds, our PRC subsidiaries are required to make contributions to the social insurance, including (i) pension; (ii)medical insurance; (iii) unemployment insurance; (iv) work related injury insurance; (v) maternity insurance, and to the housingfunds of its employees. From its establishment, each of our PRC subsidiaries has started to make the contribution for the requiredstatutory social insurance for its employees. However, we cannot assure you that the local social insurance administrativeauthority will consider our social insurance payments as adequate and no further payments will be required.

Our PRC subsidiaries have not made contributions for the employeehousing funds. If requested by the local housing fund administration authority, our PRC subsidiary shall make up the housingfunds contributions for their employees for previous periods and may be subject to certain administrative fines,

Risks Related to our Securities

Insiders have substantial control over us, and they coulddelay or prevent a change in our corporate control even if our other stockholders wanted it to occur.

Our executive officers, directors,and principal stockholders hold approximately 94% of our outstanding Common Stock. Accordingly, these stockholders are able tocontrol all matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions.This could delay or prevent an outside party from acquiring or merging with us even if our other stockholders wanted it to occur.The interest of our largest stockholders may differ from the interests of other shareholders.

We cannot assure you that the Common Stock will becomeliquid or that it will be listed on a securities exchange.

Currently, we are eligible to be quoted on the OTC BulletinBoard, where an investor may find it difficult to obtain accurate quotations as to the market value of the Common Stock. In addition,if we fail to meet the criteria set forth in SEC regulations, by law, various requirements would be imposed on broker-dealers whosell its securities to persons other than established customers and accredited investors. Consequently, such regulations may deterbroker-dealers from recommending or selling our Common Stock, which may further affect its liquidity.

There may not be sufficient liquidity in the market forour securities in order for investors to sell their securities.

There is currently only a limited public market for our CommonStock and there can be no assurance that a trading market will develop further or be maintained in the future.

In order to raise sufficient funds to expand our operations,we may have to issue additional securities at prices, which may result in substantial dilution to our shareholders.

If we raise additional funds through the sale of equity or convertibledebt, our current stockholders’ percentage ownership will be reduced. In addition, these transactions may dilute the valueof our securities outstanding. We may have to issue securities that may have rights, preferences and privileges senior to our CommonStock. We cannot provide assurance that we will be able to raise additional funds on terms acceptable to us, if at all. If futurefinancing is not available or is not available on acceptable terms, we may not be able to fund our future needs, which would havea material adverse effect on our business plans, prospects, results of operations and financial condition.

The market price of our Common Stock may be volatile.

The market price of our Common Stock has been and will likelycontinue to be highly volatile, as is the stock market in general, and the market for OTC Bulletin Board quoted stocks in particular.Some of the factors that may materially affect the market price of our Common Stock are beyond our control, such as changes infinancial estimates by industry and securities analysts, conditions or trends in the industry in which we operate or sales of ourCommon Stock. These factors may materially and adversely affect the market price of our Common Stock, regardless of our performance.In addition, the public stock markets have experienced extreme price and trading volume volatility. This volatility has significantlyaffected the market prices of securities of many companies for reasons frequently unrelated to the operating performance of thespecific companies. These broad market fluctuations may adversely affect the market price of our Common Stock.

Because we became a public company by means of a reversemerger, it may not be able to attract the attention of major brokerage firms.

Additional risks may exist since we became public through a“reverse takeover.” Securities analysts of major brokerage firms may not provide coverage of our securities since thereis little incentive to brokerage firms to recommend the purchase of our Common Stock. No assurance can be given that brokeragefirms will want to conduct any secondary offerings on our behalf in the future.

If we fail to maintain an effective system of internalcontrols, we may not be able to accurately report our financial results or be able to prevent fraud.

The United States Securities and Exchange Commission, as requiredby Section 404 of the Sarbanes-Oxley Act of 2002, adopted rules requiring every public company to include a management report onsuch company's internal controls over financial reporting in its annual report, which contains management’s assessment ofthe effectiveness of our internal controls over financial reporting. We have had these internal controls in effect sinceinception. As of December 31, 2011, management concluded that our internal control over financial reporting was noteffective. Furthermore, during the course of the evaluation, documentation and attestation, we identified material weaknessesrelating to maintaining adequate documentation of our internal control assessment and the lack of independent Board members, whichmanagement has not yet remediated. If we fail to achieve and maintain the adequacy of our internal controls, we maynot be able to conclude that we have effective internal controls, on an ongoing basis, over financial reporting in accordance withthe Sarbanes-Oxley Act. Moreover, effective internal controls are necessary for us to produce reliable financial reportsand are important to help prevent fraud. As a result, our failure to achieve and maintain effective internal controlsover financial reporting could result in the loss of investor confidence in the reliability of its financial statements, whichin turn could harm our business and negatively impact the trading price of our common shares. Furthermore, we have incurred,and anticipate that we will continue to incur, considerable costs and use significant management time and other resources in aneffort to comply with Section 404 and other requirements of the Sarbanes-Oxley Act.

Our Common Stock is considered “penny stock.”

The SEC has adopted regulations, which generally define “pennystock” to be an equity security that has a market price of less than $5.00 per share, subject to specific exemptions. Themarket price of the Common Stock is currently less than $5.00 per share and therefore may be a “penny stock.” Brokersand dealers effecting transactions in “penny stock” must disclose certain information concerning the transaction, obtaina written agreement from the purchaser and determine that the purchaser is reasonably suitable to purchase the securities. Theserules may restrict the ability of brokers or dealers to sell the Common Stock and may affect your ability to sell shares.

The market for penny stocks has experienced numerous fraudsand abuses, which could adversely impact investors in our stock.

OTCBB securities are frequent targets of fraud or market manipulation,both because of their generally low prices and because OTCBB reporting requirements are less stringent than those of the stockexchanges or NASDAQ.

Patterns of fraud and abuse include:

Our management is aware of the abuses that have occurred historicallyin the penny stock market.

None.

All land in the PRC is owned by the government and cannot besold to any individual or entity. The government alternatively grants or allocates landholders a “land use right.”There are four ways of acquiring land use rights in the PRC:

Granted land use rights are provided by the government in exchangefor a grant fee, and carry the rights to pledge, mortgage, lease and transfer the land within the term of the grant. Land is grantedfor a fixed term, generally 70 years for residential use, 50 years for industrial use, and 40 years for commercial and other use.The term is renewable in theory. Unlike in western nations, granted land must be used for the specific purpose for which it wasgranted.

Allocated land use rights are generally provided by the governmentfor an indefinite period (usually to state-owned entities) and cannot be pledged, mortgaged, leased, or transferred by the userunless otherwise approved by the competent government authorities. Allocated land can be reclaimed by the government at any time.Allocated land use rights may be converted into granted land use rights upon the payment of a grant fee to the government.

We have land use rights for two of our factories, one of ourfactories is on leased land without land use right and we leased one additional factory in Gansu province through December 31,2011.

We lease our headquarters in Hong Kong for HK$25,000 per monthon a 1-year lease term. We have leased this office since 2008.

The following chart provides details for our PRC-based properties:

In the normal course of business, we are subject to claims andlitigation. Neither we nor our subsidiaries are currently a party to any material legal proceedings nor are we aware of any materialproceeding to which any of our directors, officers, affiliates, or any holder of more than five percent of our Common Stock, orany associate of any such director, officer, affiliate, or shareholder, is a party adverse to us or any of our subsidiaries orhas a material interest adverse to us or any of our subsidiaries.

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Not applicable

Market Information

There is no established public trading market for our CommonStock, however our Common Stock is quoted on the Over-the-Counter Bulletin Board under the symbol “KKFC.” The informationin the following table is taken from the NASDAQ website and sets forth the high and low bid information for our Common Stock forthe period from January 1, 2010 through December 31, 2011. The Over-the-Counter Bulletin Board quotations reflect inter-dealerprices, are without retail markup, markdowns or commissions, and may not represent actual transactions.

Holders

As of December 31, ,2011, we had approximately 38 record owners of our Common Stock.

Dividends Paid and Dividend Policy

Prior to the time that we became a public company we paiddividend to our shareholders of approximately $23 million for the fiscal year ended December 31, 2009. We currently intend toretain all available funds and any future earnings for use in the operation and expansion of our business and do notanticipate paying any cash dividends on our Common Stock for the foreseeable future.

Future cash dividends, if any, will be at the discretion ofour Board of Directors and will depend upon our future operations and earnings, capital requirements and surplus, general financialcondition, contractual restrictions and other factors as our Board of Directors may deem relevant. We can pay dividends only outof our profits or other distributable reserves and dividends or distributions will only be paid or made if we are able to pay ourdebts as they fall due in the ordinary course of business.

Securities Authorized for Issuance Under Equity CompensationPlans

We presently do not have any equity based or other long-termincentive programs. In the future, we may adopt and establish an equity-based or other long-term incentive plan if our managementbelieves that it is in our and our stockholders’ best interest to do so.

Recent Sales of Unregistered Securities

On December 21, 2010, the Company entered into a securitiespurchase agreement with certain accredited investors for the issuance and sale of an aggregate of (i) 571,797 shares of commonstock and (ii) warrants to purchase up to 114,357 shares of common stock. The shares of common stock were valued atapproximately $2.3 million or $5.23 per share.

Not applicable to smaller reporting companies.

Disclaimer Regarding Forward-Looking Statements

This Annual Report on Form 10-K contains forward-looking statementswithin the meaning of the federal securities laws. These include statements about our expectations, beliefs, intentions or strategiesfor the future, which we indicate by words or phrases such as “anticipate,” “expect,” “intend,”“plan,” “will,” “we believe,” “believes,” “management believes” andsimilar language. Except for the historical information contained herein, the matters discussed in this “Management’sDiscussion and Analysis of Financial Condition and Results of Operations,” and elsewhere in this Form 10-K are forward-lookingstatements that involve risks and uncertainties. The factors listed in the section captioned “Risk Factors,” as wellas any cautionary language in this Form 10-K, provide examples of risks, uncertainties and events that may cause our actual resultsto differ materially from those projected. Except as may be required by law, we undertake no obligation to update any forward-lookingstatement to reflect events after the date of filing this Annual Report on Form 10-K.

Overview

We are a premium native potato starch manufacturer in the PRC. Our corporate headquarters is based in Hong Kong and our operational headquarters is based in Kunming city, Yunnan province. Webegan operations in 2004 and have factories located in Yunnan, Guizhou and Gansu provinces of China.

We primarily sell our products to distributors and food processingcompanies in the PRC.

Our products are currently sold under the “Wei Bao”and “Jiabao” brand names. The Wei Bao brand is targeted primarily to food processors and our Jiabao brand istargeted to food service operators. We believe that our company is one of the top 5 premium starch potato processors in the PRC,with a production capacity of 111,500 metric tons per year. In 2008, we received the “China’s Potato Starch IndustryTop Ten Best Selling Products”, “China’s Potato Starch Industry Top Ten Customer Satisfaction Product”and “China’s Potato Starch Industry Top Ten Best Brands” awards. Our Jiabao brand created in 2007 is gainingthe acceptance of our target customers.

Reverse acquisition and reorganization

On October 21, 2010 (the “Closing Date”), CFO Consultants,a U.S. public shell company (now known as the Company) completed a stock exchange transaction (the “Share Exchange”)with the stockholders of Hong Kong Waibo International Limited (“Waibo”), whereby 22,493,475 shares of CFO Consultants’common stock were agreed to be issued to stockholders of Waibo in exchange for 100% of their outstanding capital stock in Waibo,equal to 96% of all of the Company’s outstanding common stock, after giving effect to the conversion of an outstanding convertiblenote of the Company held by Millennium Group, Inc. (“Millennium”), in the principal amount of $25,000. Thenote was convertible into 586,804 shares of the Company’s common stock.

On the Closing Date, CFO Consultants did not have sufficientauthorized shares to complete the issuance of the entire amount of these shares, therefore only 2,361,716 shares were issued tothe designee of the shareholders of Waibo at the Closing Date, and no shares were issued to Millennium. After the ClosingDate, these shares represented approximately 87% of the total issued and outstanding shares of the Company. On March 10, 2011 theCompany increased the total number of authorized shares of common stock. On May 27, 2011 the Company issued the remaining20,131,759 shares of common stock issuable pursuant to the stock exchange transaction to the designee of the former shareholdersof Waibo and issued 586,804 shares of common stock to Millennium in full satisfaction of the convertible note.

The Share Exchange has been accounted for as a reverse acquisitionand recapitalization, whereby Waibo is the surviving and continuing entity for financial reporting purposes and is deemed to bethe acquirer. The Share Exchange is accounted for as a reverse acquisition and recapitalization because (i) after thebusiness combination the Waibo Shareholders held approximately 96% of our issued and outstanding shares of common stock and (ii)we had no prior operations.

Sales

We normally enter into six-month agreements with our customers.The agreement specifies the quantity that the customer believes they will buy during the forthcoming nine months and the negotiatedprice per metric ton. Our customers are not charged a penalty for failing to purchase the quantities set forth in our contracts.However, historically our customers have purchased the set amount in the contracts. In the event the market price exceedsthe 10% of the price stipulated in the contract, the agreed price stated on the agreement will be adjusted to the reflect the currentmarket price.

We sell premium quality native potato starch, which is usuallysold for 5-10% more than the average market price.

We have established an extensive distribution network in thePRC. During the year ended December 31, 2011, 51.5% and 48.5% of our products were sold to manufacturers and distributors respectively.

Revenue from sales of our native potato starch is recognizedupon delivery of our products to the railway station nearest to our respective factories at which time the significant risks andrewards of ownership of our products are transferred to the customers.

The main factors that affect our revenue include the following:

We expect to face competition from potato starch producers withmore than 20,000 metric tons of annual production capacity and new entrants. Our future revenue growth depends on our ability tocompete effectively against such competitors and on key considerations including the price and quality of our products. Ifwe are unable to retain existing customers and secure new ones, or fail to develop new products to meet the needs of our customers,our revenue and profitability may be adversely affected.

Profitability in the potato starch industry is materially affectedby the need to maintain a sufficient supply of potatoes at stable prices from farmers. These commodity prices are determined bysupply and demand. While the potato starch industry has historically not been subject to wide fluctuations and cycles, we cannoteliminate the risk of increased operating costs from potato price increases, and it is very difficult to predict when and if pricespiral cycles will occur.

If a new source of starch is discovered as a substitute to nativepotato starch or new production technologies are developed that render our production facilities obsolete, our revenue and profitabilitymay be adversely affected.

We currently have a production capacity of 111,500 metric tonsper year for native potato starch. As of December 31, 2011, our production capacity utilization was 88%. We plan to establish newproduction lines for native potato starch, modified potato starch and whole potato starch. We plan to increase our productioncapacity to 196,500 metric tons by 2012. Should we able to increase our production capacity in time to meet any increasein demand, future growth of our revenue will be significantly improved.

The PRC continues to experience exponential economic and populationgrowth. The per capita usage of potato starch in the PRC is mere 0.8kg per annum, compared to 10kg in developed regions such asEurope and Japan. With the increase in disposable income of the population and the per capita usage of potato starch, webelieve that the demand for our products will continue to rise and improve our revenue and profitability.

Please refer to the section “Risk Factors” hereinfor further information on other factors that may affect our revenue.

Cost of sales

Our cost of sales comprises cost of raw material, direct laborand production overhead, which accounted for 87.8%, 1.3% and 10.9% of our cost of sales respectively for the year ended December31, 2011.

Potatoes are a key raw material and we source them from farmersin Yunnan, Gansu and Guizhou provinces in the PRC.

Direct labor includes salaries, wages and staff related costsof plant operators and those who are directly involved in the production of our products. Overhead consists mainly of depreciationcharges on machinery, utilities (water and electricity) and other factory related costs.

In addition to the volume of production, our costs of salesare affected by, (i) factors affecting the costs of raw materials, namely, the market demand and supply conditions for potatoes,and harvesting conditions; (ii) factors affecting labor costs, namely demand and supply of labor, general wage levels, and governmentregulations; as well as (iii) factors affecting general manufacturing overhead, namely, our depreciation expense resulting fromcapital expenditures and general prices of utilities charges.

Operating expenses

Our operating expenses consist of selling and distribution costsand administrative expenses.

Our selling and distribution costs consisted of transportationcosts, salaries and staff welfare expenses of sales personnel, entertainment expenses and telecommunication expenses incurred byour sales personnel. Our facilities are strategically located near railways, which we use as the main method of transporting ourproducts. We only pay for shipment of our products to the railway station. Our customers pay for the railwaytransfer fee. Transportation costs accounted for an average of 77.5% of our selling and distribution costs incurredfor the year ended December 31, 2011.

Our administrative and other expenses consisted of salariesand staff related expenses for administrative personnel, depreciation charges, entertainment expenses and other office relatedexpenses. The major components of administrative and other expenses include salaries and depreciation, which accounted for an averageof 48.3% and 2.4% of our administrative expenses incurred for the year ended December 31, 2011.

Other non-operating income

Other non-operating income consists of government subsidies,bank interest income and other items. All of our PRC subsidiaries are accredited with “Leading Enterprise” status,which has entitled them to receive various forms of preferential treatment from the local and state governments including governmentsubsidies and infrastructural assistance. The subsidies received related to agriculture land development fund contributions, commitmentto produce high quality native potato starch and our contribution to rural agriculture development.

Interest expense

Our interest expense consists mainly of interest on bank borrowings,which were incurred for working capital purposes.

Income tax expenses

The PRC has enacted a tax policy that entitlesa foreign corporation to a full exemption from both PRC state and local corporate income tax for the first two profitable calendaryears of its operations and thereafter a 50% relief from the PRC state corporate income tax and full exemption from local corporateincome tax for the following three calendar years. Our PRC subsidiaries, namely Yunnan WeiLi, Guizhou WeiLi and GansuWeiBao, qualify for such tax exemptions. The circular entitled “Scope of Preliminary Processing of Agricultural ProductsEntitled to Preferential Enterprise Income Tax Policies (Trial Implementation)” published by Ministry of Finance and StateAdministrative of Taxation, entitled us to a full exemption from PRC corporate income tax since January 1, 2008. Our native potatostarch qualifies for this exemption and as a result none of our subsidiaries are subject to PRC corporate income tax.

Pursuant to the New Tax Law, dividends declared by our PRC subsidiariesto their parent company incorporated in Hong Kong are subject to withholding tax of 5% or 10%. In accordance with Caishui(2008) No. 1 issued by State Tax Authorities, undistributed profits from our PRC subsidiaries up to December 31, 2007 will be exemptfrom withholding tax when they are distributed in the future. As a result, a provision for dividend withholding taxhas been made starting January 1, 2008. No provision for dividend withholding tax has been provided since October 1, 2010,as our Board of Directors and management have adopted a plan to reserve all profits earned after October 1, 2010 for our businessexpansion in the future. As a United States public company, we do not intend to pay such dividends.

Seasonality

From May through July, we typically halt our production processat our facilities located in Yunnan and Guizhou provinces. The potato-planting season typically begins in March andthe potatoes are delivered to our facilities from August until December. The farmers store remaining unsold potatoesin cellars for up to four months, which allows us to expand our production period until April.

Our Gansu factory is in one of the colder regions in China andtypically halts production during January and February and resumes production from March to May. It typicallyshuts down again during June and July and resumes production in August. During the off-season, we spend time performingroutine maintenance.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

We have identified certain accounting policies that are significantto the preparation of the financial statements. Critical accounting policies are those that are both most important to the portrayalof our results of operations and financial condition and require management’s most difficult, subjective, or complex judgment,often as a result of the need to make estimates about the effect of matters that are inherently uncertain and may change in subsequentperiods. Certain accounting estimates are particularly sensitive because of their significance to financial statements andbecause of the possibility that future events affecting the estimate may differ significantly from management’s current judgments. Webelieve the following critical accounting policies involve the most significant estimates and judgments used in the preparationof the financial statements.

Property, plant and equipment

Property, plant and equipment are stated at cost less accumulateddepreciation. Expenditures for routine repairs and maintenance are expensed as incurred.

Depreciation is calculated on the straight-line basis over eachasset’s estimated useful life down to the estimated residual value of each asset. Estimated useful lives are as follows:

We review and evaluate property, plantand equipment for impairment when events or changes in circumstances indicate that the related carrying amounts may not be recoverable.Impairment is considered to exist if the total estimated future cash flows on an undiscounted basis are less than the carryingamount of the assets. An impairment loss is measured and recorded based on discounted estimated future cash flows. Our estimatesof future cash flows are based on numerous assumptions, and it is possible that actual future cash flows will be significantlydifferent than the estimates which are subject to significant risks and uncertainties. Management believes that thereis no impairment to property, plant and equipment as of December 31, 2010 and 2011.

Revenue recognition

We generate our revenues from the sale of native potato starchproducts. Revenues from product sales are recognized only when persuasive evidence of an arrangement exists; deliveryhas occurred and the customers' acceptance has been received; the price to the customer is fixed or determinable; and collectabilityis reasonably assured. Generally, these criteria are met upon shipment of products and transfer of title to customers.

Inventories

Inventory is stated at the lower of cost or market. Inventoryis valued using the weighted average method, which approximates actual cost. Capitalized costs include materials, labor and manufacturingoverhead related to the purchase and production of inventories. Excess and obsolete inventory reserves are establishedbased upon the our evaluation of the quantity of inventory on hand relative to demand. The total reserve for obsoleteinventory was zero as of December 31, 2010 and 2011.

Allowance for Doubtful Accounts

An allowance for doubtful accounts is provided based on an evaluationof the collectability of accounts receivable, and other receivables. An allowance for doubtful accounts is provided, when considerednecessary, primarily consisting of an analysis based on current information available about the customer or borrower. Receivablelosses are charged against the allowance when our management believes the uncollectability of the receivable is confirmed. Subsequentrecoveries, if any, are credited to the allowance. Total allowance for doubtful accounts was zero as of December 31, 2010 and 2011.

RECENTLY ISSUED ACCOUNTING GUIDANCE

In June 2011, the FASB issued guidance to amend the presentationof comprehensive income to allow an entity the option to present the total of comprehensive income, the components of net income,and the components of other comprehensive income either in a single continuous statement of comprehensive income or in two separatebut consecutive statements. In both choices, an entity is required to present each component of net income along with total netincome, each component of other comprehensive income along with a total for other comprehensive income, and a total amount forcomprehensive income. The guidance eliminates the option to present the components of other comprehensive income as part of thestatement of changes in stockholders' equity. This guidance is effective for interim and annual periods beginning after December15, 2011, and is to be applied retrospectively. The Company does not believe the adoption of this guidance will have a materialimpact on its consolidated financial statements.

Results of Operations

The Fiscal Years Ended December 31, 2010 and 2011

Sales

Our sales increased by 17.8% from $91.8 million in 2010 to $108.1million in 2011 primarily as a result of the increase in our average selling prices by 17.5% compared to that of 2010.

Cost of sales

Mergers And Acquisitions Process

Our cost of sales increased by 20.0% from $60.0 million in 2010to $72.0 million in 2011, primarily due to the corresponding increase in average purchase price of potatoes.

Gross profit and gross profit margin

The price of agricultural products increased significantly andraised the purchase price of potatoes since the third quarter of 2010. This increase was partially offset by a drop in potato pricesdue to a bumper harvest of potatoes in the third quarter of 2011. On average, potato price increased by 14.5% and accordingly ourselling price was increased by 17.5% in 2011. As a result our gross profit margin remained fairly stable from 34.7% in 2010 to33.4% in 2011.

Operating expenses

Operating expenses decreased by 5.9% from $4.5 million in 2010to $4.3 million in 2011 due to the cost incurred related to the reverse acquisition with CFO Consultants, Inc. of $0.4 millionincurred in 2010 but not incurred in 2011.

Income tax expense

The PRC subsidiaries have been entitled to full exemption onenterprise income tax in the PRC since January 1, 2008. Income tax expense has been provided for the dividend withholdingtax from 5% to 10% on dividends declared by the PRC subsidiaries to their parent company incorporated in Hong Kong.

Our Board of Directors and management has to reserve all profitsearned after October 1, 2010 for our business expansion in the future and therefore no provision for dividend withholding tax hasbeen provided since October 1, 2010.

The Fiscal Years Ended December 31, 2009 and 2010

Sales

Our sales increased by 42.3% from $64.5 million in 2009 to $91.8million in 2010 primarily as a result of the increase in our average selling prices by 33.9% and sales volume by 6.3% comparedto that of 2009.

Cost of sales

Our cost of sales increased by 64.4% from $36.5 million in 2009to $60.0 million in 2010, primarily due to the corresponding increase in average purchase price of potatoes and sales volume.

Gross profit and gross profit margin

The price of agricultural products has increased significantlysince third quarter of 2010. The average purchase price of potatoes increased by 64.5% from $64 (RMB420) per metricton in 2009 to $105 (RMB691) per metric ton in 2010. The increase in the average purchase price of potatoes in 2010resulted in an increase in the ratio of our cost of sales as a percentage to our sales.

Though our gross profit margin decreased from 43.5% in 2009to 34.7% in 2010, we successfully passed through the increase in the purchase price of potatoes to our customers and improved ourgross profit per unit by 6.9% from $303.2 per metric ton in 2009 to $324.2 per metric ton in 2010. Our customers arewell informed regarding potato prices and the fact that potatoes are our major cost of sales. Since our salespeople are able to explain the price changes, we did not experience difficulty in gaining full customer acceptance on our priceadjustments. We did not lose any anticipated orders and were able to maintain our overall gross profit levels.

We believe that we have the ability to transfer incrementalcost to our customers by making timely adjustments to our selling price. As a result, our total gross profit still increasedby 13.6%, from $28.0 million in 2009 to $31.8 million in 2010.

Operating expenses

Operating expenses increased by 30.5% from $3.5 million in 2009to $4.5 million in 2010 due to the cost incurred related to the reverse acquisition with CFO Consultants, Inc., professional servicesand listing expenses incurred in 2010.

Income tax expense

The PRC subsidiaries have been entitled to full exemption onenterprise income tax in the PRC since January 1, 2008. The income tax expense is provided for the dividend withholdingtax from 5% to 10% on dividends declared by the PRC subsidiaries to their parent company incorporated in Hong Kong.

Income tax expense decreased by 39.5% from $2.6 million in 2009to $1.6 million in 2010, as our Board of Directors and management has to reserve all profits earned after October 1, 2010 for ourbusiness expansion in the future and therefore no provision for dividend withholding tax has been provided since October 1, 2010.

LIQUIDITY AND CAPITAL RESOURCES

We have historically financed operations primarily through internallygenerated cash, loans borrowed from banks and advances from shareholders. Going forward, we believe our sources of liquidity willbe satisfied by using a combination of cash provided by our continuing operating activities and proceeds from future offerings.

The following table sets out a summary of our cash flow during2009 to 2011:

Cash flow from operating activities

We derived our cash flow from operating activities principallyfrom receipt of payments for sales of our products. Our cash outflow from operating activities is principally from purchasesof raw materials.

For 2011, we had net cash generated fromoperating activities of $37.0 million, which was primarily contributed by net income before working capital changes of $32.1 millionand a decrease, representing customer repayments, in trade accounts receivable of $3.1 million. The decrease in tradeaccounts receivable was primarily due to our increased collection effort in 2011.

For 2010, we had net cash generated fromoperating activities of $24.6 million, which was primarily contributed by net income before working capital changes of $25.9 millionand partially offset by cash outflow due to an increase in trade accounts receivable of $3.3 million. The increase intrade accounts receivable was primarily due to the increase in our sales prices during the year.

For 2009, we had net cash generated from operating activitiesof $19.8 million, which was primarily contributed by net income before working capital changes of $21.8 million. Thecash inflow was partially offset by cash outflow due to an increase in trade accounts receivable of $3.9 million. Theincrease in trade accounts receivable was primarily due to our sales growth.

Cash flow from investing activities

Our cash outflow for investing activities is principally forpurchases of and deposits made for property, plant and equipment from 2009 to 2011.

Cash flow from financing activities

We derived our cash inflow from financing activities principallyfrom bank borrowings and advances from shareholders. Our cash outflow from financing activities relates primarily tothe repayment of debts, repayments of advances from shareholders and the payment of dividends.

For 2011, we had net cash generated fromfinancing activities of $7.3 million, which was due to net proceeds from bank borrowings of $0.8 million and net advances receivedfrom shareholders of $6.7 million. The advances received were used primarily to fund working capital requirement of our new subsidiaryYunnan WeiBao.

For 2010, we had net cash used in financingactivities of $19.6 million, which was due to the cash outflow used to pay dividends of $22.8 million, net repayment of bank borrowingsof $1.1 million offset by net advances received from shareholders of $2.4 million.

For 2009, we had net cash used in financing activities of $2.1million, which was primarily due to the net cash outflow used to repay advances to shareholders of $2.1 million.

NET CURRENT ASSETS/LIABILITIES

The following table sets out our current assets and currentliabilities as at the dates indicated:

We had net current assets of $64.8 million as of December 31,2011. The significant improvement in net current assets as of December 31, 2011 from December 31, 2010 of $24.7 millionwas primarily due to cash inflow from operating activities, offset by cash used to make deposits on property, plant and equipmentfor our future expansion plans.

Trade accounts receivable

Our trade accounts receivable represent receivables from customersfor sales of products. We had trade accounts receivable of $22.2 million and $20.0 million as of December 31, 2010 and 2011 respectively. Thedecrease in trade receivables as of December 31, 2010 was due primarily to our increased collection efforts in 2011.

The table below sets out our trade accounts receivable turnoverdays for the periods indicated:

The trade accounts receivable turnover days decreased from 80days in 2010 to 71 days in 2011, as a result of our increased collection efforts in 2011.

Inventories

Our inventories amounted to $1.6 million and $1.3 million asof December 31 2010 and 2011 respectively.

The following table sets out the summary of our inventoriesas of the dates indicated:

The following table sets out the inventory turnover days forthe periods indicated:

The inventory turnover days remained relatively stable in 2010and 2011.

Trade accounts payable

Our trade accounts payable primarily represented the amountwe owed to our suppliers for the purchase of raw materials, mainly potatoes, packaging materials and coal.

Due to shareholders

The balances of amounts due to shareholders of $2.9 millionand $9.4 million as of December 31, 2010 and 2011 are unsecured, non-interest bearing and have no fixed terms of repayment.

Property, plant and equipment

Net plant and machinery and other office equipment, amountedto $7.7 million and $7.2 million as of December 31, 2010 and 2011 respectively. We had no significant additions to property,plant and equipment during the periods presented. Deposits of $11.7 million were made to purchase property, plant and equipmentduring the year ended December 31, 2011 related to our future expansion plans.

Capital Expenditures

The following table sets out the historical capital expendituresduring the periods indicated:

The following table sets out our projected capital expendituresfor the three years ending December 31:

We expect that the capital expenditures for the three yearsending December 31, 2014 will be primarily used for land use rights, buildings, and plant and machinery to establish a nationalresearch and development center for potato starch, new production lines for native potato starch, modified potato starch and wholepotato starch.

We expect to finance our projected capital expenditures mainlyby the net proceeds we received from any future equity offerings and from cash generated from our continuing operating activities.

COMMITMENTS AND CONTINGENCIES

In August 2010, the Company entered intoagreements with the People’s Government of the Zhaoyang District, Yunnan Province to purchase property, plant and equipmenttotaling approximately $19 million related to the construction of production facilities. As of December 31, 2011, the Company haspurchased $0.2 million of property, plant and equipment under these agreements and has made $11.7 million of deposits under theseagreements. Therefore, as of December 31, 2011 the commitment has been reduced to $7.1 million.

Operating lease commitments include commitments under non-cancellablelease agreements for our office premises, as well as a land lease. The leases expire from July 2012 through October2042. The yearly future minimum rental payments required as of December 31, 2011 were as follows:

Applied Mergers And Acquisitions Rar Extractor Mac

Not applicable to smaller reporting companies.

Consolidated Financial Statements

The financial statements required by this item begin on pageF-1 of this Annual Report on Form 10-K.

None.

Evaluation of Disclosure Controls andProcedures

(a) Disclosure Controls and Procedures

Under the supervision and with the participationof our management, including our principal executive officer and principal financial officer, we have conducted an evaluation ofthe effectiveness, as of December 31, 2011, of the design and operation of our disclosure controls and procedures, as defined inRules 13a – 15(e) and 15d – 15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”).A system of controls, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the systemof controls are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud,if any, within a company have been detected. Based on our evaluation, our principal executive officer and principal financial officerhave concluded that, as of such date, our disclosure controls and procedures were not effective to ensure that information requiredto be disclosed by us in our Exchange Act reports is recorded, processed, summarized, and reported within the time periods specifiedin the SEC’s rules and forms, and that information is accumulated and communicated to allow timely decisions regarding requireddisclosures due to the material weaknesses in our internal control over financial reporting as of December 31, 2011, as furtherdescribed below.

(b) Management’s Annual Report onInternal Control over Financial Reporting

Management is responsible for establishingand maintaining adequate internal control over financial reporting for the Company. Internal control over financial reporting refersto the process designed by, or under the supervision of, our principal executive and principal financial officer, and effectedby our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financialreporting and the preparation of financial statements for external purposes in accordance with accounting principles generallyaccepted in the United States of America (US GAAP) and includes those policies and procedures that:

All internal control systems, no matterhow well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonableassurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectivenessto future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degreeof compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness ofour internal control over financial reporting as of December 31, 2011. In making this assessment, we used the criteria set forthby the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control - Integrated Framework.As a result of the material weaknesses described below, we determined that our internal control over financial reporting was noteffective as of December 31, 2011, based on those criteria.

A material weakness is a significant deficiency,or combination of significant deficiencies, in internal control over financial reporting, such that there is a reasonable possibilitythat a material misstatement of the Company’s annual or interim financial statements will not be prevented or detected ona timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control over financialreporting that is less severe than a material weakness; yet important enough to merit attention by those responsible for oversightof the Company’s financial reporting.

As a result of our assessment, managementidentified the following material weaknesses in internal control over financial reporting as of December 31, 2011:

Our management does not believe that thematerial weaknesses discussed above had a material effect on our financial condition or results of operations or caused our financialstatements as of and for the year ended December 31, 2011 to contain a material misstatement.

Attestation Report of Independent RegisteredPublic Accounting Firm

This Annual Report does not include anattestation report of the Company’s independent registered public accounting firm regarding internal control over financialreporting. Management’s assessment was not subject to attestation by the Company’s independent registered public accountingfirm pursuant to rules of the Securities and Exchange Commission.

Changes in Internal Control Over FinancialReporting

No changes in the Company's internal controlover financial reporting have come to management's attention during the Company's last fiscal quarter that have materially affected,or are likely to materially affect, the Company's internal control over financial reporting.

None.

PART III

Directors and Executive Officers

Set forth below are the names of our directors, officers andsignificant employees, their age, all positions and offices that they hold with us, the period during which they have served assuch, and their business experience during at least the last five years. The directors will serve until the next annualmeeting of the stockholders or until their successors are elected or appointed and qualified. Executive officers will serve atthe discretion of the Board of Directors.

Joanny Kwok , age 33, has been chairman of the boardand Chief Executive Officer since October 21, 2010. Ms. Kwok is the co-founder of Hong Kong Wai Bo International Ltd.and has been the CEO and Chairman of the Board since it was founded 2005. In 2006, Ms. Kwok founded Gansu Weibao StarchCo., Ltd. through Hong Kong Waibo International Ltd. Prior to that, Ms. Kwok founded Ever Flow International Ltd. in2002, which was acquired by Hong Kong Wai Bo International Ltd. in 2008. In 2003, Ms. Kwok founded Yunnan Zhaoyang WeiliStarch Co., Ltd. and Guizhou Weining Starch Co., Ltd. through Ever Flow International Ltd. We believe that Ms. Kwokprovides the Board of Directors with unique insight relating to our corporate direction, strategies and business development. Ms.Kwok also is vice president of China Potato Starch-Specialized Society (CPSSS), a national trade organization focused on researchand communication in the potato starch industry. Ms. Kwok graduated from the University of Technology, Sydney (UTS) with a B.A.in International Trade and Finance in 2002.

Guohua Zheng, age 57, is our Chief Operating Officersince October 21, 2010 and has served as a member of our Board of Directors since November 1, 2010. Mr. Zheng has servedas the vice-president of Hong Kong Wai Bo International Limited. since July 2010. Prior to that, Mr. Zheng was General Managerof Gansu Weibao Starch Co., Ltd. from 2006 to July 2010. Mr. Zheng graduated from Yunnan College of Finance and Economics,with a diploma in Corporate Finance Management in 1983. Mr. Zheng offers us and the Board of Directors significant financial,strategic and management expertise.

Ken Tsang, age 31, is our Chief Financial Officer sinceOctober 21, 2010 and the Chief Financial Officer of Hong Kong Wai Bo International Limited since September 1, 2010. He is responsiblefor the implementation of our internal controls and corporate governance practice as well as liaising with external parties andregulatory bodies in respect of financial matters. Prior to joining us, he was an audit manager for RSM Nelson Wheeler, aninternational auditing firm, from 2003 to 2010, where Mr. Tsang was in charge of audit work, internal control review and due diligenceprojects. He graduated from the Hong Kong University of Science and Technology in 2002 with a Bachelor’s Degreein Accounting. He is a CPA member of the Hong Kong Institute of Certified Public Accountants.

Jacky Kwok , age 31, has served as a memberof our Board of Directors since November 1, 2010. Mr. Kwok is the co-founder of Hong Kong Wai Bo International Limitedand is the vice chairman and vice president since it was founded in 2005. Mr. Kwok is responsible for overseeing the manufacturingprocess and raw material procurement. Mr. Kwok graduated from Central Queensland University Australia, with a BachelorsDegree in Business Administration in 2005. We believe that Mr. Kwok possesses detailed and in-depth knowledge of theissues, opportunities and challenges facing us and our business and is thus best positioned to develop agendas that ensure thatthe Board of Director’s time and attention are focused on the most critical matters relating to our business.

Family Relationships

There are no family relationships among our executive officers,directors and significant employees, except that Jacky Kwok, a director, is the brother of our Chief Executive Officer and Chairmanof the Board, Joanny Kwok.

Involvement in Certain Legal Proceedings

To the best of our knowledge, there have been no events underany bankruptcy act, no criminal proceedings and no judgments, injunctions, orders or decrees material to the evaluation of theability and integrity of any director, executive officer, promoter or control person of us during the past ten years.

Code of Ethics

We adopted a Code of Business Conduct and Ethics on March 15,2011. The Code of Ethics, in accordance with Section 406 of the Sarbanes-Oxley Act of 2002 and Item 406 of Regulation S-K, constitutesour Code of Ethics for our principal executive officer, our principal financial and accounting officer and our other senior financialofficers. The Code of Ethics is intended to promote honest and ethical conduct, full and accurate reporting, and compliance withlaws as well as other matters. A printed copy of the Code of Ethics may be obtained free of charge by writing to Rm. 2102 F &G, Nan Fung Centre, 264-298 Castle Peak Rd., Tsuen Wan, N.T., Hong Kong. It may also be viewed on our corporate websiteat http://www.hkwaibo.com.

Board Leadership Structure and Risk Oversight

The Board of Directors is currently composed of three members,of which our chairperson of the board, Joanny Kwok, also serves as our chief executive officer. All actions of the Board of Directorsrequire the approval of a majority of the directors in attendance at a meeting at which a quorum is present. A quorum is a majorityof the Board of Directors. The Board of Directors believes that Ms. Kwok’s service as both Chairman of the Boardand Chief Executive Officer is in the best interests of the Company and its stockholders. Ms. Kwok possesses detailed and in-depthknowledge of the issues, opportunities and challenges facing the Company and its business and is thus best positioned to developagendas that ensure that the Board’s time and attention are focused on the most critical matters. Her combined role enablesdecisive leadership, ensures clear accountability, and enhances the Company’s ability to communicate its message and strategyclearly and consistently to the Company’s stockholders, employees, customers and suppliers.

The Board of Directors is responsible for overall supervisionof our risk oversight efforts as they relate to the key business risks facing the organization. Management identifies, assesses,and manages the risks most critical to our operations on a day-to-day basis and routinely advises the Board of Directors on thosematters, as the CEO and CFO have access to the Board of Directors and attend regular meetings. The Board of Directors’ rolein our risk oversight is consistent with our leadership structure, with senior management having responsibility for assessing andmanaging our risk exposure, and the Board of Directors providing oversight as necessary in connection with those efforts.

Committees of the Board of Directors

Audit Committee

We have not yet appointed an audit committee. At the presenttime, we believe that the members of Board of Directors are collectively capable of analyzing and evaluating our financial statementsand understanding internal controls and procedures for financial reporting. We do, however, recognize the importance of goodcorporate governance and intend to appoint an audit committee comprised entirely of independent directors, including at least onefinancial expert, in the near future.

Nominating Committee

We do not presently have a nominating committee. Our Boardof Directors currently acts as our nominating committee.

Compensation Committee

We do not presently have a compensation committee. Our Boardof Directors currently acts as our compensation committee.

Policy Regarding Board Attendance

Our directors are expected to attend meetings of the Board ofDirectors as frequently as necessary to properly discharge their responsibilities and to spend the time needed to prepare for eachsuch meeting. Our directors are expected to attend annual meetings of stockholders, but we do not have a formal policy requiringthem to do so.

Shareholder Communications

We have a process for shareholders who wish to communicate withthe Board of Directors. Shareholders who wish to communicate with the Board of Directors may write to Kaibo Foods Company Limited,Rm. 2102 F & G, Nan Fung Centre 264-298 Castle Peak Rd., Tsuen Wan, N.T., Hong Kong, Attn: Chief Operating Officer. These communicationswill be reviewed by one or more of our employees designated by the Board of Directors, who will determine whether they should bepresented to the Board of Directors. The purpose of this screening is to allow the Board of Directors to avoid having to considerirrelevant or inappropriate communications.

Security Holder Recommendations for Board of Director Nominees

There have been no changes to the proceduresby which our stockholders may recommend nominees to the Board of Directors.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires our executiveofficers, directors and persons who beneficially own more than 10% of a registered class of our equity securities to file withthe SEC initial reports of ownership and reports of changes in ownership of Common Stock and other equity securities. These executiveofficers, directors, and greater than 10% beneficial owners are required by SEC regulation to furnish us with copies of all Section 16(a)forms filed by such reporting persons.

Based solely on our review of such forms furnished to us, webelieve that all filing requirements applicable to our executive officers, directors and greater than 10% beneficial owners werecomplied with during 2011.

Summary Compensation Table

The following table sets forth all cash compensation paid byus, as well as certain other compensation paid or accrued, for each of the last two of our fiscal years to each named executiveofficers.

Employment Agreements with Executive Officers

We do not have any employment agreements with our executiveofficers.

Option Grants in Last Fiscal Year

There were no options granted to any of the named executiveofficers during the fiscal years ended December 31, 2010 and 2011.

Equity Compensation Plan Information

We currently do not have any equity compensation plans.

Compensation of Directors

Currently our directors serve without compensation.

Security Ownership of Certain Beneficial Owners and Management

The following table sets forth certain information regardingbeneficial ownership of Common Stock as of December 31, 2011 by (i) each person (orgroup of affiliated persons) who is known by us to own more than five percent of the outstanding shares of Common Stock, (ii) eachdirector, executive officer and director nominee, and (iii) all of our directors, executive officers and director nominees as agroup. As of December 31, 2011, we had 24,003,570 shares of Common Stock issued and outstanding, warrants to acquire 2,760,000shares of Common Stock (“Warrants”). None of the Warrants are held by officers, directors, or principle shareholdersof the Company.

Securities Authorized for Issuance Under Equity CompensationPlans

None.

Changes in Control

Not Applicable.

Shareholder Loans

Ms. Joanny Kwok, our Chief Executive Officer and Chairperson,has at various times advanced funds to the Company either directly or through entities that she controls. These loans have beenunsecured, non-interest bearing, and have no fixed terms of repayment. The principle amount due on these loans was approximately$2.9 million and $9.4 million as of December 31, 2010 and 2011. The maximum amount advanced to the Company was approximately $2.9million and $9.4 million during the years ended December 31, 2010 and 2011. The Company repaid approximately $0.6 million of theadvances during the year ended December 31, 2010, and no repayment was made during the year ended December 31, 2011.

Director Independence

Currently, we do not have any independent directors. Since ourCommon Stock is not currently listed on a national securities exchange, we have used the definition of “independence”of The NASDAQ Stock Market to make this determination.

Under NASDAQ Listing Rule 5605(a)(2), an “independentdirector” is a “person other than an officer or employee of the company or any other individual having a relationshipwhich, in the opinion of the company’s board of directors, would interfere with the exercise of independent judgment in carryingout the responsibilities of a director.”

We do not currently have a separately designated audit, nominatingor compensation committee. However, we do intend to comply with the independent director and committee composition requirementsin the future.

Effective October 21, 2010, we retained GHP Horwath, P.C. asour independent registered public accounting firm. Prior to October 21, 2010, Sam Kan & Company had served as ourauditor.

Fees for the fiscal years ended December 31, 2011 and2010

Audit Fees. Fees billed and expected to bebilled by GHP Horwath, P.C. for the annual audit and quarterly reviews relating to the fiscal year ended December 31, 2011 wereapproximately $241,000. This amount includes fees related to procedures performed required to issue consents related to RegistrationStatements filed by the Company during 2011. Fees billed by GHP Horwath, P.C. were approximately $185,000 for the audit of theannual financial statements for the fiscal year ended December 31, 2010. Fees billed by GHP Horwath, P.C. in 2010 inconnection with the review of our Forms 8-K and 8-K/A, including the audit of Hong Kong Waibo’s financial statements priorto the reverse merger were approximately $212,000.

Audit-Related Fees. None.

Tax Fees. None.

All Other Fees. None

SIGNATURES

Pursuant to the requirements of Section13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this Report to be signed on its behalf by theundersigned, thereunto duly authorized.

Pursuant to the requirements of the SecuritiesExchange Act of 1934, this Report has been signed below by the following persons on behalf of the registrant and in the capacitiesand on the date indicated.

Exhibit Index

KAIBO FOODS COMPANY LIMITED

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2009, 2010 AND2011

REPORT OF INDEPENDENT REGISTERED PUBLICACCOUNTING FIRM

Board of Directors and Shareholders

Kaibo Foods Company Limited

We have audited the accompanying consolidatedbalance sheets of Kaibo Foods Company Limited and subsidiaries (“the Company”) as of December 31, 2011 and 2010, andthe related consolidated statements of operations, comprehensive income, shareholders’ equity, and cash flows for each ofthe three years in the period ended December 31, 2011. These financial statements are the responsibility of the Company’smanagement. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance withthe standards of the Public Company Accounting Oversight Board (United States). Those standards require that we planand perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. Anaudit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Anaudit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluatingthe overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financialstatements referred to above present fairly, in all material respects, the financial position of Kaibo Foods Company Limited andsubsidiaries as of December 31, 2011 and 2010, and the results of their operations and their cash flows for each of the three yearsin the period ended December 31, 2011, in conformity with accounting principles generally accepted in the United States of America.

KAIBO FOODS COMPANY LIMITED

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 2010 AND 2011

(US dollars in thousands, except sharedata)

The accompanying notesare an integral part of these consolidated financial statements.

KAIBO FOODS COMPANY LIMITED

CONSOLIDATED STATEMENTS OF OPERATIONS

YEARS ENDED DECEMBER 31, 2009, 2010 AND2011

(US dollars in thousands, except forshare and per share data)

The accompanying notes are an integral partof these consolidated financial statements.

KAIBO FOODS COMPANY LIMITED

CONSOLIDATED STATEMENTS OF COMPREHENSIVEINCOME

YEARS ENDED DECEMBER 31, 2009, 2010 AND2011

(US dollars in thousands)

The accompanying notes are an integral partof these consolidated financial statements.

KAIBO FOODS COMPANY LIMITED

CONSOLIDATED STATEMENTS OF SHAREHOLDERS’EQUITY

YEARS ENDED DECEMBER 31, 2009, 2010 AND2011

(US dollars in thousands, except sharedata)

The accompanying notes are an integral partof these consolidated financial statements.

KAIBO FOODS COMPANY LIMITED

CONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER 31, 2009, 2010 AND2011

(US dollars in thousands)

The accompanying notes are an integral partof these consolidated financial statements.

Kaibo Foods Company Limited(the “Company”) was incorporated in the State of Nevada on December 10, 2007 in the former name of CFO Consultants,Inc (“CFO Consultants”). On March 10, 2011, the Company changed its name from “CFO Consultants, Inc.”to “Kaibo Foods Company Limited”. The Company is primarily engaged in the business of processing potatoesand selling potato starch products in the People’s Republic of China (the “PRC”).

The Company’s principalsubsidiaries at December 31, 2011 are as follows:

On October 21, 2010 (the “ClosingDate”), CFO Consultants, a U.S. public shell company (now known as the Company) completed a stock exchange transaction (the“Share Exchange”) with the stockholders of Hong Kong Waibo International Limited (“Waibo”), whereby 22,493,475shares of CFO Consultants’ common stock were agreed to be issued to stockholders of Waibo in exchange for 100% of their outstandingcapital stock in Waibo, equal to 96% of all of the Company’s outstanding common stock, after giving effect to the conversionof an outstanding convertible note of the Company held by Millennium Group, Inc. (“Millennium”), in the principal amountof $25,000 (Note 5). The note was convertible into 586,804 shares of the Company’s common stock.

On the Closing Date, CFO Consultantsdid not have sufficient authorized shares to complete the issuance of the entire amount of these shares, therefore only 2,361,716shares were issued to the designee of the shareholders of Waibo at the Closing Date, and no shares were issued to Millennium. Afterthe Closing Date, these shares represented approximately 87% of the total issued and outstanding shares of the Company. On March10, 2011 the Company increased the total number of authorized shares of common stock. On May 27, 2011 the Company issuedthe remaining 20,131,759 shares of common stock issuable pursuant to the stock exchange transaction to the designee of the formershareholders of Waibo and issued 586,804 shares of common stock to Millennium in full satisfaction of the convertible note.

On the Closing Date, Waibo becamea wholly-owned subsidiary of the Company. The Share Exchange has been accounted for as a reverse acquisition and recapitalizationwhereby Waibo is deemed to be the accounting acquirer (legal acquiree) and the Company is deemed to be the accounting acquiree(legal acquirer). Accordingly, Waibo’s historical financial statements for the periods prior to the reverse acquisition becamethose of the Company retroactively restated for, and giving effect to, the number of shares received in the Share Exchange. Theassets and liabilities, and revenues and expenses of the Company are included in the accompanying financial statements effectivefrom the Closing Date. The total net liabilities assumed by Waibo as of the Closing Date were $25,000. TheCompany is deemed to be a continuation of the business of Waibo.

On March 10, 2011, the Companyfiled a Certificate of Amendment to its Articles of Incorporation (the “Amendment”) with the Secretary of State ofthe State of Nevada for the purpose affecting a 1 for 16.09 reverse stock split (the “Reverse Stock Split”). Inaddition to setting forth the terms of the Reverse Stock Split, the Amendment also (i) increased the total number of authorizedshares of capital stock of the Company from 75,000,000 to 600,000,000 shares of common stock; (ii) provided for a class of 2,000,000shares of blank check preferred stock; (iii) elected for the Company not to be governed by the business combination statute underthe Nevada Private Corporations Law; and (iv) changed the name of the Company to “Kaibo Foods Company Limited”.All shares and per share amounts for periods prior to March 10, 2011 in these financial statements have been given effect to theReverse Stock Split.

On March 23, 2011, the Companywas approved to change to its stock symbol on the OTC Bulletin Board and now trades under the stock symbol “KKFC”.

The Company mainly focuses onserving the local market in the PRC. Currently, the Company’s potato starch products are sold to customers intwelve provinces and four municipalities in the PRC. Sales of the Company’s products are generated using a combinationof direct sales and distributor agreements. The Company created the “Weibao” and “Jiabao” brands with emphasison high quality, purity, whiteness and consistency. The Weibao brand is targeted at industrial users such as food andpharmaceutical manufacturers, while the Jiabao brand is targeted at food service operators such as restaurants, caterers and thecustomer retail market.

The consolidated financial statementsof the Company are prepared in accordance with accounting principles generally accepted in the United States of America (“USGAAP”). The accompanying financial statements present the consolidated financial position of the Company as of December 31,2010 and 2011, and the consolidated results of operations and cash flows of the Company for each of the three years in the periodended December 31, 2011. Significant intercompany accounts and transactions have been eliminated in consolidation.

The preparation of the consolidatedfinancial statements in conformity with US GAAP requires management to make estimates and assumptions that affect the reportedamounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financialstatements and the reported amounts of revenues and expenses during the reporting periods. Estimates are used in accounting for,among other things, the allowance for doubtful accounts, derivative instruments, accruals, and the useful lives of property, plantand equipment. Actual results may differ from previously estimated amounts.

The majority of the Company’soperations are conducted in the PRC. Accordingly, the Company’s business, financial condition and results of operations maybe influenced by the political, economic and legal environment in the PRC, and by the general state of the PRC economy. The Company’soperations in the PRC are subject to special considerations and significant risks not typically associated with companies in NorthAmerica and Western Europe. These include risks associated with, among others, the political, economic and legal environment, andforeign currency exchange. The Company's results may be adversely affected by changes in the political and social conditions inthe 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.

The Company generally halts itsproduction process from May through July for its production facilities located in the Yunnan and Guizhou provinces. The potatoplanting season typically begins in March, and potatoes are harvested from early July until the end of December. The harvestedpotatoes can typically be stored up to four months in cellars by farmers, allowing the facilities in Yunnan and Guizhou to expandtheir production period through April of each year.

The Company’s productionfacility in Gansu is located in a colder region in the PRC and typically halts production from January to February. TheGansu facility will then close for production from June through July and resumes production in August.

During the off season, the productionfacilities perform routine maintenance on their production lines.

Cash includes deposits in bankswhich are unrestricted as to withdrawal or use.

An allowance for doubtful accountsis provided based on an evaluation of the collectability of accounts receivable, and other receivables. This evaluation primarilyconsists of an analysis based on current information available about the customer or borrower. Receivable losses are charged againstthe allowance when the Company believes the uncollectability of the receivable is confirmed. Subsequent recoveries, if any, arecredited to the allowance. No allowance for doubtful accounts was deemed necessary as of December 31, 2010 and 2011.

The carrying value of financialinstruments including cash, trade accounts receivable and payable, convertible notes and short-term borrowings approximate fairvalue due to their short maturities. The fair value of amounts due to shareholders is not practicable to estimate,due to the related party nature of the underlying transactions.

Financial Accounting StandardsBoard (“FASB”) Accounting Standards Codification (“ASC”) No. 820-10 (“FASB ASC 820-10”) establishesa fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives thehighest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and thelowest priority to unobservable inputs (Level 3 measurements). As required by FASB ASC 820-10, assets and liabilities are classifiedin their entirety based on the lowest level of input that is significant to the fair value measurement. The three levels of thefair value hierarchy under FASB ASC 820-10 are described below:

As of December 31, 2010 and 2011,derivative instruments are measured at fair value on a recurring basis within Level 2 (See Note 10). The Company didnot have any assets or liabilities measured on a recurring basis within Level 1 or Level 3.

Inventory is stated at the lowerof cost or market. Inventory is valued using the weighted-average method, which approximates actual cost. Capitalized costs includematerials, labor and manufacturing overhead related to the purchase and production of inventories. Excess and obsoleteinventory reserves are established based upon the Company’s evaluation of the quantity of inventory on hand relative to demand. Noreserve for obsolete inventory was deemed necessary as of December 31, 2010 and 2011.

Property, plant and equipmentare stated at cost less accumulated depreciation. Expenditures for routine repairs and maintenance are expensed as incurred.

Depreciation is calculated onthe straight-line basis over each asset’s estimated useful life down to the estimated residual value of each asset. Estimateduseful lives are as follows:

All land in the PRC is owned bythe PRC government. The government in the PRC, according to PRC law, may sell the right to use the land for a specified periodof time. Thus, all of the Company’s land purchases in the PRC are considered to be land use rights and are stated at costless accumulated amortization and any recognized impairment loss. The cost of the land use right is amortized on a straight-linebasis over the lease term.

The Company reviews and evaluatesits property, plant and equipment for impairment when events or changes in circumstances indicate that the related carrying amountsmay not be recoverable. Recoverability is measured by comparing the total estimated future cash flows on an undiscounted basisto the carrying amount of the assets. If such assets are considered to be impaired, an impairment loss is measured and recordedbased on the amount that carrying value exceeds fair value. The Company’s estimates of future cash flows used in determiningfair value are based on numerous assumptions, and it is possible that actual future cash flows may be significantly different thanthe estimates, which are subject to significant risks and uncertainties. Management believes there is no impairmentto property, plant and equipment as of December 31, 2010 and 2011.

The Company generates its revenuesfrom the sale of potato starch products.

Revenues from product sales arerecognized only when persuasive evidence of an arrangement exists; delivery has occurred and any necessary customer acceptancehas been received; the price to the customer is fixed or determinable, and collectability is reasonably assured. Generally, thesecriteria are met upon shipment of products and transfer of title to customers.

Income tax expense is recognizedfor the amount of taxes payable or refundable for the current year. In addition, deferred tax assets and liabilities are recognizedfor expected future tax consequences of temporary differences between the financial reporting and tax bases of assets and liabilities,and for operating losses and tax credit carry forwards. Deferred taxes are measured by applying enacted tax rates expectedto apply to the taxable income in the years in which those temporary differences are expected to be recovered or settled.

The Company recognizes the financialstatement impact of a tax position taken or expected to be taken in a tax return in its consolidated financial statements whenit is more-likely-than-not that the position will be sustained upon examination by tax authorities. A recognized tax position isthen measured at the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement.

The Company files income tax returnsin various foreign jurisdictions. Various foreign jurisdiction tax years remain open to examination; however, the Companybelieves any additional assessment, if any, will be immaterial to its consolidated financial statements. The Companydoes not believe there will be any material changes in its tax positions over the next 12 months. Interest and penaltiesaccrued on any unrecognized tax benefits, if any, will be recognized as a component of income tax expense. As of December31, 2010 and 2011 the Company did not have any accrued interest or penalties associated with any unrecognized tax benefits, norwas any interest expense recognized during the years ended December 31, 2009, 2010 and 2011.

Sales of goods in the PRC aresubject to VAT at 17% (Output VAT). Input tax on purchases can be deducted from output VAT. The net amount of VAT recoverable from,or payable to, the taxation authority is included as part of “other receivables” or “other payables” inthe consolidated balance sheets.

Revenues, expenses and assetsare recognized net of the amount of VAT, except:

Pursuant to the relevant regulationsof the PRC government, the Company participates in a local municipal government social benefits plan, whereby the subsidiariesof the Company in the PRC are required to contribute a certain percentage of the basic salaries of their employees to fund theirretirement benefits. The local municipal government undertakes to assume the retirement benefits obligations of allexisting and future retired employees of the subsidiaries of the Company. The only obligation of the Company is to pay the ongoingrequired contributions. Contributions are charged to expense as incurred (Note 8). There are no provisions whereby forfeitedcontributions may be used to reduce future contributions.

The Company charges all costsof advertising to expense. The Company incurred no advertising expense during the years ended December 31, 2009, 2010and 2011.

The functional currency of Waibois the Hong Kong Dollar (“HK$”). The functional currency of the Company’s wholly-owned PRC subsidiaries is theChinese Renminbi Yuan, (“RMB”). The RMB is not freely convertible into foreign currencies. The Company’s HongKong and PRC subsidiaries’ financial statements are maintained in their respective functional currencies. Monetary assetsand liabilities denominated in currencies other than the functional currency are translated into the functional currency at ratesof exchange prevailing at the balance sheet date. Transactions denominated in currencies other than the functional currency aretranslated into the functional currency at the exchange rates prevailing at the dates of the transactions. Exchange gains or lossesarising from foreign currency transactions are included in the determination of net income for the respective periods, which werenot significant in 2009, 2010, or 2011.

For financial reporting purposes,the consolidated financial statements of the Company have been translated into United States dollars (“US$”). Assetsand liabilities are translated at exchange rates at the balance sheet dates, revenue and expenses are translated at average exchangerates, and shareholders’ equity is translated at historical exchange rates. Any resulting translation adjustments are notincluded in determining net income but are included as a foreign currency translation adjustment to other comprehensive income,a component of shareholders’ equity.

The exchange rates applied areas follows:

Revenue is recorded net of applicablesales, use and value added tax.

ASC 260 “Earnings Per Share”requires dual presentation of basic and diluted earnings per share (“EPS”) with a reconciliation of the numerator anddenominator of the basic EPS computation to the numerator and denominator of the diluted EPS computation. Basic EPS excludes dilution.Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercisedor converted into common stock or resulted in the issuance of common stock that then shared in the earnings of the Company.

Earnings per basic share of commonstock is based on the weighted average number of shares of common stock outstanding during each respective period. Earnings perdiluted share of common stock adds to basic weighted shares the weighted average number of shares issuable under convertible securitiesand warrants outstanding during each respective period, using the if-converted and treasury-stock methods (See Note 7).

In June 2011, the FASB issuedguidance to amend the presentation of comprehensive income to allow an entity the option to present the total of comprehensiveincome, the components of net income, and the components of other comprehensive income either in a single continuous statementof comprehensive income or in two separate but consecutive statements. In both choices, an entity is required to present each componentof net income along with total net income, each component of other comprehensive income along with a total for other comprehensiveincome, and a total amount for comprehensive income. The guidance eliminates the option to present the components of other comprehensiveincome as part of the statement of changes in stockholders' equity. This guidance is effective for interim and annual periods beginningafter December 15, 2011, and is to be applied retrospectively. The Company does not believe the adoption of this guidance willhave a material impact on its consolidated financial statements.

Inventories consist of:

Property, plant and equipment consist of:

On August 20, 2010, CFO Consultantsissued a convertible note with a principal amount of $25,000, and a maturity date of August 20, 2012, to Millennium. Millenniumis a consulting services firm that is owned and managed by an individual whose father is a minority shareholder of the Company. Theconvertible note was issued to Millennium as a non-refundable retainer to pay for Millennium to complete due diligence on CFO Consultantsand to secure its assistance with future advice and assistance on new business directions, including possible acquisitions. CFOConsultants also engaged Millennium pursuant to a consulting agreement to assist them in connection with new business developmentstrategies and options.

Mergers And Acquisitions Definition

Under a consulting agreement,Millennium was to also receive a $400,000 cash payment if it was involved in assisting or advising the Company on any acquisitionthat is completed. On October 21, 2010, Millennium elected to convert the entire balance of the convertible note plus accrued interestinto 586,804 shares of the Company’s common stock. The fair value of the consideration received by Millennium (the586,804 shares of common stock) was determined to be approximately $400,000 at the date Millennium provided the Company with itsnotice to convert (October 21, 2010). However, the Company did not have sufficient authorized shares to complete the conversionat that time. Therefore, this amount was reported as a liability within “Accruals and Other Payables” as of December31, 2010. On May 27, 2011, the Company issued 586,804 shares of common stock to Millennium to complete the conversion. Accordingly,both the carrying amount of the $25,000 convertible note and the $400,000 liability were reclassified to common stock and additionalpaid in capital of the Company at the date of conversion.

Pre-tax income from operationsfor the years ended December 31, 2009, 2010 and 2011, was taxable in the following jurisdiction:

No U.S. corporate income taxesare provided for in these consolidated financial statements, as the Company did not generate any taxable income in the U.S.

No provision has been made for Hong Kong profits taxas the Company did not earn income subject to Hong Kong profits tax.

Pursuant to the circular entitledScope of Preliminary Processing of Agricultural Products Entitled to Preferential Enterprise Income Tax Policies (Trial Implementation)published by Ministry of Finance (“MOF”) and State Administrative of Taxation (“SAT”), the Company’sPRC subsidiaries have been entitled to full exemption from PRC corporate income tax beginning January 1, 2008. The exemptioncurrently is not subject to any limitations.

A reconciliation of the PRC statutorytax rate to the actual provision for income taxes is as follows:

Basic income per share is calculated using the weightedaverage number of shares of common stock outstanding during the period. Diluted income per share assumes the conversion,exercise or issuance of all potential common stock instruments, such as warrants and convertible debt, unless the effect is anti-dilutive.

The following is a reconciliation of the denominatorsfor the weighted average number of shares outstanding used in the calculation of basic income per share for the years ended December31, 2009, 2010 and 2011:

The following is a reconciliation of the denominatorsfor the weighted average number of shares outstanding used in the calculation of diluted income per share for the years ended December31, 2009, 2010 and 2011:

As of December 31, 2010 and 2011the Company had warrants outstanding to purchase 171,536 shares of common stock, which were considered anti-dilutive as the exerciseprices of the warrants exceeded the average market price of the Company’s common stock. As of December 31, 2009,the Company had no potentially dilutive securities outstanding.

The Company’s subsidiariesin the PRC participate in a government-mandated social benefits plan pursuant to which certain retirement, medical, housing andother welfare benefits are provided to employees. Chinese labor regulations require the Company’s PRC subsidiaries to payto the local labor bureau a monthly contribution at a stated contribution rate based on the monthly base compensation of qualifiedemployees. The relevant local labor bureau is responsible for meeting all retirement benefit obligations; the Company has no furthercommitments beyond its monthly contribution. The Company recorded expenses of approximately $0.4 million, $0.5 millionand $0.6 million related to plan contributions during the years ended December 31, 2009, 2010 and 2011, respectively.

The amounts dueto shareholders (who are beneficial owners of 93.7% of the Company’s common stock) as of December 31, 2009, 2010 and2011 and annual transactions are as follows:

The amounts due to shareholdersare unsecured, non-interest bearing and have no fixed terms of repayment. Cash advances received from shareholders areprimarily used by the Company to finance working capital requirements.

On December 21, 2010, the Companyentered into a securities purchase agreement (the “Purchase Agreement”) with certain accredited investors (the “Investors”)for the issuance and sale of an aggregate of (i) 571,797 shares of common stock and (ii) warrants to purchase up to 114,357 sharesof common stock. Each warrant has an initial exercise price of $5.23 per share and expires on March 10, 2014. Grossproceeds received from the private placement totaled approximately $2,300,000 ($1,886,000 of proceeds net of offering costs). Inaddition, in connection with this private placement, the Company granted 57,179 warrants to the placement agent exercisable at$5.23 per share that expire on March 10, 2014.

In connection with the PurchaseAgreement, the Company and its majority stockholder, Kai Bo Holdings Limited (“Kai Bo”), entered into an escrow agreement(the “Make Good Escrow Agreement”) with the Investors, pursuant to which Kai Bo placed 285,892 shares of its commonstock of the Company into escrow for distribution of up to 142,946 shares to the Investors in each of 2011 and 2012 in the eventthat the Company fails to reach certain net income targets for its 2010 and 2011 fiscal years. Pursuant to the MakeGood Escrow Agreement, if the Company’s after tax net income for fiscal 2010 is less than 95% of $25,882,536 (95% of suchamount being the “2010 Guaranteed ATNI”), the escrow agent will transfer to each Investor on a pro rata basis a numberof shares that is equal to 7,148 shares of common stock for each full percentage point by which the 2010 Guaranteed ATNI was notachieved up to a maximum of 142,946 shares. If the Company’s after tax net income for fiscal 2011 is less than95% of $33,382,670 (95% of such amount being the “2011 Guaranteed ATNI”), the escrow agent will transfer to each Investora number of shares that is equal to 7,148 shares of commons stock for each full percentage point by which the 2011 Guaranteed ATNIwas not achieved up to a maximum of 142,946 shares. The 2010 and 2011 Guaranteed ATNI were reached, therefore no amounts are owedto the Investors.

In connection with the PurchaseAgreement, the Company granted to the Investors and the placement agent warrants to purchase an aggregate of 171,536 shares ofthe Company’s common stock at an exercise price of $5.23 per share or on a cashless exercise basis, which expire on March10, 2014.

Pursuant to the Purchase Agreement,if at any time prior to the exercise of the warrants, the Company enters into an agreement to issue shares of its common stockat a price less than that obtained for the common stock and warrants issued under the Purchase Agreement, the exercise price ofthe warrants will be adjusted downward as to obtain an equivalent number of shares of common stock at the lower issuance price. Asa result, the warrants are not considered to be indexed to the Company’s common stock and are therefore accounted for asa derivative liability instrument in the Company’s consolidated balance sheet. As of December 31, 2010,the Company valued the warrants at approximately $55,000 using a binominal model and has reported the warrants as a liability onits consolidated balance sheet under the caption “Derivative Instruments”. The change in fair valueof the derivative instruments was not significant from the date of the closing of the Purchase Agreement (December 21, 2010) throughDecember 31, 2010. The change in fair value of the derivative instruments during the year ended December 31, 2011 wasapproximately $50,000. Changes to the fair value of the Derivative Instruments are reported in the Company’s statement ofoperations under the caption “Interest income and other”.

The assumptions used in the binominalmodel to estimate the fair value of the warrants as of December 31, 2010 and 2011 are as follows:

In accordance with the relevantregulations of the PRC, the Company’s subsidiaries registered in the PRC are required to transfer 10% of their net incomeafter tax, if any, to a statutory reserve until such reserve reaches 50% of their registered capital. As of December 31, 2009 and2010, all of the PRC subsidiaries statutory reserves have reached 50% of their registered capital. Subject to certain restrictionsas set out in the relevant regulations and the articles of association of these PRC subsidiaries, the statutory reserve may beused to offset the accumulated losses, or for capitalization as paid-up capital of the subsidiaries, provided that the balanceafter such issue is not less than 25% of their registered capital.

In accordance with the relevantPRC regulations and the Articles of Association of the Company’s subsidiaries in the PRC, appropriations of net income asreflected in its PRC statutory financial statements are to be allocated to each of the general reserve and enterprise expansionreserve, as determined by the resolution of the Board of Directors annually. For the years ended December 31, 2009, 2010 and 2011,approximately $0.2 million, $0 and $0 of reserves, respectively, were appropriated.

The Company’s structurecreates restrictions on its payment of dividends. The payment of dividends is also subject to numerous restrictions imposed underPRC law, including restrictions on the conversion of local currency into United States dollars and other currencies.

Financial instruments that potentiallysubject the Company to a significant concentration of credit risk consist principally of the following:

The Company maintains its cashand cash deposits primarily with various China State-owned banks and Hong Kong-based financial institutions. The Company performsperiodic evaluations of the relative credit standing of those financial institutions.

The Company sells potato starchto customers in the PRC. Management considers that the Company’s current customers are generally creditworthy and creditis extended based on an evaluation of the customers’ financial condition. Therefore collateral is generally not required.The Company evaluates accounts receivable for potential credit losses based on its loss history and aging analysis. Such losseshave been within management’s expectations. At December 31, 2010 and 2011, the five largest customers accounted for26% and 25% of trade receivables, respectively. No single customer exceeds 10% of trade receivables. For the years endedDecember 31, 2009, 2010 and 2011, the five largest customers accounted for 20%, 25% and 21% of net sales, respectively.

The cash flows and profitabilityof the Company’s operations are significantly affected by the market price of potato starch and potatoes. These commodityprices can fluctuate widely and are affected by factors beyond the Company’s control.

The RMB is not freely convertibleinto foreign currencies. The State Administration for Foreign Exchange, under the authority of People’s Bank of China, controlsthe conversion of the RMB into foreign currencies. The value of the RMB is subject to changes in PRC government policies and tointernational economic and political developments affecting supply and demand in the China Foreign Exchange Trading System market.All foreign exchange transactions continue to take place either through the People’s Bank of China or other banks authorizedto buy and sell foreign currencies at the exchange rates quoted by the People’s Bank of China.

Applied Mergers And Acquisitions Cd-rom

Applied Mergers And Acquisitions Bruner

In August 2010, the Companyentered into agreements with the People’s Government of the Zhaoyang District, Yunnan Province to purchase property, plantand equipment totaling approximately $19 million related to the construction of production facilities. As of December 31, 2011,the Company has purchased $0.2 million of property, plant and equipment under these agreements and has made $11.7 million of depositsunder these agreements. Therefore, as of December 31, 2011, the commitment has been reduced to $7.1 million. In addition, as ofDecember 31, 2011, the company has contracts with vendors to purchase equipment relating to the construction of production facilitiesfor $10.3 million.

Mergers And Acquisitions Process

Operating lease commitments includecommitments under non cancellable lease agreements for the Company’s office premises, as well as a land lease. Theleases expire from July 2012 through October 2042. The future minimum rental payments as of December 31, 2011 were asfollows: