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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10−Q

(Mark One)

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: March 31, 2012

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

For the transition period from ____________to _____________

Commission File No. 000-53141

FIFTH SEASON INTERNATIONAL, INC.
(Exact name of registrant as specified in its charter)

Delaware	26-0855681
(State or other jurisdiction of incorporation or	(I.R.S. Employer Identification No.)
organization)

C-22, Shimao Plaza, 9 Fuhong Lu
Futian District, Shenzhen 518033
People’s Republic of China
(Address of principal executive offices)

(86) 755 83 67 9378
(Registrant’s telephone number, including area code)

_____________________________________________________
(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes [X]                                           No [   ]

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes [    ]                                            No [   ]

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

Large accelerated filer [   ]	Accelerated filer [   ]
Non-accelerated filer  [   ]  (Do not check if a smaller reporting company)	Smaller reporting company [X]

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

Yes [    ]                                             No [X]

The number of shares outstanding of each of the issuer’s classes of common stock, as of May 10, 2012 is as follows:

	Class of Securities		Shares Outstanding
	Common Stock, $0.00001 par value		399,999,847

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FIFTH SEASON INTERNATIONAL, INC.

Quarterly Report on Form 10-Q

Three Months Ended March 31, 2012

TABLE OF CONTENTS

PART I	1
FINANCIAL INFORMATION	1

	ITEM 1.	FINANCIAL STATEMENTS.	1
	ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.	20
	ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.	31
	ITEM 4.	CONTROLS AND PROCEDURES.	31

PART II	32
OTHER INFORMATION	32

	ITEM 1.	LEGAL PROCEEDINGS.	32
	ITEM 1A.	RISK FACTORS.	32
	ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.	32
	ITEM 3.	DEFAULTS UPON SENIOR SECURITIES.	32
	ITEM 4.	(REMOVED AND RESERVED).	32
	ITEM 5.	OTHER INFORMATION.	32
	ITEM 6.	EXHIBITS.	32

i

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PART I
FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

FIFTH SEASON INTERNATIONAL, INC.
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 2012 AND 2011

	Page(s)
Financial Statements
Consolidated Balance Sheets	2
Consolidated Statements of Operation and Comprehensive Income (Loss)	3
Condensed Consolidated Statements of Cash Flows	4
Notes to Consolidated Financial Statements	5 - 19

1

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FIFTH SEASON INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS

		March 31,			December 31,
		2012			2011
		(Unaudited)
ASSETS
Current assets
Cash and cash equivalents	$	3,481,329		$	308,661
Restricted cash		27,484,510			25,076,180
Accrued straight-line rents receivable, net of doubtful provision in amount of $609,062 and nil, respectively		3,790,710			3,462,279
Accounts receivable, net of doubtful provision in amount of $3,656,719 and 3,653,036, respectively		40,738,143			49,608,100
Trade and Rents receivable from related parties		3,677,942			4,070,994
Inventories		66,229			295,737
Deposit with property developer		28,321,707			28,293,184
Advance to suppliers, related parties		8,578,980			8,570,341
Prepayments and other receivables		21,508,584			12,364,765
Loans receivable from related parties		647,509			496,785
Current deferred tax assets		624,973			327,145
Deferred cost		3,590,476			3,586,860
Total current assets		142,511,092			136,461,031
Non-current assets
Real estate and related assets, net		83,898,905			84,610,919
Long term prepaid lease		385,215			428,718
Prepayment for acquisition of properties		4,726,970			4,722,209
Long-term deferred tax assets		3,429,967			2,834,285
Total non-current assets		92,441,057			92,596,131
TOTAL ASSETS	$	234,952,149		$	229,057,162
LIABILITIES AND EQUITY
Current liabilities
Short-term loans	$	62,753,650		$	60,944,640
Accounts payable		35,481,322			37,396,108
Notes payable		51,791,620			46,978,160
Advance from customers		207,163			737,647
Accrued expenses and other payables		4,368,130			3,775,324
Amounts due to third parties		10,512,428			6,824,530
Taxes payable		844,841			613,610
Loans payable to related parties		10,583,463			10,061,996
Current deferred tax liabilities		1,180,787			1,311,401
Total current liabilities		177,723,404			168,643,416
Non-current liabilities
Long term bank loans		4,250,000			4,250,000
Long term deferred tax liabilities		13,031,679			12,982,090
Total liabilities		195,005,083			185,875,506
Commitment and contingencies
Stockholders’ equity
Preferred Stock,$0.00001 par value 20,000,000 shares authorized, none issued at March 31, 2012 and December 31, 2011		-			-
Common stock (US$0.00001 par value, 480,000,000 shares authorized, 399,999,847 and 399,999,847 shares issued and outstanding as of March 31, 2012 and December 31, 2011)		4,000			4,000
Additional paid in capital		30,191,115			30,191,115
Appropriated retained earnings		3,992			3,992
Unappropriated retained earnings		5,739,525			9,000,724
Accumulated other comprehensive income		3,303,295			3,259,583
Total stockholders’ equity		39,241,927			42,459,414
Noncontrolling interest		705,139			722,242
Total equity		39,947,066			43,181,656
TOTAL LIABILITIES AND EQUITY	$	234,952,149		$	229,057,162

See notes to consolidated financial statements

2

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FIFTH SEASON INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATION AND COMPREHENSIVE INCOME (LOSS)

		Three Months Ended March 31,
		2012			2011
		(Unaudited)			(Unaudited)
Sales	$	35,831,978		$	25,988,880
Straight-line rental income		1,682,379			929,419
Contingent rental income and others		2,886			81,034
Total revenue		37,517,243			26,999,333
Cost of goods sold		35,677,273			25,377,060
Expenses applicable to straight-line rental income		1,216,681			1,003,373
Expenses applicable to contingent rental and others		-			97,636
Total cost		36,893,954			26,478,069
Gross profit		623,289			521,264
Operating expenses
Selling expenses		292,612			219,112
General and administrative expenses		2,252,393			1,327,318
Total operating expenses		2,545,005			1,546,430
Loss from operations		(1,921,716	)		(1,025,166	)
Other income (expenses)
Interest income		615,424			1,546
Interest expense		(2,654,997	)		(2,150,977	)
Net non-operating (expense)/income		(235,290	)		3,537
Gain on business combination		-			7,116,499
Other income (expenses), net		(2,274,863	)		4,970,605
Income (loss) before income tax		(4,196,579	)		3,945,439
Income tax benefit		918,313			623,464
Net income (loss) from continuing operations		(3,278,266	)		4,568,903
Discontinued operations
Loss from operations of the discontinued component, including gain/loss on the disposal of Nil		-			(43,077	)
Income tax		-			10,769
Net loss on discontinued operation		-			(32,308	)
Income/(loss) before extraordinary items		(3,278,266	)		4,536,595
Less: net loss attributable to the non-controlling interest		(17,067	)		-
Net income (loss) attributable to the Fifth Season’s common stockholders	$	(3,261,199	)	$	4,536,595
Comprehensive income (loss):
Net income (loss)	$	(3,278,266	)	$	4,536,595
Foreign currency translation adjustment		60,743			156,167
Comprehensive income (loss)		(3,217,523	)		4,692,762
Less: comprehensive loss attributable to the non-controlling
interests		(36	)		(35,745	)
Comprehensive income(loss) attributable to the Fifth Season’s common stockholders	$	(3,217,487	)	$	4,728,507
Basic and diluted weighted average shares outstanding		399,999,847			391,637,459
Basic and diluted earnings(loss) per share
-Continuing operations	$	(0.01	)	$	0.01
-Discontinued operations	$	0.00		$	(0.00)
-Continuing and discontinued operations	$	(0.01)		$	0.01

See notes to consolidated financial statements

3

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FIFTH SEASON INTERNATIONAL, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

		Three months ended March 31,
		2012			2011
		(Unaudited)			(Unaudited)
Net cash provided (used) in operating activities	$	(1,734,834	)	$	(31,400,981	)
Cash flows from investing activities
Purchase of real estate and related assets		164,735			(11,046,617	)
Acquisition of subsidiaries, net of cash acquired					(4,183,806	)
Change in amount due from third parties		(3,422,086	)		(183,814	)
Change in amount due from related parties		(149,480	)		(5,856,775	)
Net cash used in investing activities		(3,406,831	)		(21,271,012	)
Cash flows from financing activities
Proceeds from capital injection by non-controlling interest		-			747,203
Proceeds from capital injection by controlling stockholders		-			637,831
Proceeds from short-term loans		7,609,920			47,620,650
Proceeds from in notes payable		23,781,000			-
Proceeds from long-term loans		-			6,633,471
Repayments of short-term loans		(5,865,980	)		-
Repayments of notes payable		(19,024,800	)		-
Change in amount due to third parties		3,673,372			1,974,700
Change in amount due to related parties		512,020			(639,049	)
Change in restricted cash		(2,378,100	)		-
Net cash provided by financing activities		8,307,432			56,974,806
Effect of foreign currency fluctuation on cash and cash equivalents		6,901			7,979
Net changes in cash and cash equivalents		3,172,668			4,310,792
Cash and cash equivalents, beginning of year		308,661			228,763
Cash and cash equivalents, end of period	$	3,481,329		$	4,539,555
Supplemental cash flow information:
Interest paid	$	2,269,790		$	1,435,774
Income taxes paid	$	3,281		$	-

See notes to consolidated financial statements

4

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FIFTH SEASON INTERNATIONAL, INC. AND SUBSIDIARIES
Notes to unaudited consolidated financial statements

1.	ORGANIZATION AND PRINCIPAL ACTIVITIES
	Fifth Season International, Inc. (the “Company” or “Fifth Season International”) was incorporated in the State of Delaware on October 5, 2007. It did not engage in any operations and was an inactive “shell” company from its inception until its reverse acquisition with The Fifth Season (Hong Kong) International Group Limited “Fifth Season HK” on March 31, 2011.
	On March 31, 2011, Fifth Season International completed a reverse acquisition transaction through a share exchange with Fifth Season HK and its stockholders Cheng Chushing, Shaoping Lu and Power Guide Investment Limited, whereby Fifth Season International acquired 100% of the issued and outstanding capital stock of Fifth Season HK by issuing 391,543,500 shares to the Fifth Season HK’s stockholders, which constituted 98% of its issued and outstanding shares on a fully-diluted basis of Fifth Season International after the consummation of the reverse acquisition. As a result of the reverse acquisition, Fifth Season HK became Fifth Season International’ wholly-owned subsidiary, The share exchange transaction with Fifth Season HK was treated as a reverse acquisition, with Fifth Season HK as the accounting acquirer and Fifth Season International as the acquired party.
	Fifth Season HK is a holding company and, through its consolidated subsidiaries, is principally engaged in the investment, management, assignment, and lease of commercial properties, as well as the operations of department stores; trading and online sales of goods; and hotel management in the People’s Republic of China (“PRC”). Fifth Season International, Fifth Season HK and its subsidiaries are collectively referred to as the “Group.”
	Details of the Company’s subsidiaries are summarized as follows:

5

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FIFTH SEASON INTERNATIONAL, INC. AND SUBSIDIARIES
Notes to unaudited consolidated financial statements

	The Fifth Season Jiashan Investment Management Co., Ltd has not started its operation in hotel management business as of March 31, 2012.
2.	Going concern
	The consolidated financial statements have been prepared on the basis that the Group will continue to operate throughout the next twelve months as a going concern. The Group’s consolidated current liabilities exceeded its consolidated current assets by approximately US$35 million as of March 31, 2012. In addition the Group has commitments for the tenant improvement projects and the purchase of commercial properties totaled to $10.7 million as of March 31, 2012. Management believes that these factors raise substantial doubt about its ability to continue as a going concern. Based on future projections of the Group’s profits and cash inflows from operations, including commercial property leasing, providing agent service to properties sales, additional fund obtained by the Group as discussed in footnote 12, and the anticipated ability of the Group to obtain continued financing or related parties’ loan to finance its continuing operations, the Group’s management has prepared the consolidated financial statements on a going concern basis.

6

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FIFTH SEASON INTERNATIONAL, INC. AND SUBSIDIARIES
Notes to unaudited consolidated financial statements

3.	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

	(a)	Basis of presentation
		As a result of the share exchange on March 31, 2011, Fifth Season HK became a subsidiary of Fifth Season International. The former Fifth Season HK’s stockholders owned a majority of common stock of the Company. The transaction was regarded as a reverse merger whereby Fifth Season HK was considered to be the accounting acquirer as its shareholders retained control of the Company after the share exchange, although Fifth Season International is the legal parent company. The share exchange was treated as a recapitalization of the Company. As such, Fifth Season HK is the continuing entity for financial reporting purpose.
		The consolidated interim financial information as of March 31, 2012 and for the three months ended March 31, 2012 and 2011 have been prepared without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and footnote disclosures, which are normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), have been condensed or omitted as permitted by SEC rules and regulations, although the management believe that the disclosures made are adequate to provide for fair presentation. The interim financial information should be read in conjunction with the Financial Statements and the notes thereto, included in the Group’s Form 10-K previously filed with the SEC on April 16, 2012.
		In the opinion of management, all adjustments (which include normal recurring adjustments) necessary to present a fair statement of the Group’s consolidated financial position as of March 31, 2012, its consolidated results of operations for the three-month periods and cash flows for the three-month periods ended March 31, 2012 and 2011, as applicable, have been made. The interim results of operations are not necessarily indicative of the operating results for the full fiscal year or any future periods.
	(b)	Basis of consolidation
		The consolidated financial statements include the financial statements of the Company and its subsidiaries. All significant inter-company transactions and balances have been eliminated in consolidation.
		Non-controlling interest represents the ownership interests in the subsidiary that are held by owners other than the parent. The non-controlling interest is reported in the consolidated statement of financial position within equity, separately from the parent’s equity and that net income or loss and comprehensive income or loss are attributed to the parent and the non-controlling interest. If losses attributable to the parent and the non-controlling interest in a subsidiary exceed their interests in the subsidiary’s equity, the excess, and any further losses attributable to the parent and the non-controlling interest, is attributed to those interests.
		The results of operations of a reportable segment, a subsidiary or an asset group, that either has been disposed of or is classified as held for sale is reported in discontinued operations separately in the consolidated financial statements, if the operations and cash flows of the component have been eliminated from the ongoing operations as a result of the disposal transaction and that the Group will not have any significant continuing involvement in its operations after the disposal transaction.
	(c)	Use of estimates
		The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. On an on-going basis, the Group evaluates its estimates based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results could differ from these estimates. Significant judgments and estimates include useful lives for amortization and depreciation, impairment of long-lived assets, fair value measurements, revenue recognition, allowance for doubtful accounts, deferred tax assets and liabilities, which represent critical accounting policies that reflect significant judgments and estimates used in the preparation of the Group’s consolidated financial statements. The relevant amounts could be adjusted in the near term if experience differs from current estimates.

7

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FIFTH SEASON INTERNATIONAL, INC. AND SUBSIDIARIES
Notes to unaudited consolidated financial statements

	(d)	Allowance for doubtful accounts
		Accrued straight-line rents receivable, trade receivable, other receivables and due from third parties/related parties are reviewed periodically as to whether they are past due based on contractual terms and their carrying value has become impaired. An allowance for doubtful accounts is recorded in the period in which loss is determined to be probable based on an assessment of specific evidence indicating doubtful collection, historical experience, credit quality of customers, account balance aging and prevailing economic conditions. Receivable balances are written off after all collection efforts have been exhausted.
		None of the receivables of the Group are with collateral assets. Allowance of $3,656,719 and $3,653,036 was provided for trade receivable as of March 31, 2012 and December 31, 2011, respectively. Allowance of $609,062 and nil was provided for accrued straight-line rents receivables as of March 31, 2012 and December 31, 2011, respectively. No write-offs were provided for trade receivable, other receivables, accrued straight-line rents receivable or due from third parties/related parties as of March 31, 2012 and December 31, 2011, respectively.
	(e)	Inventories
		Inventories consist of goods purchased, which are stated at lower of cost or market. Cost is determined using weighted average method. Net realizable value is the estimated selling price, in the ordinary course of business, less estimated costs to dispose.
		Where there is evidence that market value of inventories, in their disposal in the ordinary course of business, will be less than cost, whether due to physical deterioration, obsolescence, changes in price levels, or other causes, a provision is accrued for the difference with charges to cost of goods sold. No provision was provided for the inventory as of March 31, 2012 and December 31, 2011, respectively.
	(f)	Real estate and related assets
		Real estate and related assets are recorded at cost and stated at cost less accumulated depreciation. Renovations, replacements and other expenditures that improve or extend the life of assets are capitalized and depreciated over their estimated useful lives. Expenditures for ordinary maintenance and repairs are charged to expense as incurred.
		Construction in progress represents capital expenditure in respect of direct costs of construction and design fees of renovations or replacements incurred. Capitalization of these costs ceases and the construction in progress is transferred to tenant improvement when substantially all the activities necessary to prepare the assets for their intended use are completed. Construction in progress is not depreciated.
		Depreciation of real estate and related assets is calculated using the straight-line method (after taking into account their respective estimated residual value) over the estimated useful lives of the assets as follows:

			Years			Residual value
	Commercial properties		30			5%
	Tenant improvements		5-10			Nil
	Office equipment and furniture		3-5			5%
	Motor vehicles		4-5			5%

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FIFTH SEASON INTERNATIONAL, INC. AND SUBSIDIARIES
Notes to unaudited consolidated financial statements

		Upon the acquisition of real estate assets, the Group allocates the purchase price of real estate to the acquired tangible assets and liabilities based on each case on the fair value of acquired tangible assets such as buildings and prior tenant improvements at date of acquisition, intangible assets such as above and below market leases, acquired in-place leases, customer relationships and other identified intangible assets and assumed liabilities. Except for buildings, no other tangible assets or intangible assets were identified when acquiring the real estate assets for the period ended March 31, 2012 and the year ended December 31, 2011, respectively.
	(g)	Impairment of long-lived assets
		A long-lived asset (asset group) classified as held for sale is measured at the lower of its carrying amount or fair value less cost to sell. A long-lived asset is not depreciated (amortized) while it is classified as held for sale. A gain or loss not previously recognized that results from the sale of a long-lived asset (asset group) are recognized at the date of sale.
		A long-lived asset (asset group) classified as held for use is tested for recoverability whenever events or changes in circumstances indicate that its carrying amount may not be recoverable. An impairment loss is recognized only if the carrying amount of a long-lived asset (asset group) is not recoverable and exceeds its fair value. The carrying amount of a long-lived asset (asset group) is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset (asset group). These cash flows are estimated based on a number of assumptions that are subject to economic and market uncertainties including among others, tenant’s payment history and financial condition, the likelihood of lease renewal, business condition in the industry in which tenants operate, changes in market rental rates, costs to operate property. The assessment is based on the carrying amount of the asset (asset group) at the date it is tested for recoverability, whether in use or under development. An impairment loss is measured as the amount by which the carrying amount of a long-lived asset (asset group) exceeds its fair value.
		No impairment loss was recognized as of March 31, 2012 and December 31, 2011, respectively.
	(h)	Revenue recognition

Sales of goods

The Group recognizes revenue from sales of various goods when all of the following criteria exist: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) price to the buyer is fixed or determinable; and (4) collectability is reasonably assured.

Delivery does not occur until goods have been shipped to the customers, risk of loss has transferred to the customers and customers’ acceptance has been obtained, or the Group has objective evidence that the criteria specified in customers’ acceptance provisions have been satisfied. The sales price is not considered to be fixed or determinable until all contingencies related to the sale have been resolved. Certain credit terms and limits were granted to customers with low risk of collectability based on the Group’s credit assessment. Historically, no material collectability problem has occurred. Revenue is recognized when delivery occurs and collectability is reasonably assured.

The installment method of recognizing revenue is used where the collectability of the sales price is not reasonably assured. The installment method apportions each cash receipt between cost recovered and profit. The apportionment is in the same ratio as total cost and total profit bear to the sales value. Certain sales are reported under the installment collection method resulting in deferred revenue (net of any allowance for bad debts) and costs until the collection of the sale.

In the PRC, value added tax (the “VAT”) of generally 17% on invoice amount is collected in respect of the sales of goods against the customers on behalf of tax authorities. The VAT collected is not revenue of the Group; instead, the amount is recorded as a liability on the balance sheet until such VAT is paid to the authorities.

Rental revenue

Minimum contractual rental from leases are recognized on a straight-line basis over the terms of the respective leases. With respect to a particular lease, actual amounts billed in accordance with the lease during any given period may be higher or lower than the amount of rental revenue recognized for the period. Straight-line rental revenue commences when the customer assumes control of the leased premises. Accrued straight-line rents receivable represents the amount by which straight-line rental revenue exceeds rents currently billed in accordance with lease agreements. Contingent rental revenue, such as percentage rent on sale volume of tenant, is accrued when the contingency is removed.

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FIFTH SEASON INTERNATIONAL, INC. AND SUBSIDIARIES
Notes to unaudited consolidated financial statements

Service income

The Group provides agency or consulting services for third-party property owners who wish to sell or lease commercial properties in exchange for consulting services on the sale or lease of such properties. Service income is recognized when the following criteria exist: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred or services have been rendered, (3) the price is fixed or determinable, and (4) collectability is reasonably assured.

The Group’s PRC subsidiaries are subject to business tax 5% for their revenues from straight-line rental and consulting service, which are recognized after net off business tax.

	(i)	Fair value measurements
		Financial instruments include cash and cash equivalents, restricted cash, accrued straight-line rents receivable, trade receivable, prepayments and other receivables, due from related parties, short-term loans, notes payable, advance from customers, accounts payable, other payables and amount due to related parties. The carrying amounts of these financial instruments approximate their fair value due to the short term maturities of these instruments.
		The Group adopted ASC Topic 820 Fair Value Measurements and Disclosures for all financial assets and liabilities and nonfinancial assets and liabilities that are recognized or disclosed at fair value in the consolidated financial statements on a recurring basis (at least annually).
		Fair value is defined as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Group considers the principal or most advantageous market in which it would transact and it considers assumptions that market participants would use when pricing the asset or liability.
		The Group maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value. A financial instrument’s categorization within the fair value hierarchy is based upon the lowest level of input that is significant to the fair value measurement. Three levels of inputs are used to measure fair value:
		Level 1 applies to assets or liabilities for which there are quoted prices in active markets for identical assets or liabilities.
		Level 2 applies to assets or liabilities for which there are inputs other than quoted prices included within Level 1 that are observable for the asset or liability such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which significant inputs are observable or can be derived principally from, or corroborated by, observable market data.
		Level 3 applies to assets or liabilities for which there are unobservable inputs to the valuation methodology that are significant to the measurement of the fair value of the assets or liabilities.
	(j)	Recently issued accounting standards affecting the Group
		In the three months ended March 31, 2012, the FASB has not issued any Accounting Standards Update.

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FIFTH SEASON INTERNATIONAL, INC. AND SUBSIDIARIES
Notes to unaudited consolidated financial statements

4.	CONCENTRATION OF RISK
	Concentration of credit risk
	Assets that potentially subject the Group to significant concentration of credit risk primarily consist of cash and cash equivalents, accrued straight-line rents receivable, trade receivable. As of March 31, 2012 and December 31, 2011, all of the Group’s cash and cash equivalents were deposited in financial institutions located in the PRC and Hong Kong, which management believes are of high credit quality. Trade receivable and accrued straight-line rents receivable are typically unsecured and are derived from revenue earned from customers in the PRC. The risk with respect to accrued straight-line rents receivable and trade receivable are mitigated by credit evaluations the Group performs on its customers and its ongoing monitoring process of outstanding balances.
	Concentration of customers and suppliers
	A summary of the customers in the segment of trading business, who accounted for 10% or more of the Group’s consolidated revenues for the periods ended March 31, 2012 and 2011 are as follows:

			Three months ended March 31,
			2012			2011
			(Unaudited)			(Unaudited)
	Customer A		68%			*
	Customer B		31%			*
	Customer C		*			65%
	Customer D		*			20%
	Total		99%			85%

* less than 10%

In other segments, there are no revenues from any customers for three months ended March 31, 2012 and 2011 which individually represent greater than 10% of the total revenue.

The above customers accounted for 44% and nil of accounts receivable balance as of March 31, 2012 and 2011, respectively.

The Group had two major suppliers that accounted for 95% of the total purchase of goods for the three months ended March 31, 2012, and four major suppliers that accounted for 89% of the total purchase of goods for three months ended March 31, 2011.

The above suppliers accounted for 83% and 56% of accounts payable balance as of March 31, 2012 and 2011, respectively.

Current vulnerability due to certain other concentrations

The Group’s operations may be adversely affected by significant political, economic and social uncertainties in the PRC. Although the PRC government has been pursuing economic reform policies for more than 30 years, no assurance can be given that the PRC government will continue to pursue such policies or that such policies may not be significantly altered, especially in the event of a change in leadership, social or political disruption or unforeseen circumstances affecting the PRC’s political, economic and social conditions. There is also no guarantee that the PRC government’s pursuit of economic reforms will be consistent or effective.

The Group transacts all of its business in RMB, which is not freely convertible into foreign currencies. On January 1, 1994, the PRC government abolished the dual rate system and introduced a single rate of exchange as quoted daily by the People’s Bank of China (the “PBOC”). However, the unification of the exchange rates does not imply that RMB may be readily convertible into US$ or other foreign currencies. All foreign exchange transactions continue to take place either through the PBOC or other banks authorized to buy and sell foreign currencies at the exchange rates quoted by the PBOC. Approval of foreign currency payments by the PBOC or other institutions requires submitting a payment application form together with suppliers’ invoices, shipping documents and signed contracts.

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FIFTH SEASON INTERNATIONAL, INC. AND SUBSIDIARIES
Notes to unaudited consolidated financial statements

Additionally, the value of RMB is subject to changes in central government policies and international economic and political developments affecting supply and demand in the PRC foreign exchange trading system market.

5.	EARNINGS PER SHARE

			Three months ended March 31,
			2012			2011
	Net income (loss) from continuing operations	$	(3,278,266	)	$	4,568,903
	Net loss on discontinued operation		-			(32,308	)
	Less: Net loss attributable to the noncontrolling interest		(17,067	)		-
	Net income (loss) attributable to the Fifth Season’s common stockholders		(3,261,199	)		4,536,595
	Basic and diluted weighted average shares outstanding		399,999,847			391,637,459
	Earning (loss) per share from continuing operations, net of tax	$	(0.01	)	$	0.01
	Loss per share from Discontinued operations, net of tax	$	0.00		$	(0.00)

6.	PREPAYMENTS AND OTHER RECEIVABLES
	Prepayments and other receivables consist of the following:

			March 31, 2012			December 31, 2011
			(Unaudited)
	Advance to suppliers	$	13,408,388		$	7,753,707
	Tenant improvements of Mintai Building		2,992,942			2,989,928
	Due from third party companies		4,116,621			686,720
	Prepaid office rental, petty cash and others		494,032			479,502
	Rental deposits to lessors		427,360			426,930
	Prepaid taxes and input VAT		69,241			27,978
			21,508,584			12,364,765

For the period ended March 31, 2012, due from third party companies were non-interest bearing loans to third parties for their working capital purposes.

Advance to suppliers were mainly the prepayments to the suppliers of the segment of trading business for the guarantee of the supply of goods.

7.	REAL ESTATE AND RELATED ASSETS, NET
	Real estate and related assets consist of the following:

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FIFTH SEASON INTERNATIONAL, INC. AND SUBSIDIARIES
Notes to unaudited consolidated financial statements

			March 31,			December 31,
			2012			2011
			(Unaudited)
	Commercial properties held for operating lease	$	80,346,151		$	80,265,234
	Tenant improvements		6,204,349			6,198,100
	Office equipment and furniture		583,600			565,415
	Motor vehicles		280,151			279,868
			87,414,251			87,308,617
	Less: accumulated depreciation		4,846,323			3,946,250
			82,567,928			83,362,367
	Construction in progress		1,330,977			1,248,552
		$	83,898,905		$	84,610,919

The Group recorded depreciation expenses of $894,232 and $620,659 for three months ended March 31, 2012 and 2011, respectively.

Accumulated depreciation for real estate held for operating leasing, including commercial properties and tenant improvements were $4,617,653 and $3,753,330, as of March 31, 2012 and December 31, 2011, respectively.

Certificates of ownership of certain commercial properties with an aggregate carrying value of $975,285 are still in the application process.

Certain commercial properties with an aggregate carrying value of $36,893,835 and $37,162,981 were pledged as collateral for short-term borrowings and a letter of credit as of March 31, 2012 and December 31, 2011, respectively. As of March 31, 2012 and December 31, 2011, certain commercial properties with an aggregate carrying value of $1,127,244 and $1,135,316, respectively, were pledged as collateral for bank loans of a related party, Fifth Season Industrial (Original: Hangzhou Huaren Costume Co., Ltd).

8.	BORROWINGS

Borrowings consist of the following:

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FIFTH SEASON INTERNATIONAL, INC. AND SUBSIDIARIES
Notes to unaudited consolidated financial statements

¹Floating rate, 258% of basis interest rate of PBOC, 16.94% as of March 31, 2012
²Floating rate, 115% of basis interest rate of PBOC, 7.26% as of March 31, 2012
³Floating rate, 120% of basis interest rate of PBOC, 7.87% as of March 31, 2012
⁴Floating rate, 110% of basis interest rate of PBOC, 6.71% as of December 31, 2011
⁵Floating rate, 120% of basis interest rate of PBOC, 7.87% as of March 31, 2012

The weighted average interest rate for the outstanding short-term bank loans was 16.7% and 14.53% as of March 31, 2012 and December 31, 2011, respectively. As of March 31, 2011, the outstanding short-term loan from China Construction Bank amounting to $1,906,440 was pledged by commercial properties amounting to $9,150,869. Short-term borrowing amounting to $2,383,050 from China CITIC Bank was secured by a pledge of commercial properties amounting to $3,979,819and guaranteed by Lianmo Wu, stockholder and Chairman of Board of Directors. This borrowing was originally $5,560,450 in total, of which $3,177,400 was repaid on March 31, 2012 and the rest was repaid on April 6, 2012 subsequently. The short-term loan from China Minsheng Bank amounting to $3,177,400 was pledged by commercial properties amounting to $5,285,422 and guaranteed by the stockholder Chushing Cheung and her husband Lianmo Wu. The short-term loan from Ningbo Bank amounting to $7,625,760 was pledged by commercial properties amounting to $10,662,556. Long-term borrowing from Shaopin Lu was guaranteed by Mr. Lianmo Wu and his wife, Ms. Chushing Cheung.

The interest expenses were $2,654,997 and $2,150,977 for the three months ended March 31, 2012 and 2011, respectively.

The weighted average amounts of the borrowings were $63,197,753 and $45,014,499 for the three months ended March 31, 2012 and 2011, respectively.

As of March 31, 2012, the Group is in compliance with the covenant requirements with respect to the outstanding borrowings except for the loan with China Construction Bank of Longyun (see above) which it is not in compliance with the loan covenant. Longyun entered into a loan agreement with China Construction Bank on April 18, 2011 for borrowing $1,906,440 for the purpose of maintaining cash flow. The loan will be repayable in 12 months at an interest rate of 15% above the base rate published by the People’s Bank of China. According to the loan agreement, Longyun’s debt and capital ratio should not be higher than 65%, current ratio should not be lower than 1 and quick ratio should not be lower than 0.7. Longyun’s current ratio and quick ratio were lower than 1 as of December 31, 2011. The maturity date of the loan is April 18, 2012 and Longyun is in default of the loan. The Group has orally agreed with China Construction Bank on extending maturity date from April 18, 2012 to May 18, 2012. During the period that the loan is in default, the Group is required to pay an additional interest penalty charged at 50% of the interest rate defined in the original loan agreement.

The Group had paid off the loan from China CITIC Bank amounting to $2,383,050 in April 2012, which is in compliance with the loan terms.

The following table summarizes the unused lines of credit:

March 31,

2012

Lender

Starting date

Maturity date

Facility amount

Unused facility

Guangdong Development Bank

July 4, 2011

July 4, 2012

$

2,700,790

$

317,740

Under the line of credit contract signed with Guangdong Development Bank on July 4, 2011, the above line of credit was guaranteed by Hangzhou the Fifth Season Store Co, Ltd., the shareholders Lianmo Wu and Chushing Cheung and Chief Operating Officer, Xiaolei Xing, and also collaterlized by third party pledges of property and private dwellings. As of March 31, 2012, the Group had executed credit facility amounting to $2,383,050 with Guangdong Development Bank that provided working capital in the form of Bank acceptance bills and $317,740 remained unused.

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FIFTH SEASON INTERNATIONAL, INC. AND SUBSIDIARIES
Notes to unaudited consolidated financial statements

9.	ACCRUED EXPENSES AND OTHER PAYABLES

Accrued expenses and other payables consist of the following:

			March 31,			December 31,
			2012			2011
			(Unaudited)
	Accrued rental expense and other related costs	$	1,443,873		$	1,254,600
	Accrued interest expense		1,469,622			1,082,958
	Payroll and welfare payable		18,312			20,239
	Rental deposits from lessees and others		1,436,323			1,417,527
		$	4,368,130		$	3,775,324

10.	RESTRICTED NET ASSETS
	In accordance with relevant PRC statutory laws and regulations, the Company’s PRC subsidiaries are restricted to transfer funds to the off-shore companies in the form of cash dividends, loans or advances, except for the unrestricted retained earnings, if any.
	The Group’s ability to pay dividends or transfer funds to the stockholder through loans, advance is primarily dependent on the Company receiving distributions of funds from its subsidiaries. Relevant PRC statutory laws and regulations permit payments of dividends by the Company’s PRC subsidiary only out of their retained earnings, if any, as determined in accordance with PRC accounting standards and regulations. The results of operations reflected in the financial statements prepared in accordance with U.S. GAAP differ from those reflected in the statutory financial statements of the Company’s subsidiaries. Gain on business combination recorded in accordance with U.S. GAAP is not distributable as a result of GAAP difference and no unrestricted retained earnings from the Group’s PRC subsidiaries.
	Therefore, the Group’s restricted net assets, comprising of the Company’s common stock and net assets of Company’s PRC subsidiaries, were $39,947,066 and $43,181,656 as of March 31, 2012 and December 31, 2011, respectively.
11.	TAXATION

The Company and its consolidated entities each files tax returns separately.

a)

Income tax expenses (benefits)

The reconciliation of income taxes computed at the statutory tax rates applicable to the PRC and Hong Kong, to income tax benefits is as follows:

			Three months ended March 31,
			2012			2011
			(Unaudited)			(Unaudited)
	Income (loss) before income tax	$	(4,196,579	)	$	3,945,439
	Tax at statutory rate		(1,014,593	)		1,035,265
	Gain on the business combination		-			(1,779,125	)
	Change in valuation allowance		96,280			95,330
	Non-deductible expenses		-			25,066
	Income tax benefit	$	(918,313	)	$	(623,464)

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FIFTH SEASON INTERNATIONAL, INC. AND SUBSIDIARIES
Notes to unaudited consolidated financial statements

The charges for income tax expenses are based on the results for the periods as adjusted for items which are non-assessable or disallowed. They are calculated using tax rates that have been enacted or granted at the balance sheet dates.

12.	RELATED PARTY TRANSACTIONS AND BALANCES

All the related parties are as follows:

	Name of related party	Relationship with the Group
	Zhejiang the Fifth Season Investment Co., Ltd. (“Zhejiang Fifth Season”)	Controlled by one of stockholders
	Zhejiang the Fifth Season Industrial Co., Ltd. (Original: Huaren Costume )	Controlled by one of stockholders
	Hangzhou the Fifth Season E-commerce Co., Ltd. (Original: Hangzhou the Fifth Season Costume Co., Ltd.)	Controlled by one of stockholders
	Hangzhou Liuhe Industrial Co., Ltd. (“Hangzhou Liuhe”)	Controlled by one of stockholders
	Hangzhou Haigang Technology Co., Ltd. (“Hangzhou Haigang”)	Controlled by one of stockholders
	The Fifth Season Hangzhou Real Estate Planning and Services Co., Ltd. (“Hangzhou Real Estate”)	Controlled by one of stockholders
	The Fifth Season Nantong Commercial Investment Management Co., Ltd. (“Nantong Commercial”)	Controlled by one of stockholders
	Jiashan Lijing Mingzuo Entertainment Co., Ltd. (“Jiashan Lijing”)	Controlled by one of stockholders
	The Fifth Season Shandong Trade Co., Ltd	Controlled by one of stockholders
	Hangzhou Yinli Decorative Lighting Co.,Ltd. (“Yinli Decorative Lighting”)	Controlled by one of the key management
	Hangzhou Buy Bar	Controlled by one of stockholders
	Shandong Demian Group Co., Ltd. (“Shandong Demian”)	Controlled by one of stockholders
	Hangzhou Yiyue E-commerce Co., Ltd.	Controlled by one of stockholders
	Lianmo Wu	Stockholder and Chairman of Board of Directors
	Chushing Chueng	Stockholder
	Shaoping Lu	Stockholder and CEO of Group
	Hangzhou Hengji Energy Company Ltd. (“Hangzhou Hengji”)	Stockholder
	Hongsen Xu	Key management
	Dacheng Rao	Key management
	Huaiqu Wen	Key management

a)

Trade and rents receivables from related parties consist of the following:

			March 31,			December 31,
			2012			2011
			(Unaudited)
	Shandong Demian Group Co. Ltd.	$	2,769,454		$	2,766,665
	The Fifth Season Shandong Trade Co., Ltd		-			631,666
	Zhejiang the Fifth Season Industrial Co., Ltd. (Original: Huaren Costume)		200,464			200,262
	Dacheng Rao		708,024			472,401
		$	3,677,942		$	4,070,994

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FIFTH SEASON INTERNATIONAL, INC. AND SUBSIDIARIES
Notes to unaudited consolidated financial statements

Trade receivable from Zhejiang the Fifth Season Industrial Co., Ltd. (Original: Huaren Costume) was fully settled in April, 2012.

b)

Loans receivables from related parties consist of the following:

			March 31,			December 31,
			2012			2011
			(Unaudited)
	Nantong Commercial	$	25,896		$	25,871
	Hangzhou E-commerce( Original: Hangzhou Costume)		101,478			312,839
	Yinli Decorative Lighting		377,788			-
	Hangzhou Yiyue E-commerce		-			15,871
	Huaiqu Wen		142,347			142,204
		$	647,509		$	496,785

Loans receivable from related parties were short-term loans for additional working capital purpose of such related parties, which were non-interest bearing and are due on demand.

c)

Advance to suppliers, related parties consists of the following:

			March 31,			December 31,
			2012			2011
			(Unaudited)
	Yinli Decorative Lighting	$	5,719,320		$	5,713,561
	Hangzhou Hengji		2,859,660			2,856,780
	Total	$	8,578,980		$	8,570,341

Loans payable to related parties were short-term loans from related parties for the Group’s additional working capital purpose, which were non-interest bearing and due on demand.

d)

Short term loans payable to related parties consists of the following:

			March 31,			December 31,
			2012			2011
			(Unaudited)
	Fifth Season Industrial	$	2,369,879		$	574,530
	Zhejiang Investment		952,575			1,169,858
	Hangzhou Real Estate		98,817			40,471
	Hangzhou Buy Bar		-			8,024
	The Fifth Season Shandong Trade Co., Ltd		4,724,476			5,351,384
	Hongsen Xu		-			57,070
	Yinli Decorative Lighting		-			344,231
	Lianmo Wu		245,309			929,328
	Hangzhou Hengji		2,192,407			1,587,100
		$	10,583,463		$	10,061,996

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FIFTH SEASON INTERNATIONAL, INC. AND SUBSIDIARIES
Notes to unaudited consolidated financial statements

e)

Long-term loans payable to related parties consists of the following

			March 31, 2012			December 31, 2011
	Shaoping Lu	$	4,250,000		$	4,250,000

Long-term loans to related party was interest bearing, see Note 8 for the interest rate and guarantee of the loan.

f)

Significant related party transactions other than loans are as follows:

						Three Months ended March 31,
			Transaction			2012			2011
	Dacheng Rao		Leasing		$	234,658		$	--

13.	COMMITMENTS AND CONTINGENCIES

	a)	Purchase Commitments

Commitments for the purchase of commercial properties and construction for building totaled to $10,706,327 as of March 31, 2012.

b)

Lease commitments

As of March 31, 2012, future minimum rental payments under non-cancellable operating leases having initial or remaining lease terms of more than one year are as follows:

	Year		Amount
	2012	$	1,704,720
	2013		2,063,820
	2014		2,116,683
	2015		1,860,793
	2016		1,030,750
	Thereafter		791,769
		$	9,568,535

c)

Contingencies

The Group is a defendant in a lawsuit filed by a former lessor for alleged breach of contract. The suit asks for actual and punitive damages totaling $991,938. The Group believes the suit is completely without merit and intends to vigorously defend its position. The Group is unable at this time to predict the outcome of this litigation or whether the Group will incur any liability associated with the litigation, or to estimate the effect such outcome would have on the financial condition, results of operations, or cash flows of the Group.

As of March 31, 2012, the Group had delivered guarantees on behalf of related party Yinli for RMB12 million (approximately $1.9 million) in bank loans. The Group would be obligated to fulfill Yinli’s obligations under the loans in the event that Yinli is unable to meet these obligations. Should the Group be required to pay any portion of the total amount of the loans it would attempt to recover some or the entire amount from Yinli.

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FIFTH SEASON INTERNATIONAL, INC. AND SUBSIDIARIES
Notes to unaudited consolidated financial statements

As of March 31, 2012, the Group had mortgaged certain of the Group’s commercial properties amounting to $1.1 million as collateral for private loans for Fifth Season Industrial. The Group would be obligated to fulfill Fifth Season Industrial’s obligations under the loans in the event that Fifth Season Industrial is unable to meet these obligations. Should the Group be required to pay any portion of the total amount of the loans it would attempt to recover some or the entire amount from Fifth Season Industrial.

The Group did not accrue for any contingencies as of March 31, 2012.

14.	SEGMENT FINANCIAL INFORMATION
	The Group determines segments based on how management makes decisions about allocating resources to segments and measuring their performance.
	The Group’s operations are mainly classified into two principal reportable segments that provide different products or services: commercial properties leasing, and the purchase and sale of goods, which we refer to as trading. Separate management of each segment is required because each business unit is subject to different marketing, operation, and technology strategies.
	Accounting policies of the transactions between segments are the same as those described in the summary of significant accounting policies. Performance is measured by various factors such as segment revenue and segment profit. Individual segment assets are not measurement reviewed by management. All corporate expenses and income tax expenses are allocated to the segments.

Three months ended March 31, 2012 (Unaudited)

Three months ended March 31, 2011 (Unaudited)

*Revenue from other segment consist of small on-line sales of goods

15.	SUBSEQUENT EVENT
	Management of the Group has evaluated subsequent events through the issuance of the consolidated financial statements and identified the following subsequent event:
	In April 2012, we obtained a loan of RMB25 million (approximately $4 million) from China CITIC Bank for working capital.

In May 2012, we obtained a RMB96 million (approximately $15.2 million) non-interest bearing bank acceptance from Shanghai Pudong Development Bank which matures in November, 2012, and is secured by a RMB48 million (approximately $7.6 million) bank deposit of the Group.

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

Special Note Regarding Forward Looking Statements

This report contains forward-looking statements. The forward-looking statements are contained principally in the sections entitled “Description of Business,” “Risk Factors,” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” These statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements. These risks and uncertainties include, but are not limited to, the factors described in the section captioned “Risk Factors” above. In some cases, you can identify forward-looking statements by terms such as “anticipates,” “believes,” “could,” “estimates,” “expects,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “should,” “would” and similar expressions intended to identify forward-looking statements. Forward-looking statements reflect our current views with respect to future events and are based on assumptions and subject to risks and uncertainties. Given these uncertainties, you should not place undue reliance on these forward-looking statements.

Also, forward-looking statements represent our estimates and assumptions only as of the date of this report. You should read this registration statement and the documents that we reference and filed as exhibits to the registration statement completely and with the understanding that our actual future results may be materially different from what we expect. Except as required by law, we assume no obligation to update any forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in any forward-looking statements, even if new information becomes available in the future.

Use of Certain Defined Terms

Except where the context otherwise requires and for the purposes of this report only, references to:

• “Binzhou TFS” are to The Fifth Season Binzhou Commerce Co., Ltd., a PRC company;
• “Business Real Estates” are to Business Real Estates (China) Investment Holding Group Co., Ltd., a Hong Kong company;
• the “Company,” “we,” “us,” and “our” are to the combined business of Fifth Season International, Inc., a Delaware corporation, and its consolidated subsidiaries: “Fifth Season HK”, “Business Real Estates”, “ Kairui Real Estates”, “ TFS Technology”, “TFS Trade”, “TFS GM”, “Shandong TFS”, “Jiashan TFS”, “Wuxi TFS”, “Liyang TFS”, “TFS Tengzhou Enterprise”, “TFS Tengzhou Real Estate,” “Shanghai Jiadu”, “Shanghai Lomo”, “Zibo Jiadu”, “Zibo Lomo”, “Shandong Trade”, “Longyun”, and “Binzhou TFS”;
• “Exchange Act” are to the Securities Exchange Act of 1934, as amended;
• “Fifth Season HK” are to The Fifth Season (Hong Kong) International Group Limited, a Hong Kong company;
• “Hong Kong” are to the Hong Kong Special Administrative Region of the People’s Republic of China;
• “Jiashan TFS” are to The Fifth Season Jiashan Investment Management Co., Ltd., a PRC company;
• “Kairui Real Estates” are to Kairui (Hangzhou) Commercial Property Management Co., Ltd., a PRC company;
• “Longyun” are to Zibo Longyun Industrial and Trade Co., Ltd., a PRC company;
• “PRC” and “China” are to the People’s Republic of China;
• “Renminbi” and “RMB” are to the legal currency of China;
• “SEC” are to the Securities and Exchange Commission;
• “Securities Act” are to the Securities Act of 1933, as amended;
• “Shandong TFS” are to The Fifth Season Shandong Commercial Investment Co., Ltd., a PRC company;
• “Shandong Trade” are to The Fifth Season Shandong Trade Co., Ltd., a PRC company;
• “Shanghai Jiadu” are to Shanghai Jiadu Commercial Management Co., Ltd., a PRC company;
• “Shanghai Lomo” are to Shanghai Lomo Industrial Co., Ltd., a PRC company;
• “Suqian TFS” are to The Fifth Season Suqian Investment Management Co., Ltd., a PRC company;
• “TFS GM” are to The Fifth Season Hangzhou Department Store Investment Management Co., Ltd., a PRC company;

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• “TFS Technology” are to The Fifth Season (Zhejiang) Technology Co., Ltd., a PRC company;
• “TFS Tengzhou Enterprise” are to The Fifth Season Tengzhou Enterprise Management Co., Ltd., a PRC company;
• “TFS Tengzhou Real Estate” are to The Fifth Season Tengzhou Real Estate Development Co., Ltd., a PRC company;
• “TFS Trade” are to The Fifth Season (Zhejiang) Trade Co., Ltd., a PRC company;
• “U.S. dollars,” “USD,” “dollars,” and “$” are to the legal currency of the United States;
• “Wuxi TFS” are to The Fifth Season Wuxi Commercial Investment Management Co., Ltd.; a PRC company;
• “Zibo Jiadu” are to The Fifth Season Zibo Jiadu Commerce Co., Ltd., a PRC company; and
• “Zibo Lomo” are to The Fifth Season Zibo Lomo Commerce Co., Ltd., a PRC company.

Overview of our Business

We are engaged in the investment, assignment, and leasing of commercial properties, in the operation of department stores, and in the wholesale of goods in China. In 2009, we expanded our business to include the wholesale of goods, such as copper, steel, energy saving lamps, clothing and zinc slabs, and in 2010, we began engaging in online sales of general consumer products manufactured by third-parties, we discontinued this business in November 2011 in order to comply with PRC government prohibitions of engagement in such activity by foreign invested companies.

As at March 31, 2012, we invested or leased seven commercial properties in Southeastern China, encompassing approximately 152,244 square meters, which includes three properties comprising 93,010 square meters, or approximately 61% of the properties, directly owned by us. Many of the properties are positioned as department stores with large commercial tenants, including but not limited to Trust-Mart, Bank of China, and Boshiwa International Holding Limited. We rely on the knowledge of our board of directors and management when making investment decisions. We intend to put additional investment policies in place as we expand our commercial real estate business in the coming years.

We wholesale our commodities to wholesale and retail customers in China, including to Shanghai Senhong Metal Co., Ltd and Shanghai Quanhao Material Co., Ltd.

We operate our business in Hangzhou, Jiashan, Shanghai, Wuxi, Zibo, Tengzhou, Binzhou and Suqian.

First Quarter Financial Performance Highlights

The following are some financial highlights for the interim period ended March 31, 2012:

• Revenue: Revenue increased $10 million, or 36.71%, to $37 million for the three months ended March 31, 2012, from $27 million for the same period in 2011.

• Gross Profit and Margin: Gross profit decreased $0.4 million, or 84.58%, to $0.1 million for the three months ended March 31, 2012, from $0.5 million for the same period in 2011.

• Net income (loss) from continuing operation: Net loss from continuing operation was $3.4 million for the three months ended March 31, 2012, while net income from continuing operation of $4.5 million for the same period in 2011.

• Fully diluted earnings (loss) per share: Fully diluted loss per share was $(0.01) for the three months ended March 31, 2012, as compared to fully diluted earnings per share of $0.01 for the same period in 2011.

Results of Operations

The following tables set forth key components of our results of operations for the periods indicated, both in dollars and as a percentage of sales revenue and key components of our revenue for the periods indicated in dollars.

Comparison of Three Months Ended March 31, 2012 and 2011

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The following table sets forth key components of our results of operations for the periods indicated, both in dollars and as a percentage of our net sales.

Total Revenue: We generate revenue primarily from the leasing of commercial properties and the wholesale of various goods, as well as from some online sales of consumer products. For the three months ended March 31, 2012, approximately 4.49% and 95.51% of our revenues were derived from our real estate operation segment and wholesale segment, respectively, as compared to 3.74% and 96.26%, respectively, for the same period in 2011. Our total revenue increased from approximately $27 million in the three months ended March 31, 2011, to approximately $38 million in the same period in 2012, representing a compounded growth rate of approximately 38.96%.

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Revenue from our real estate operations segment increased by 66.78%, to $1.7 million in the three months ended March 31, 2012, from $1 million in the same period in 2011. The increase was primarily due to an increase in revenues of $0.2 million from the increasing occupancy rate of our subsidiaries, Jiashan TFS and Shandong TFS and a contribution of $0.3 million from our subsidiary, TFS Bingzhou, which commenced operations in April 2011.

• Investing Activities – We acquire and renovate undervalued companies with commercial property leasing businesses in Tier 2 and 3 cities in China. When such properties are fully renovated, we generate rental income through leasing them to clients such as clothing retailers and supermarket chains. In a general investment procedure, we mainly generate lease revenue and incur acquisition and renovation costs. We recorded a gain on business combination of $nil in the three months ended March 31, 2012, as compared to $7.1 million in the same period in 2011.

• Property Management – None of our clients have taken advantage of our property management services to date and so we recorded $nil management fees and related expenses for the three months ended March 31, 2012 and 2011.

• Property Assignment – We may assign or transfer our commercial properties to unrelated third parties if we believe that such property is underperforming or has become overvalued. When we assign such property, we generate sales revenue and our relevant property right is transferred to the purchaser. No revenue applicable to property assignment was recognized for the three months ended March 31, 2012 and 2011, because no commercial property was sold during the period.

• Commercial Leasing – We lease commercial properties, such as department stores, and karaoke lounges, to third party customers in China. We earn revenues through the receipt of monthly lease payments from our tenants, most of which are department store tenants. We also earn revenue from occasionally providing consulting services to third party property owners who wish to sell or lease commercial properties. Revenue from commercial leasing increased by 66.78%, to $1.7 million in the three months ended March 31, 2012, from $1 million in the same period in 2011. The increase was primarily due to increase in revenues from the increased occupancy rate of Jiashan TFS and Shandong TFS and due to contribution from our subsidiary, TFS Bingzhou, which commenced operations in April 2011.

Revenue from our wholesale segment, increased by 37.87% to $36 million in the three months ended March 31, 2012, from $26 million in the same period in 2011. Sales of copper and zinc accounted for 99.9% of our segment revenue for first quarter of 2012. Sales of copper, steel and lamps accounted for 99.9% of our segment revenue for the first quarter of 2011. The increase in revenue from our wholesale segment was mainly due to an increase in sales volume, primarily due to increased sales orders from Shanghai Senhong who made us their major supplier in 2011. In addition, we achieved orders from new customers. We expect this trend to continue during for the remaining 2012 quarters as a result of management’s continuing efforts to develop new customers and strengthen our management of suppliers to reduce purchasing costs and enhance our competitiveness.

Total Cost of Revenue: Our cost of revenue includes expenses applicable to our real estate operation segment, cost of goods sold for our wholesale segment and other expenses relating to our online sales. Our total cost of revenue was $36.9 million, or 98.34% of total revenue, for the three months ended March 31, 2012, as compared to $26.5 million, or 98.07% of total revenue, for the same period in 2011.

Rental property expenses are expenses associated with our ownership and operation of rental properties and include expenses that vary somewhat proportionately to occupancy levels, such as common area maintenance and utilities, and expenses that do not vary based on occupancy, such as property taxes. Unless we buy, place in service or sell assets, depreciation and amortization is a non-cash expense associated with the ownership of real property and generally remains relatively consistent each year as we depreciate our properties and related building and tenant improvement assets on a straight-line basis over a useful life. Expenses applicable to our real estate operation segment increased by 10.51% to $1.2 million in the three months ended March 31, 2012, from $1.1 million in the same period in 2011. The increase was primarily due to the combined effect of the higher 2012 period depreciation expense resulting from newly acquired property in February and April 2011, and the decrease in staff costs and rental expense, as we liquidated our business in Liyang in late 2011.

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• Investing Activities – On March 31, 2011, pursuant to the terms of an Equity Sale and Purchase Agreement, dated February 28, 2011, by and among Shandong TFS and two original individual stockholders of Longyun, the Company completed its acquisition of 100% of the equity interest of Longyun for a total consideration of RMB58 million (approximately $8,846,160) in cash, which was paid in 2011.

• Property Management – None of our clients have taken advantage of our property management services to date and so we recorded $nil expenses for the three months ended March 31, 2012 and 2011.

• Property Assignment – There are no expenses related to our property assignment activities for the three months ended March 31, 2012 and 2011.

• Commercial Leasing – Expenses applicable to our real estate operation segment increased by 10.51% to $1.2 million in the three months ended March 31, 2012, from $1.1 million in the same period in 2011. The increase was primarily due to the combined effect of the higher 2012 period depreciation expense resulting from newly acquired property in February and April 2011, and the decrease in staff costs and rental expense, as we liquidated our business in Liyang in late 2011.

Cost of goods sold for our wholesale segment includes the cost of the purchase of goods and freight costs. Cost of goods sold increased by 40.59% to $35.7 million in first quarter of 2012, from $25.4 million in the same quarter of 2011. Such increase was generally in line with the increase in sales from our wholesale segment.

Gross Profit and Gross Margin: Our gross profit increased by 19.57% to $0.6 million in the three months ended March 31, 2012, from $0.5 million in the same period in 2011, due to increase in gross profit from our real estate operations segment. Gross profit as a percentage of total revenue (gross margin) was 1.66% and 1.93% for the three months ended March 31, 2012 and 2011, respectively.

In our real estate operations segment we enjoyed a gross profit of $0.5 million in the three months ended March 31, 2012, a 617.45% increase, as compared to a gross loss of $0.09 million in the same period of 2011. Such change was primarily due to the establishment of new subsidiaries such as TFS Binzhou, and effective market strategies to boost leasing income and cut our costs in the undeveloped market of Liyang.

Gross profit from our wholesale segment decreased by 74.71% to a gross profit of $0.15 million in the three months ended March 31, 2012, from $0.6 million in the same period in 2011. The decrease resulted from our strategy to expand our market share and be more competitive by lowering our selling price.

Selling Expenses: Our selling expenses consist primarily of compensation and benefits to our sales staff, advertising expenses, business travel, transportation costs and other sales related costs. Our selling and marketing expenses in the three months ended March 31, 2012 were $292,612, from $219,112 in the same 2011 period, representing a 33.54% increase. The increase was mainly due to an increase in staff costs and advertising expense caused by the development of our business.

General and Administrative Expenses: General and administrative expenses, net of amounts capitalized, consist primarily of management and employee salaries and other personnel costs and corporate overhead. Our administrative expenses increased $0.9 million, or 69.7%, to $2.3 million in the three months ended March 31, 2012, from $1.3 million in the same period in 2011. The increase was mainly due to the increase in professional expense, staff costs, office building rental expense and other administrative expenses as a result of the establishment of subsidiary companies in late 2011.

Interest income. Interest income increased $0.6 million in the three months ended March 31, 2012, from $1,546 in the same period in 2011. We have been engaged in providing exclusive agency services to assist a property development company to sell its properties, with the condition that we prepay approximately $33 million as a deposit towards the proceeds of such sales. We entered into a supplementary agreement with this company whereby they agreed to pay interest on the deposit, at a rate of 15% per annum for the cost of capital, commencing from February 1, 2011 to January 31, 2012. We recognized approximately $0.6 million in interest income in the first quarter of 2012.

Interest Expense: Interest expense increased $0.5 million, or 23.43%, to $2.6 million in the three months ended March 31, 2012, from $2.1 million in the same period in 2011, primarily due to more borrowings and loans during the first quarter of 2012.

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Net non-operating income/expense: On January 28, 2011, Shandong TFS entered into an entrustment loan agreement with CITIC Bank (as trustee on behalf of Shendong Shenli Steel Pipe Co., Ltd.), an unrelated third party, for a loan in the principal amount of $47,661,000 with original maturity date of January 27, 2012. In January 2012, Shandong TFS applied for an extension of its entrusted loan agreement to July 31, 2012, which was finally agreed by Shandong Shengli in February 17, 2012. It was 21 days after the original maturity and Shandong TFS was charged an interest penalty of $0.2 million by CITIC Bank.

Gain on business combination: Gain on business combination of $7.1 million during 2011 resulted from the acquisition of Longyun during the first quarter in 2011.

Income Taxes: Our income taxes increased by approximately $0.3 million, or 47.29%, to $0.9 million in the three months ended March 31, 2012, from $0.6 million in the same period of 2011. The increase was due to the combined effect of recognition of deferred tax assets and liabilities.

Net income (Loss) from continuing operations: In the three months ended March 31, 2012, we suffered a net loss from continuing operations of $3.3 million in the three months ended March 31, 2012, while we record a net income from continuing operations of $4.5 million in the same period last year, as a result of the factors described above.

Net income (Loss): In the three months ended March 31, 2012, we suffered a net loss of $3.3 million in the three months ended March 31, 2012, while we recorded a net income of $4.5 million in the same period last year, as a result of the factors described above.

Liquidity and Capital Resources

As of March 31, 2012, we had cash and cash equivalents of $3.5 million and we had a working capital deficit of approximately $35 million. We provided approximately $8 million in cash for our operating activities in the three months ended March 31, 2012. We believe that these factors raise substantial doubt about its ability to continue as a going concern. Based on future projections of the our profits and cash inflows from operations, including commercial property leasing and providing agent service to properties sales, and the anticipated our ability to obtain continued financing or related parties’ loan to finance its continuing operations, we have prepared the consolidated financial statements on a going concern basis.

Our short-term liquidity requirements primarily consists of operating expenses, interest on our debt, business acquisitions and capital expenditures, including tenant improvement costs. Our long-term liquidity uses generally consists of the retirement or refinancing of debt upon maturity, funding of existing and new property improvement projects and funding of purchase of commercial properties.

As of March 31, 2012, our operating lease commitment and capital commitment, which will be paid during 2012, were $1.7million and $ 10.8 million, respectively. We have also budgeted approximately $10.7 million for our future business acquisitions. We expect that our future capital expenditures will continue to involve the acquisition of more properties and upgrade of our existing properties to enhance our competiveness in the rental market and that such expenditure will expand our business and bring us extra cash flow within the next year. Based on the fore mentioned matters, we have budgeted approximately $22 million to sustain our operations for the next twelve-month period.

Currently, available working capital and borrowings from different financing sources are our principal source of funds to meet our short-term liquidity requirements. Other sources of funds for short-term liquidity needs include our operating activities, which we expect to be our principal source of funds in the future.

We expect to meet our liquidity needs through a combination of:

• cash flow from operating activities;

• new borrowings and credit facilities to be obtained;

• revolving of existing borrowings

• the issuance of equity securities by the Company; and

• the disposition of non-core assets.

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We expect to obtain more cash flow from operation activities with increasing occupancy rate of our commercial properties and the expiration of lease holiday. In addition, we expect to enjoy a commission income up to RMB150 million (approximately $23 million), benefiting from our exclusive agent services provided on the Mintai Project. We expect to complete the sales within one year, and will collect the remaining prepaid deposit of RMB178 million (approximately $28 million) upon completion of sales.

We have renewed the existing entrusted loan amounting to $47.6 million. We believe that existing unmortgaged commercial properties and the properties to be acquired in the future will enhance our ability to obtain continue finance from lenders. We expect to obtain credit facilities from banks, by pledging the existing unmortgaged properties, up to $80 million in 2012, and expect no difficulties to revolve credit facilities or borrowings when necessary based on our good relationship with the lenders.

Except for the short-term loan from China Construction Bank, we are currently in compliance with the covenants and other requirements with respect to our outstanding debt. We have received an oral exemption for our non-compliance from China Construction Bank as discussed in more detail under “Financing Activities – Loans” below.

We believe that our available cash and cash equivalents and cash provided by operating activities, together with cash available from borrowings, will be adequate to meet presently anticipated cash needs for at least the next 12 months and we have prepared the consolidated financial statements on a going concern basis.

Except for the cash flows from operating activities and continued finance from banks and stockholders, we expect to meet our long-term liquidity needs through the proceeds from issuance of equity securities. We may require additional cash due to changing business conditions or other future developments, including any investments or acquisitions we may decide to pursue. The actual amount and timing of our future capital requirements may differ materially from our estimate depending on our actual results of operations.

Though there are restrictions on the convertibility of the RMB for capital account transactions, which principally includes investments and loans, we generally follow the regulations and apply to obtain the approval of SAFE and other relevant PRC governmental authorities. Our ability to pay dividends is primarily dependent on our receiving distributions of funds from our subsidiaries, which is restricted by certain regulatory requirements. Relevant PRC statutory laws and regulations permit payments of dividends by our PRC Operating Subsidiaries only out of their retained earnings, if any, as determined in accordance with PRC accounting standards and regulations. Our PRC subsidiaries are also required under PRC laws and regulations to allocate at least 10% of their annual after-tax profits determined in accordance with PRC GAAP to a statutory reserve fund until the amounts in said fund reaches 50% of their registered capital. The reserve that each of our PRC subsidiaries provided is to make provision for loss or transfer to capital. As of March 31, 2012, the accumulated statutory reserve fund of these subsidiaries was $3,992. Our PRC subsidiaries will be required to allocate 10% of our future net income, after deducting accumulated deficit, to a maximum reserve of RMB228.5 million (approximately $33.5 million), representing 50% of the total registered capital of our PRC subsidiaries amounting to RMB457 million (approximately $67 million) as of March 31, 2012. Allocations to these statutory reserve funds can only be used for specific purposes and are not transferable to us in the form of loans, advances, or cash dividends, which affects the nature of retained earnings: the part of retained earnings allocated to statutory reserve funds is treated as appropriated retained earnings, and the remaining part is unappropriated retained earnings. Our statutory reserve does not limit our ability to use cash from operations to fund our business, but affects the nature of retained earnings only. Allocations to statutory reserve are not transferrable as cash dividends.

As investment holding companies, our off-shore subsidiaries, including Fifth Season HK and Business Real Estates, do not have material cash obligations to third parties. Therefore, the restriction does not impact the liquidity of the companies.

We may not be able to repay, refinance or extend any or all of our debt at maturity or upon any acceleration. If any refinancing is done at higher interest rates, the increased interest expense could adversely affect our cash flow. Any such refinancing could also impose tighter financial ratios and other covenants that restrict our ability to take actions that could otherwise be in our best interest, such as funding property purchase activity and making opportunistic business acquisitions. We are currently in compliance with the covenants and other requirements with respect to our outstanding debt. There is no specific terms relating to financial ratios in our loan contracts signed up to March 31, 2012.

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We believe that our cash on hand and cash flow from operations will meet part of our present cash needs but we will require additional cash resources, including loans, to meet our expected capital expenditure and working capital for the next 12 months, which we expect to amount to approximately $22 million. To satisfy our capital requirements, we may seek to sell additional equity or debt securities or obtain additional credit facilities. The sale of additional equity securities could result in dilution to our stockholders. The incurrence of indebtedness would result in increased debt service obligations and could require us to agree to operating and financial covenants that would restrict our operations. Financing may not be available in amounts or on terms acceptable to us, if at all. Any failure by us to raise additional funds on terms favorable to us, or at all, could limit our ability to expand our business operations and could harm our overall business prospects.

The following table summarizes the key cash flow metrics from our condensed consolidated statements of cash flows for the three months ended March 31, 2012 and 2011.

Cash Flow
(all amounts in U.S. dollars)

		Three Months Ended March 31,
		2012			2011
Net cash used in operating activities	$	(1,734,834	)	$	(31,400,981	)
Net cash used in investing activities		(3,406,831	)		(21,271,012	)
Net cash provided by financing activities		8,307,432			56,974,806
Effects of exchange rate change in cash		6,901			7,979
Net increase in cash and cash equivalents		3,172,668			4,310,792
Cash and cash equivalents, beginning of the year		308,661			228,763
Cash and cash equivalent, End of the period	$	3,481,329		$	4,539,555

Operating activities

Net cash used in operating activities was $2 million for the three months ended March 31, 2012, as compared to $31 million net cash used in operating activities for the same period in 2011, which was primarily due to in the first quarter of 2011, we prepaid approximately $33 million as a deposit for providing exclusive agency services to assist a property development company to sell its properties, while there was no such kind of expenditure in 2012 period.

Investing activities

Net cash used in investing activities for the three months ended March 31, 2012 was $3.4 million, as compared to $21 million net cash used in investing activities for the same period in 2011. The decrease was primarily due to $nil expenditure over acquisition of subsidiary and less expenditure over purchase of real estate and related assets in 2012 period.

Financing activities

Net cash provided by financing activities for the three months ended March 31, 2012 was $8.3 million, as compared to $57 million net cash provided by financing activities for the same period in 2011. Such decrease was primarily due to more short-term and long-term borrowings obtained in the 2011 period, but there was only tiny change in the balances of borrowings in the 2012 period.

Loans

As of March 31, 2012, the amount, maturity date and term of each of our bank loans were as follows:

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(All amounts in U.S. Dollars)

		Interest rate			Maturity date			Balance
Entrusted bank loans
China CITIC Bank		258% of interest rate of PBOC			July 31, 2012		$	47,661,000
Ningbo Bank		24%			June 30, 2012			7,625,760
Short-term bank loans
China Construction Bank		115% of basis interest rate of PBOC			April 18, 2012			1,906,440
China CITIC Bank		120% of basis interest rate of PBOC			April 13, 2012			2,383,050
China Minsheng Bank		120% of interest rate of PBOC			August 1, 2012			3,177,400
Subtotal							$	62,753,650
Long-term borrowings
Shaopin Lu		12%			March 1, 2013		$	4,250,000
Subtotal								4,250,000
Total							$	67,003,650

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* Calculated based on the exchange rate of $1 = RMB 6.2943

As at March 31, 2012, except for the loan agreement entered between Longyun and China Construction Bank, we were in material compliance with all our outstanding loans as disclosed in more detail as follows:

• On January 28, 2011, Shandong TFS entered into an entrustment loan agreement with CITIC Bank (as trustee on behalf of Shendong Shenli Steel Pipe Co., Ltd., an unrelated third party), for a loan in the principal amount of $47,661,000. The loan is unsecured and is repayable in 12 months at an annual interest rate of 258% of the base rate published by the People’s Bank of China, payable each month by Shandong TFS. An Entrusted Loan is a form of agency service provided by banks in China. In this case, CITIC Bank acts as the trustee to lend out money on behalf of Shendong Shenli Steel Pipe Co., Ltd. (the “Trustor”). The Trustor provides instruction which specifies target borrowers, use of funds, loan term, interest rate, project organizer and beneficiary. CITIC Bank will not assume liability for the repayment of the loan on behalf of the borrower if the loan is not repaid upon maturity of the loan. Shandong TFS must submit a written request to CITIC Bank and the Trustor 30 days in advance to obtain their consent to prepay the loan, and the repayment schedule will become mandatory unless the due date is extended by CITIC Bank and the Trustor upon 15 days’ written notice from Shandong TFS. During the term of the loan, Shandong TFS is required to notify the Trustor and CITIC Bank of, and seek advance written consent for, any major changes to its operational policies, including without limitation equity transfers, restructuring, mergers, divisions, joint ventures, cooperation, joint operation, leases, or amendment to the its business scope or registered capital. In addition, Shandong TFS needs to obtain consent from the Trustor in writing for transferring its debt liability, leasing its major assets or using its major assets to provide security for other debt obligations. The contract was renewed and with new maturity date of July 31, 2012.

• On March 30, 2012, TFS Trade entered into an entrustment loan agreement with Ningbo Bank (as trustee on behalf of Junling Property Consulting (Shanghai) Co., Ltd, or Junling, an unrelated third party), pursuant to which, TFS Trade borrowed funds in the principal amount of $7,625,760 for the purpose of funding working capital. The loan will be repayable on June 30, 2012, at an interest rate of 24% and was secured by commercial properties valued at $10,662,556. If TFS Trade fails to repay the loan when the loan is due and payable, Junling is entitled to receive an additional penalty interest of 50% of the current interest rate of the unpaid amount. If TFS Trade fails to use the loan in accordance with the specified purpose, Junling is entitled to receive an additional interest of 80% of the current interest rate of the loan.

• Longyun entered into a loan agreement with China Construction Bank on April 18, 2011 for borrowing $1,906,440 for the purpose of maintaining cash flow. The loan will be repayable in 12 months at an interest rate of 15% above the base rate published by the People’s Bank of China. According to the loan agreement, Longyun’s debt and capital ratio should not be higher than 65%, its current ratio should not be lower than 1, and its quick ratio should not be lower than 0.7. However, Longyun’s current ratio and quick ratio were lower than 1 as of March 31 2012, which is not in compliance with the covenant. As of March 31, 2012, the outstanding short-term loan from China Construction Bank was secured by commercial properties valued at $9,150,869. The maturity date of the loan is April 18, 2012 and Longyun is in default of the loan. The Company has orally agreed with China Construction Bank on extending maturity date from April 18, 2012 to May 18, 2012. During the extended period, the Company is required to pay an additional interest penalty charged at 50% of the interest rate defined in the original loan agreement.

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• TFS GM entered into a loan agreement with China CITIC Bank on April 13, 2011 for borrowing $5,560,450 for the purpose of operating business. The loan will be repayable in 12 months at an interest rate of 20% above the base rate published by the People’s Bank of China. The outstanding short-term loan from China CITIC Bank was secured by a pledge of commercial properties with net book value amounting to $3,979,819 and was guaranteed by Mr. Lianmo Wu, the Chairman of our Board of Directors and a major stockholder of the Company. This loan has been repaid in full. A total of $3,177,400 was repaid on March 31, 2012 and a balance of $2,383,050 was repaid in April 2012.

• We entered into a loan agreement with China Minsheng Bank on August 1, 2011 for borrowing $3,177,400 for the purpose of purchasing goods. The loan will be repayable in 12 months at an interest rate of 20% above the base rate published by the People’s Bank of China. The outstanding short-term loan from China Minsheng Bank was pledged by commercial properties valued at $5,285,422 and was guaranteed by Mr. Wu and his wife, Ms. Cheung.

• On February 23, 2011, Fifth Season HK entered into a loan agreement with Mr. Shaoping Lu, our Chief Executive Officer and Director, for a loan in the principal amount of $4,250,000. The loan from Mr. Lu was guaranteed by Mr. Lianmo Wu, our president and director, and by his wife, Ms. Chushing Cheung. The loan is repayable in 2 years at an annual interest rate of 12%. The purpose of the loan is for purchasing properties in Zibo, Shandong. The loan is secured by the entire assets of Fifth Season HK, Mr. Wu and Ms. Cheung. The repayment must be made in Renminbi at the official foreign exchange rate of the PRC on the day of the repayment, and must be used to first settle penalty interest, handling charge and overdue fines (if any), and then to settle the interest and the principal. Mr. Lu is entitled to rescind the loan agreement if any of the following circumstances occurs: (1) Fifth Season HK provides untrue information, (2) the repayment of the loan is overdue for more than 5 days, (3) the loan is used outside of the permitted purpose, (4) Fifth Season HK fails to inform Mr. Lu of a material change, (5) Fifth Season HK provides a third-party guarantee without informing Mr. Lu in writing 30 days in advance, (6) Mr. Wu and Ms. Cheung commence divorce proceedings or (7) Fifth Season HK breaches the loan agreement.

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Obligations under Material Contracts

In addition to the loan commitments described above, we have the following material payment obligation:

On December 31, 2011, pursuant to the terms of the Property Sale and Purchase Agreement dated June 8, 2009, by and between TFS GM and Shanghai Shuangou Property Co., Ltd. (“Shanghai Shuangou”), TFS GM is required to pay RMB 37 million (approximately $5.9 million) before the end of 2012, but the payment terms may be extended at the request of TGS GM. In addition, pursuant to the terms of certain tenant improvement contracts signed in 2011, TFS GM is required to pay an additional RMB 31 million to Shanghai Shuangou (approximately $4.9 million) before the end of 2012.

Critical Accounting Policies

The preparation of financial statements in conformity with US GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the date of the financial statements and the reported amounts of revenues and expenses for the reporting period. Actual results could differ from our estimates.

The policies used in the preparation of our Consolidated Financial Statements are described in Note 3 to our Consolidated Financial Statements. However, certain of our significant accounting policies contain an increased level of assumptions used or estimates made in determining their impact in our Consolidated Financial Statements. Management has reviewed and determined the appropriateness of our critical accounting policies and estimates.

We consider our critical accounting estimates to be those used in the determination of the reported amounts and disclosure related to the following:

• Revenue recognition;
• Impairment of long-lived assets;
• Allowance for doubtful accounts; and
• Deferred tax assets and liabilities

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Revenue Recognition

Sales of goods

We primarily generate revenue from goods sales to distributors and end users. The delivery of our sales is made based on sales contracts from customers, which specify particular sales prices for the goods. Delivery occurs only upon receipt of the goods by the customer’s warehouse or designated destination, or at the time the goods are picked up by the customer. We granted certain credit terms and limits to customers that we believed to be low risk of collectability based on our credit assessment. Historically, no material collectability problem has occurred. Revenue is recognized when delivery occurs and collectability is reasonably assured. We have no post-delivery obligations on our goods sold.

The installment method of recognizing revenue is used where the collectability of the sales price is not reasonably assured. The installment method apportions each cash receipt between cost recovered and profit. The apportionment is in the same ratio as total cost and total profit bear to the sales value. Certain sales are reported under the installment collection method resulting in deferred revenue (net of any allowance for bad debts) and costs until the collection of the sale.

Rental revenue

Rental revenue includes rents that each tenant pays in accordance with the terms of its respective lease reported evenly over the non-cancelable term of the lease. Most of our leases contain rental increases at specified intervals. We recognize such revenues on a straight-line basis by averaging the non-cancelable rental revenues over the lease terms. Contingent rental revenue, such as percentage rent on sale volume of tenant, is accrued when the contingency is removed.

Impairment of long-lived assets

A long-lived asset (asset group) classified as held for sale is measured at the lower of its carrying amount or fair value less cost to sell. A long-lived asset is not depreciated (amortized) while it is classified as held for sale. A gain or loss not previously recognized that results from the sale of a long-lived asset (asset group) are recognized at the date of sale.

A long-lived asset (asset group) classified as held for use is tested for recoverability whenever events or changes in circumstances indicate that its carrying amount may not be recoverable. An impairment loss is recognized only if the carrying amount of a long-lived asset (asset group) is not recoverable and exceeds its fair value. The carrying amount of a long-lived asset (asset group) is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset (asset group). These cash flows are estimated based on a number of assumptions that are subject to economic and market uncertainties including among others, tenant’s payment history and financial condition, the likelihood of lease renewal, business condition in the industry in which tenants operate, changes in market rental rates, costs to operate property. The assessment is based on the carrying amount of the asset (asset group) at the date it is tested for recoverability, whether in use or under development. An impairment loss is measured as the amount by which the carrying amount of a long-lived asset (asset group) exceeds its fair value.

Allowance for Doubtful Accounts

Accrued straight-line rents receivable, trade receivable, other receivables and due from third parties/related parties are reviewed periodically as to whether they are past due based on contractual terms and their carrying values have become impaired. An allowance for doubtful accounts is recorded in the period in which loss is determined to be probable based on an assessment of specific evidence indicating doubtful collection, historical experience, account balance aging and prevailing economic conditions. Measurement of such losses requires consideration of historical loss experience, including the need to adjust for current conditions, and judgments about the probable effects of relevant observable data, including present economic conditions such as delinquency rates and financial health of specific customers. We have considered all available information in our assessments of the adequacy of the provision for doubtful accounts and we do not expect there would be significant changes on conditions that would result in material effect on the allowance estimation. We will continue to assess our receivable portfolio in light of the current economic environment and its impact on our estimation of the adequacy of the allowance for doubtful accounts.

Deferred tax assets and liabilities

We recognize deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each period end based on enacted tax laws and statutory tax rates, applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established, when necessary, to reduce deferred tax assets to the amount expected to be realized.

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We regularly review our deferred tax assets for recoverability considering historical profitability, projected future taxable income, the expected timing of the reversals of existing temporary differences and tax planning strategies. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income and tax planning strategies in making this assessment. If we are unable to generate sufficient future taxable income, or if there is a material change in the actual effective tax rates or time period within which the underlying temporary differences become taxable or deductible, we could be required to increase the valuation allowance against all or a significant portion of our deferred tax assets resulting in a substantial adverse impact on our operating results.

Seasonality

Our operating results and operating cash flows historically have not been subject to seasonal variations. This pattern may change, however, as a result of new market opportunities or new product introduction.

Inflation

Inflation and changing prices have not had a material effect on our business and we do not expect that inflation or changing prices will materially affect our business in the foreseeable future. However, our management will closely monitor the price change in our industry and continually maintain effective cost control in operations.

Off-Balance Sheet Arrangements

As of March 31, 2012, the Company had delivered guarantees on behalf of related party Yinli for RMB12 million (approximately $1.9 million) in bank loans. The Company would be obligated to fulfill Yinli’s obligations under the loans in the event that Yinli is unable to meet these obligations. Should the Company be required to pay any portion of the total amount of the loans it would attempt to recover some or the entire amount from Yinli.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Not Applicable.

ITEM 4. CONTROLS AND PROCEDURES.

Disclosure Controls and Procedures

We maintain disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) that are designed to ensure that information that would be required to be disclosed in Exchange Act reports is recorded, processed, summarized and reported within the time period specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including to our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

As required by Rule 13a-15 under the Exchange Act, our management, including our Chief Executive Officer, Mr. Shaoping Lu, and our Chief Financial Officer, Mr. Glen R. Shear, evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of March 31, 2012. During their review of our internal control over financial reporting during the three-month period ended March 31, 2012, our management determined that there was a material weaknesses in our internal control over financial reporting because we lack an audit committee and an internal audit department (described in Item 9A of our Annual Report on Form 10-K for the year ended December 31, 2011). Based on that evaluation, our management concluded that our internal control over financial reporting was not effective, as of March 31, 2012.

Management is currently seeking for and plans to establish an audit committee and appoint qualified personnel as soon as possible to remediate this material weakness. In the interim, on December 21, 2011, our Board of Directors appointed Mr. Glen Shear to serve as the Company’s new Chief Financial Officer, effective immediately. Mr. Shear has over 10 years’ experience in the financial services industry, 5 of which was spent as Chief Financial Officer of a U.S. public company, and has the requisite understanding of and expertise in U.S. GAAP.

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Changes in Internal Controls over Financial Reporting

There were no changes in our internal controls over financial reporting during the three months ended March 31, 2012 that have materially affected, or are reasonably likely to materially affect our internal control over financial reporting.

PART II
OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

From time to time, we may become involved in various lawsuits and legal proceedings, which arise, in the ordinary course of business. However, litigation is subject to inherent uncertainties, and an adverse result in these, or other matters, may arise from time to time that may harm our business. Except for the legal proceeding described below, we are currently not aware of any such legal proceedings or claims that we believe will have a material adverse affect on our business, financial condition or operating results.

Our subsidiaries, the Fifth Season Hangzhou Department Store Investment Management Co., Ltd and the Fifth Season Liyang Investment Management Co., Ltd., are a defendants in a lawsuit filed in the Liyang People’s Court by one of our lessees, Jianhua Si, for alleged breach of contract. We responded with a countersuit against the lessee for breach of contract. On July 21, 2011, the case was adjudicated with the following results. On one hand, the lessee prevailed in its original claim and we were ordered to pay actual and punitive damages totaling about US$65,000. On the other hand, we prevailed in our counterclaim and the lessee was ordered to pay us a default payment of about US$65,000. The plaintiff has appealed the People’s Court ruling and we are awaiting the result of such appeal. We do not expect the outcome of the case to have a substantial impact on our business and operations.

ITEM 1A. RISK FACTORS.

There are no material changes from the risk factors previously disclosed in Item 1A “Risk Factors” of our Annual Report on Form 10-K filed on April 16, 2012.

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

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES.

None.

ITEM 4. (REMOVED AND RESERVED).

ITEM 5. OTHER INFORMATION.

We have no information to disclose that was required to be in a report on Form 8-K during the period covered by this report, but was not reported. There have been no material changes to the procedures by which security holders may recommend nominees to our board of directors.

ITEM 6. EXHIBITS.

The following exhibits are filed as part of this report or incorporated by reference:

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Exhibit No.		Description
31.1		Certifications of Principal Executive Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2		Certifications of Principal Financial Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1		Certifications of Principal Executive Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2		Certifications of Principal Financial Officer furnished pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

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SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

Date: May 15, 2012	FIFTH SEASON INTERNATIONAL, INC.
	By: /s/ Shaoping Lu
	Shaoping Lu
	Chief Executive Officer
	(Principal Executive Officer)
	By: /s/ Glen Shear
	Glen Shear
	Chief Financial Officer
	(Principal Financial Officer and Principal
	Accounting Officer)

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