RENMIN TIANLI GROUP, INC. - FORM 10-Q

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EX-32.1 - RENMIN TIANLI GROUP, INC.	e609888_ex32-1.htm
EX-32.2 - RENMIN TIANLI GROUP, INC.	e609888_ex32-2.htm
EX-31.1 - RENMIN TIANLI GROUP, INC.	e609888_ex31-1.htm
EXCEL - IDEA: XBRL DOCUMENT - RENMIN TIANLI GROUP, INC.	Financial_Report.xls
EX-31.2 - RENMIN TIANLI GROUP, INC.	e609888_ex31-2.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

x	Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended June 30, 2012

o	Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to .

Commission File Number 001-34799

TIANLI AGRITECH, INC.

(Exact name of registrant as specified in its charter)


British Virgin Islands		Not applicable
(State or other jurisdiction of incorporation or organization)		(I.R.S. employer identification number)

Suite F, 23rd Floor, Building B, Jiangjing Mansion

228 Yanjiang Ave., Jiangan District, Wuhan City

Hubei Province, China 430010

(Address of principal executive offices and zip code)

(+86) 27 8274 0726

(Registrant’s telephone number, including area code)

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 o

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 x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.


Large accelerated filer	o		Accelerated filer	o

Non-accelerated filer	o	(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 o No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date. As of August 10, 2012, the Registrant had outstanding 10,135,000 shares of common stock, par value $0.001 per share.

Table of Contents

TIANLI AGRITECH, INC.

FORM 10-Q

INDEX

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS		2
PART I FINANCIAL INFORMATION		4
Item 1.	Financial Statements.	4
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	25
Item 3.	Quantitative and Qualitative Disclosures about Market Risk.	34
Item 4.	Controls and Procedures	34
PART II OTHER INFORMATION		35
Item 1A.	Risk Factors	35
Item 6.	Exhibits	35

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This document contains certain statements of a forward-looking nature. Such forward-looking statements, including but not limited to projected growth, trends and strategies, future operating and financial results, financial expectations and current business indicators are based upon current information and expectations and are subject to change based on factors beyond the control of the Company. Forward-looking statements typically are identified by the use of terms such as “look,” “may,” “should,” “might,” “believe,” “plan,” “expect,” “anticipate,” “estimate” and similar words, although some forward-looking statements are expressed differently. The accuracy of such statements may be impacted by a number of business risks and uncertainties that could cause actual results to differ materially from those projected or anticipated, including but not limited to those set forth herein and in our Annual Report on Form 10-K for the fiscal year ended December 31, 2011 filed on March 14, 2012.

Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date hereof. Except as required by the federal securities laws, the Company undertakes no obligation to update forward-looking information. Nonetheless, the Company reserves the right to make such updates from time to time by press release, periodic report or other method of public disclosure without the need for specific reference to this Report. No such update shall be deemed to indicate that other statements not addressed by such update remain correct or create an obligation to provide any other updates.

PART I FINANCIAL INFORMATION

Item 1.

Financial Statements.

TIANLI AGRITECH, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(AMOUNTS EXPRESSED IN US DOLLARS)

	June 30, 2012		December 31, 2011
	(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents	$	5,697,854	$	6,507,742
Accounts receivable		127,265		126,866
Inventories		9,207,605		9,578,040
Advances to suppliers		226,648		-
Prepaid expenses		199,550		164,664
Loan to An Puluo		-		1,101,582
Other receivables		251,182		154,775
Assets - discontinued operations		-		1,402,842
Total Current Assets		15,710,104		19,036,511
Long-term prepaid expenses		1,735,345		1,818,399
Plant and equipment, net		21,031,864		17,676,999
Construction in progress		1,358,505		3,126,317
Biological assets, net		4,645,060		3,886,580
Land use rights, net		1,508,825		1,522,709
Total Assets	$	45,989,703	$	47,067,515

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities:
Short-term loans	$	2,345,892	$	4,721,064
Accounts payable and accrued liabilities		136,231		172,541
Due to An Puluo		-		35,951
Other payables		2,041,411		781,037
Due to related party		125,725		120,326
Liabilities - discontinued operations		-		1,198,544
Total Liabilities		4,649,259		7,029,463

Stockholders’ Equity:
Common stock ($0.001 par value, 50,000,000 shares
authorized, 10,135,000 shares issued and outstanding on June 30, 2012 and December 31, 2011)		10,135		10,135
Additional paid in capital		13,530,963		13,520,276
Statutory surplus reserves		2,416,647		2,416,647
Retained earnings		22,817,406		21,795,072
Accumulated other comprehensive income		2,565,293		2,295,922
Total Stockholders’ Equity		41,340,444		40,038,052
Total Liabilities and Stockholders’ Equity	$	45,989,703	$	47,067,515

See notes to financial statements.

TIANLI AGRITECH, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME

(AMOUNTS EXPRESSED IN US DOLLARS)

(UNAUDITED)

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2012			2011			2012			2011
Revenue	$	6,391,343		$	7,670,429		$	13,097,764		$	13,577,395
Cost of goods sold		5,589,803			4,452,623			10,994,216			7,896,443
Gross profit		801,540			3,217,806			2,103,548			5,680,952

General and administrative expenses		425,207			610,983			1,058,674			1,380,957
Selling expenses		1,253			25,128			1,253			62,310
Income from operations		375,080			2,581,695			1,043,621			4,237,685

Other income (expense):
Interest expenses and bank charges		(85,692	)		(98,700	)		(179,358	)		(108,973	)
Subsidy income		27,339			22,970			161,986			213,267
Other income (expense)		(44,927	)		(26,814	)		(43,094	)		(25,359	)
Total other income (expense)		(103,280	)		(102,544	)		(60,466	)		78,935

Income before income taxes		271,800			2,479,151			983,155			4,316,620
Income taxes		-			-			-			-
Net income from continuing operations		271,800			2,479,151			983,155			4,316,620

Discontinued operations:
Gain from operations of discontinued component, net of taxes		43,836			-			39,179			-
Net income	$	315,636		$	2,479,151		$	1,022,334		$	4,316,620

Earnings per share:
Basic and diluted weighted average shares		10,135,000			10,125,000			10,135,000			10,125,000
Basic and diluted earnings per share from continuing operations	$	0.03		$	0.24		$	0.10		$	0.43
Basic and diluted earnings per share from discontinued operations	$	-		$	-		$	-		$	-

Comprehensive income:
Net income	$	315,636		$	2,479,151		$	1,022,334		$	4,316,620
Unrealized foreign currency translation adjustment		21,566			273,638			269,371			461,419
Comprehensive income	$	337,202		$	2,752,789		$	1,291,705		$	4,778,039

See notes to financial statements.

TIANLI AGRITECH, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(AMOUNTS EXPRESSED IN US DOLLARS)

(UNAUDITED)

	For the Six Months Ended June 30,
	2012			2011
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	1,022,334		$	4,316,620
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization		1,487,841			979,443
Amortization of prepaid rental expenses		96,293			-
Bad debt expense		-			104,245
Stock-based compensation		10,687			173,581
Gain on disposal of biological assets		-			(168,710	)
Loss from disposal of construction in progress		49,344			-
Changes in operating assets and liabilities:
Accounts receivable		519			(67,791	)
Inventories		440,097			(2,324,369	)
Advances to suppliers		(226,871	)		707,637
Prepaid expenses		(149,952	)		79,307
Other receivables		(40,618	)		(1,088,237	)
Accounts payable and accrued liabilities		(37,595	)		42,602
Other payables		1,257,271			-
Net cash provided by operating activities from continuing operations		3,909,350			2,754,328
Net cash used in operating activities from discontinued operations		114,969			-
Net cash provided by operating activities		4,024,319			2,754,328

CASH FLOWS FROM INVESTING ACTIVITIES
Cash collected from loan to An Puluo		1,110,635			-
Payment for long-term prepaid expenses		-			(85,701	)
Purchase of plant and equipment		(161,998	)		(1,693,392	)
Purchase of farms		-			(2,152,543	)
Addition to construction in progress		(2,628,812	)		(2,198,927	)
Proceeds from disposal of construction in progress		571,025			-
Purchase of biological assets		(1,346,696	)		(1,515,063	)
Proceeds from disposal of biological assets		-			267,732
Net cash used in investing activities		(2,455,846	)		(7,377,894	)

CASH FLOWS FROM FINANCING ACTIVITIES
Increase in restricted cash		-			(305,759	)
Repayment of short-term loans		(3,173,243	)		-
Proceeds from short-term loans		761,578			3,057,590
Net cash provided by (used in) financing activities		(2,411,655	)		2,751,831

EFFECT OF EXCHANGE RATE CHANGES ON CASH		33,304			137,456
NET DECREASE IN CASH		(809,888	)		(1,734,279	)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD		6,507,742			7,983,793
CASH AND CASH EQUIVALENTS, END OF PERIOD	$	5,697,854		$	6,249,514

SUPPLEMENTAL DISCLOSURES:
Cash paid during the period for:
Interest expense paid	$	191,357		$	36,075
Income tax paid	$	-		$	-

See notes to financial statements.

TIANLI AGRITECH, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2012 AND 2011

(UNAUDITED)

NOTE 1—ORGANIZATION AND DESCRIPTION OF BUSINESS

The consolidated financial statements include the financial statements of Tianli Agritech, Inc. (referred to herein as “Tianli”); its wholly-owned subsidiary, HC Shengyuan Limited, a Hong Kong limited liability company (“HCS”); HCS’s wholly-owned subsidiary, Wuhan Fengxing Agricultural Science and Technology Development Co., Ltd., a Chinese limited liability company and a wholly foreign owned entity (“WFOE”); WFOE’s variable interest entity, Wuhan Fengze Agricultural Science and Technology Development Co., Ltd., a Chinese limited liability company (“Fengze” or the “VIE”), where WFOE is deemed the primary beneficiary; Fengze’s wholly-owned subsidiary, Hubei Tianzhili Breeder Hog Co., Ltd., a Chinese limited liability company (“Tianzhili”). All of Tianli’s operations are conducted by Fengze and Tianzhili whose results of operations are consolidated into those of Tianli. HCS and WFOE are sometimes referred to as the “subsidiaries”. Tianli, its consolidated subsidiaries and Fengze and Tianzhili are collectively referred to herein as the “Company”, “we” and “us”, unless specific reference is made to an entity.

Tianli was incorporated in the British Virgin Islands on November 9, 2009 as a limited liability company. The Company is engaged in the business of breeding, raising, and selling hogs for use in China’s pork meat production and hog breeding by other hog producers. The Company also sells pork products through its retail operation. The Company operates eleven production farms in areas around Wuhan City, within Hubei Province, People’s Republic of China (“PRC”). Its wholly owned subsidiary, HCS, was incorporated in Hong Kong on November 24, 2009 as a limited liability company. Other than its equity interest in HCS, Tianli does not own any assets or conduct any operations.

WFOE was incorporated in Wuhan City on June 2, 2005. On November 26, 2009, HCS entered into a stock purchase agreement with WFOE where HCS would acquire a 100% equity interest of WFOE. On January 19, 2010, the Wuhan Municipal Commission of Commerce approved the ownership change. On January 27, 2010, the ownership change was declared effective by Wuhan Administrator for Industry & Commerce. HCS acquired WFOE and became the holder of 100% of the equity interest of WFOE, and WFOE effectively became the wholly-owned subsidiary of the Company. Other than the equity interest in WFOE, HCS does not own any assets or conduct any operations.

WFOE conducts its business through Fengze, which is consolidated as a variable interest entity, as discussed below.

Chinese laws and regulations currently do not prohibit or restrict foreign ownership in hog breeding businesses. However, Chinese laws and regulations do prevent direct foreign investment in certain industries. On December 1, 2009, Fengze and all of the stockholders of Fengze (“Principal Stockholders”) entered into an Entrusted Management Agreement (the “EMA”) with WFOE, which provides that WFOE will be fully and exclusively responsible for the management of Fengze. WFOE is also entitled to receive the residual return of Fengze. As a result of the agreement, WFOE will absorb 100% of the expected losses and gains of Fengze, which results in WFOE being the primary beneficiary of Fengze.

WFOE also entered into a Pledge of Equity Agreement (the “PEA”) with the Principal Stockholders, who pledged all their equity interest in these entities to WFOE. The PEA, which was entered into by each Principal Shareholder, pledged each of the Principal Stockholder’s equity interest in WFOE as a guarantee for the entrustment payment under the EMA.

In addition, WFOE entered into an Option Agreement (the “OA”) to acquire the Principal Stockholders’ equity interest in these entities at such time as it determined to do so provided such acquisition is then permitted by the PRC laws.

TIANLI AGRITECH, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2012 AND 2011

(UNAUDITED)

NOTE 1—ORGANIZATION AND DESCRIPTION OF BUSINESS (CONTINUED)

Collectively, the EMA, PEA and OA are referred to as the Exclusive Agreements, based upon which the Company consolidates the variable interest entity, Fengze, as required by generally accepted accounting principles in the United States (“US GAAP”), because the Company is the primary beneficiary of the VIE. The profits and losses of Fengze are allocated to WFOE and thus to the Company based upon the EMA.

As discussed in Note 19, the Company completed its Initial Public Offering (“IPO”) on July 19, 2010, whereby it issued 2,000,000 shares of its common stock at a price of $6.00 per share.

On May 12, 2011, the Company acquired its eleventh farm from An Puluo Food, Inc. (“An Puluo”), which is located in Enshi Tujia and Miao Autonomous Prefecture of Hubei Province, for a purchase price of $2.2 million.

On June 22, 2011, Fengze established a wholly owned subsidiary, Hubei Tianzhili Breeder Hog Co., Ltd. (“Tianzhili”), in Enshi City, Hubei Province as a limited liability company. Tianzhili engages in the business of raising and selling black hogs, some of the meat of which is to be sold through several major Chinese retail channels pursuant to a collaborative agreement with An Puluo that commenced in the third quarter of 2011. This collaborative agreement has been terminated as of June 15, 2012.

TIANLI AGRITECH, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2012 AND 2011

(UNAUDITED)

NOTE 2—BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying consolidated financial statements have been prepared in conformity with US GAAP. The basis of accounting differs from that used in the statutory accounts of the Company, which are prepared in accordance with the accounting principles of the PRC (“PRC GAAP”). The Company’s functional currency is the Chinese Renminbi (“RMB”); however the accompanying consolidated financial statements have been translated and presented in United States Dollars (“USD”). All significant intercompany transactions and balances have been eliminated.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and the related disclosure of contingent assets and liabilities at the date of these financial statements and the reported amounts of revenues and expenses during the reporting period. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Accordingly, actual results may differ from these estimates. Significant estimates include the useful lives of property and equipment, land use rights and biological assets, and assumptions used in assessing impairment for long-term assets.

Principles of Consolidation

Pursuant to US GAAP, Fengze is the VIE of the Company and the Company is the primary beneficiary of the VIE. Accordingly, the VIE has been consolidated in the Company’s financial statements.

Based on the Exclusive agreements, the Company is able to exercise control over Fengze, and obtain the financial interests such as the periodic income of Fengze through the EMA, PEA, and OA and to acquire the net assets of Fengze through purchase of its equities at essentially no cost. The Company therefore concluded that its interest in the VIE is not a non-controlling interest and therefore is not classified as such. Based on the Exclusive Agreements, the amount of controlling interest of the Fengze shareholders, who are holding shares of Fengze for the Company, is zero. They exercise no control over Fengze and no financial interests of ownership are due to them either for periodic income or the net assets.

Cash and Cash Equivalents

Cash and cash equivalents consist of all cash balances and highly liquid investments with an original maturity of three months or less. Because of the short maturity of these investments, the carrying amounts approximate their fair value. Restricted cash is excluded from cash and cash equivalents.

TIANLI AGRITECH, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2012 AND 2011

(UNAUDITED)

NOTE 2—BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Accounts Receivable

Accounts receivable is stated at cost, net of an allowance for doubtful accounts. The Company maintains allowances for doubtful accounts for estimated losses resulting from the failure of customers to make required payments. The Company reviews the accounts receivable on a periodic basis and makes allowances where there is doubt as to the collectability of individual balances. In evaluating the collectability of individual receivable balances, the Company considers many factors, including the age of the accounts receivable balance, the customer’s payment history, its current credit-worthiness and current economic trends.

Management believes that accounts receivable are fully collectable. No allowance for doubtful accounts has been provided as of June 30, 2012 and December 31, 2011.

Inventories

Inventories are stated at the lower of cost, as determined by the weighted-average method, or market. Management compares the cost of inventories with the market value, and allowance is made for writing down the inventories to their market value if that is lower. Costs of raised animals include proportionate costs of breeding, including amortization of the breeding herd or biological assets, plus the costs of feed and other maintenance costs through the balance sheet date. Management inspects and monitors inventory on a continual basis.

Prepaid Expenses

Prepaid expenses at June 30, 2012 and December 31, 2011 totaled $199,550 and $164,664, respectively, and includes prepayments to suppliers for merchandise that had not yet been shipped to us, as well as services that had not yet been provided to us. We recognize prepayments as inventory or expense as suppliers make delivery of goods or provide services, in compliance with our accounting policy.

Plant and Equipment

The Company states plant and equipment at cost less accumulated depreciation. Expenditures for maintenance and repairs are charged to operations as incurred; additions, renewals and betterments are capitalized. When plant and equipment assets are retired or otherwise disposed of, the related cost and accumulated depreciation are removed from the respective accounts, and any resulting gain or loss is recorded as an operating expense. In accordance with US GAAP, the Company examines the possibility of decreases in the value of plant and equipment when events or changes in circumstances reflect the fact that their recorded value may not be recoverable. The Company computes depreciation using the straight-line method over the estimated useful lives of the assets with a residual value of 5% of plant and equipment.

Estimated useful lives of the Company’s assets are as follows:


		Useful Life
Buildings		20 years
Vehicles		5 years
Office equipment		5 years
Production equipment		5-10 years

TIANLI AGRITECH, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2012 AND 2011

(UNAUDITED)

NOTE 2—BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Construction in Progress

Construction in progress consists of amounts expended for building construction of new breeding and animal rearing facilities. Once the building construction is completed and the facilities are approved for adequate breeding and animal rearing activity, the construction in progress assets are categorized as buildings and production equipment and are then accounted for in plant and equipment. Assets accounted for as plant and equipment are used in the Company’s production process, whereupon they are depreciated over their estimated useful lives.

Biological Assets

Biological assets consist primarily of hogs purchased or selected from the Company’s own production for breeding and farrowing, which management believes will produce piglets that grow faster and have better quality breeding capabilities and carcasses with a high percentage of meat and a small quantity of fat. The costs to purchase and cultivate these breeding hogs and the expenditures related to labor and materials to feed the breeding hogs until they become commercially productive and breedable are capitalized. When these breeding hogs are entered into breeding and farrowing production, amortization of the costs of these breeding hogs commences. The estimated production life for breeding hogs is three years, and the costs are amortized to a residual value of $76 (RMB 500). After the breeding hogs have completed their production life of breeding, these breeding hogs are then transferred into inventory as the vast majority of these breeding hogs will then be sold for meat processing. Expenses incurred maintaining breeding hogs during gestation until piglets are weaned are capitalized into inventory and included in Work in process—biological assets, a component of inventories. If these breeding hogs produce piglets which are deemed appropriate for internal breeding purposes, the gestation and raising costs until weaned for these piglets are then allocated into biological assets.

Amortized expenses pertaining to biological assets are included in inventory costs for those piglets to be sold and ultimately become a component of cost of goods sold.

Land Use Rights

According to the laws of the PRC, the government owns all the land in the PRC. Companies or individuals are authorized to possess and use the land only through land use rights granted by the Chinese government. Land use rights are being amortized using the straight-line method over their lease terms.

The Company carries land use rights at cost less accumulated amortization. In accordance with US GAAP, the Company examines the possibility of decreases in the value of land use rights when events or changes in circumstances reflect the fact that their recorded value may not be recoverable. The Company computes amortization using the straight-line method over the 50 year life of the land use rights.

Impairment of Long-lived Assets

In accordance with US GAAP, the Company periodically reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be fully recoverable. The Company recognizes an impairment loss when the sum of expected undiscounted future cash flows is less than the carrying amount of the asset. The amount of impairment is measured as the difference between the asset’s estimated fair value and its book value. The Company did not consider it necessary to record any impairment charges during the six months ended June 30, 2012 and 2011.

TIANLI AGRITECH, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2012 AND 2011

(UNAUDITED)

NOTE 2—BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Fair Value of Financial Instruments

Effective January 1, 2008, the Company adopted ASC 820, Fair Value Measurements and Disclosure (“ASC 820”) for assets and liabilities measured at fair value on a recurring basis. ASC 820 establishes a common definition for fair value to be applied to existing generally accepted accounting principles that require the use of fair value measurements, establishes a framework for measuring fair value and expands disclosure about such fair value measurements. The adoption of ASC 820 did not have an impact on the Company’s financial position or operating results, but did expand certain disclosures.

ASC 820 defines fair value as the price that would be received upon sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Additionally, ASC 820 requires the use of valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. These inputs are prioritized below:

Level 1: Observable inputs such as quoted market prices in active markets for identical assets or liabilities

Level 2: Observable market-based inputs or unobservable inputs that are corroborated by market data

Level 3: Unobservable inputs for which there is little or no market data, which require the use of the reporting entity’s own assumptions.

The Company did not identify any assets and liabilities that are required to be presented on the consolidated balance sheets at fair value in accordance with the relevant accounting standards.

The carrying values of cash and cash equivalents, trade receivables and payables, and short-term bank loans and debts approximate their fair values due to the short maturities of these instruments.

Revenue Recognition

The Company generates revenues from the business of breeding, raising, and selling hogs for use in Chinese pork meat production and the sale of hogs for breeding by other hog producers. Starting from the quarter ended September 30, 2011, the Company also generates revenue from selling processed pork products to retailers. The revenues from retail business have been discontinued as of June 15, 2012.

Revenues generated from the sales of breeding and meat hogs and processed pork are recognized when these products are delivered to customers in accordance with previously agreed upon pricing and delivery arrangements, and the collectability of these sales is reasonably assured. Cash payment, which sometimes is in the form of wired cash transfers to the Company’s bank account, is usually received by the Company at the time the hogs are sold. Sold hogs and processed pork are not returnable and accordingly, no provision has been made for returnable goods. The customers are responsible for the shipping of the hogs that they have purchased.

TIANLI AGRITECH, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2012 AND 2011

(UNAUDITED)

NOTE 2—BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Collaborative Arrangements

The Company evaluates whether an arrangement is a collaborative arrangement under FASB ASC Topic 808, Collaborative Arrangements, at its inception based on the facts and circumstances specific to the arrangement. The Company also reevaluates whether an arrangement qualifies or continues to qualify as a collaborative arrangement whenever there is a change in either the roles of the participants or the participants’ exposure to significant risks and rewards dependent on the ultimate commercial success of the endeavor. For those collaborative arrangements where it is determined that the Company is the principal participant, costs incurred and revenue generated from third parties are recorded on a gross basis in the financial statements.

The Company’s collaboration agreements with third parties are performed on a ‘‘best efforts’’ basis with no guarantee of either technological or commercial success.

Payments to and from the Company’s collaboration partners are presented in the statements of income based on the nature of the arrangement (including its contractual terms), the nature of the payments and applicable accounting guidance. Under the collaborative agreements with An Puluo, the Company is the principal in the transaction and the Company records revenues when An Puluo sells the product and title passes to its customer. The Company and An Puluo share the profit from this collaborative business and all profit sharing to An Puluo is recorded as part of cost of sales in the Company’s consolidated statements of income. On June 15, 2012, the Company terminated the collaborative agreement with An Puluo.

In accordance with the Company’s collaborative agreement with An Puluo, the Company was able to establish retail operations within existing retail facilities with whom An Puluo had ongoing business arrangements. In these retail facilities, the Company is permitted to retail pork products. The owners of these retail facilities are responsible for collection of all retail sales made by the Company. These retail facilities are responsible for remitting to the Company the sales revenue that they collect on behalf of the Company, less any fees for operating a retail operation in their facility. As of June 30, 2012 and December 31, 2011, the retailers owed the Company $1,197,902 and $994,329, respectively, accounted for as accounts receivable of the Company. The receivable as of June 15, 2012, along with all assets and liabilities generated and incurred under the collaborative arrangement, has been assumed by An Puluo after the Company terminated the collaborative arrangement as An Puluo has the capacity to operate a retail operation. Net assets and liabilities that arose under this terminated collaborative arrangement have been resolved as of June 30, 2012 and are reflected as $0 in net assets and liabilities of discontinued operations.

According to the agreement, the Company and An Puluo share the net income of the collaborative retail business on a ratio of 60% to the Company and 40% to An Puluo. Profit sharing to An Puluo during the six months ended June 30, 2012 and 2011 was $26,120 and $0, respectively. The profit sharing payable though June 15, 2012 has been resolved with An Puluo as part of the termination of the collaborative arrangement. As of December 31, 2011 profit share payable to An Puluo is reflected in liabilities of discontinued operations.

TIANLI AGRITECH, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2012 AND 2011

(UNAUDITED)

NOTE 2—BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Segment Information

The Company follows FASB ASC 280-Segment Reporting, which requires that companies disclose segment data based on how management makes decision about allocating resources to segments and evaluating their performance. The Company’s management has determined that as of June 30, 2012 their operations are in one segment, that of hog farming. While the Company operated under the obligations due under their collaboration agreement with An Puluo they operated under two segments, that of hog farming and retail pork product sales. Subsequent to the cancellation of the collaboration agreement on June 15, 2012 the Company operates in the hog farming segment only.

Income Taxes

The Company accounts for income taxes under the provisions of Section 740-10-30 of the FASB Accounting Standards Codification, which is an asset and liability approach that requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been recognized in its financial statements or tax returns. The Company did not have any deferred tax assets or liabilities as of June 30, 2012 and December 31, 2011.

The Company is subject to the Enterprise Income Tax law (“EIT”) of the People’s Republic of China. However, according to the EIT, companies that are engaged in the agricultural business and primary processing of agricultural products are exempt from the 25% enterprise income tax. The Company is engaged in breeding, raising, and selling hogs for use in Chinese pork meat production and hog breeding, which is exempt from the Chinese income tax. Tianli is incorporated in the British Virgin Islands. Under the current tax laws of the British Virgin Islands, the Company is not subject to income taxes. In addition, the Company is not subject to the PRC’s 13% VAT tax for hog sales or the 5% business tax levied on incomes from services rendered. According to the PRC tax regulations, companies engaging in the agricultural business are exempt from these taxes. With respect to the Company’s terminated collaboration agreement with An Puluo, the Company had engaged in retail sales activities which were not exempt from VAT taxes. With respect to this operation, the Company was required to collect VAT taxes of 13% from its customers. As of June 30, 2012 and December 31, 2011, the Company has no VAT payable with respect to its retail operations as they were resolved with An Puluo upon termination of the collaborative arrangement.

Basic and Diluted Earnings per Share

The Company reports earnings per share in accordance with FASB ASC 260 “Earnings per share”. The Company’s basic earnings per share are computed using the weighted average number of shares outstanding for the periods presented. Diluted earnings per share are computed based on the assumption that any dilutive options or warrants were converted or exercised. Dilution is computed by applying the treasury stock method. Under this method, the Company’s outstanding stock warrants are assumed to be exercised, and funds thus obtained were assumed to be used to purchase common stock at the average market price during the period. There were no dilutive instruments outstanding during the six months periods ended June 30, 2012 and 2011.

TIANLI AGRITECH, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2012 AND 2011

(UNAUDITED)

NOTE 2—BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Foreign Currency Translation

As of June 30, 2012 and December 31, 2011, the accounts of Tianli were maintained and its financial statements were expressed in Chinese Renminbi (RMB). Such financial statements were translated into United States Dollars (USD) in accordance with US GAAP, with the RMB as the functional currency. All assets and liabilities are translated at the current exchange rates as of the balance sheet dates. These rates were RMB 6.31 per US dollar and RMB 6.35 per US dollar as of June 30, 2012 and December 31, 2011, respectively. Stockholders’ equity is translated at the historical rates and items in the statements of operations and cash flows are translated at the average exchange rate for the period. The resulting translation adjustments are reported under other comprehensive income in accordance with US GAAP as a component of stockholders’ equity.

During the six months ended June 30, 2012 and 2011, the transactions of Tianli were denominated and recorded in RMB and are translated at the average rates of exchange for the period. There rates were RMB 6.30 and RMB 6.57 per US dollar for the six months ended June 30, 2012 and 2011, respectively. Exchange gains and losses are recognized for the different foreign exchange rates applied when the foreign currency assets and liabilities are settled. Transaction gains and losses that arise from exchange rate fluctuations on transactions denominated in a currency other than the functional currency are included in the results of operations as incurred.

Stock Based Compensation

In December 2004, the Financial Accounting Standards Board, or FASB, issued FASB ASC 718-10-55 - Compensation-Stock Compensation, or ASC 718-10-55. Under ASC 718-10-55, companies are required to measure the compensation costs of share-based compensation arrangements based on the grant-date fair value and recognize the costs in the financial statements over the period during which employees are required to provide services. Share-based compensation arrangements include stock options, restricted share plans, performance-based awards, share appreciation rights and employee share purchase plans. In addition, FASB ASC 825-10-50-10 – Financial Instruments – Overall – Disclosures, or ASC 825-10-50-10, expresses views of the Securities and Exchange Commission, or the SEC, staff regarding the interaction between ASC 718-10-55 and certain SEC rules and regulations and provides the staff's views regarding the valuation of share-based payment arrangements for public companies. The Company’s compensation cost is measured on the date of grant at its fair value. Such compensation amounts, if any, are amortized over the respective vesting periods or period of service of the option grant.

TIANLI AGRITECH, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2012 AND 2011

(UNAUDITED)

NOTE 2—BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Contingencies

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

If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company’s financial statements. If the assessment indicates that a potential material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material would be disclosed.

Loss contingencies considered to be remote by management are generally not disclosed unless they involve guarantees, in which case the guarantee would be disclosed.

Accrual of Environmental Obligations

ASC Section 410-30-25 “Recognition” of environmental obligations requires the accrual of a liability if both of the following conditions are met:

a) Information available before the financial statements are issued or are available to be issued indicates that it is probable that an asset has been impaired or a liability has been incurred at the date of the financial statements.

b) The amount of the loss can be reasonably estimated.

As of June 30, 2012 and December 31, 2011, the Company did not have any environmental remediation obligations, nor did it have any asset retirement obligations under ASC 410. Furthermore, the Company did not have any environmental remediation loss contingencies requiring recognition or disclosure in its financial statements.

Reclassifications

Certain reclassifications have been made to the prior periods’ financial statements to conform to the current year presentation. These reclassifications had no effect on previously reported results of operations or the sum of retained earnings and statutory reserves.

TIANLI AGRITECH, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2012 AND 2011

(UNAUDITED)

NOTE 2—BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Recently Issued Accounting Pronouncements

In January 2011, the FASB issued ASU No. 2011-01- Receivables (Topic 310): Deferral of the Effective Date of Disclosures about Troubled Debt Restructurings in Update No. 2010-20. The amendments in this update temporarily delay the effective date of the disclosures about troubled debt restructurings in ASU No. 2010-20, Receivables (Topic 310): Disclosures about the Credit Quality of Financing Receivables and the Allowance for Credit Losses, for public entities. The delay is intended to allow the FASB time to complete its deliberations on what constitutes a troubled debt restructuring. The effective date of the new disclosures about troubled debt restructurings for public entities and the guidance for determining what constitutes a troubled debt restructuring will then be coordinated. This deferral is expected not to have a material impact on the Company’s consolidated financial statements.

In January 2011, the FASB issued ASU No. 2011-02- Receivables (Topic 310): A Creditor’s Determination of Whether a Restructuring Is a Troubled Debt Restructuring. The amendments in this update provide additional guidance to assist creditors in determining whether a restructuring of a receivable meets the criteria to be considered a troubled debt restructuring. For public companies, the new guidance is effective for interim and annual periods beginning on or after June 15, 2011, and applies retrospectively to restructurings occurring on or after the beginning of the fiscal year of adoption within those annual periods. Early application is permitted. The adoption of the provisions in ASU 2011-02 did not have a material impact on the Company’s consolidated financial statements.

In May 2011, the FASB issued ASU No. 2011-04 – Fair Value Measurement (Topic 820): Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S.GAAP and IFRSs. The amendments in this update intend to converge requirements for how to measure fair value and for disclosing information about fair value measurements in US GAAP with International Financial Reporting Standards. For public entities, this ASU is effective for interim and annual periods beginning after December 15, 2011. The adoption of the provisions in ASU 2011-04 did not to have a material impact on the Company’s consolidated financial statements.

In June 2011, the FASB issued ASU No. 2011-05 – Comprehensive Income (Topic 220): Presentation of Comprehensive Income. The amendments in this update require (i) that all non-owner changes in stockholders’ equity be presented either in a single continuous statement of comprehensive income or in two separate but consecutive statements (the current option to present components of other comprehensive income (“OCI”) as part of the statement of changes in stockholders’ equity is eliminated); and (ii) presentation of reclassification adjustments from OCI to net income on the face of the financial statements. For public entities, the amendments in this ASU are effective for years, and interim periods within those years, beginning after December 15, 2011. The amendments in this update should be applied retrospectively. Early adoption is permitted. The adoption of the provisions in ASU 2011-05 did not have a material impact on the Company’s consolidated financial statements.

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

TIANLI AGRITECH, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2012 AND 2011

(UNAUDITED)

NOTE 3—DISCONTINUED OPERATIONS

On June 15, 2012, the Company entered into a termination agreement with An Puluo to terminate its collaborative agreement retail business.

Pursuant to the termination agreement, starting from June 15, 2012, the Company cancelled their collaborative agreement with An Puluo. After the termination, the Company no longer has any operations in a retail segment. As of June 15, 2012, the Company had realized accumulated retained earnings of $240,286 from its collaborative arrangement with An Puluo since the inception of the collaboration.

In accordance with Accounting Standard Codification (“ASC”) 360 (Formerly FAS 144) of Financial Accounting Standards Board (“FASB”), Accounting for Impairment or Disposal of Long-Lived Assets, the Company has reflected the An Puluo collaboration agreement, formerly the Company’s retail segment, as discontinued operations with results of operations reflected in the consolidated statements of operations through the date of the sale as discontinued operations for all periods presented. The assets, liabilities and equity of the retail segment in the Company’s consolidated balance sheets as of June 30, 2012 and December 31, 2011 have been reclassified as discontinued operations. The cash flows from discontinued operations have also been reclassified. The Company has recorded a gain from operations of the discontinued operation, net of income taxes, of $39,179 and $0, for the six months ended June 30, 2012 and 2011, respectively.

The following table presents the revenues and net gain from discontinued operations for the periods presented:

	For the Six Months Ended June 30,
	2012		2011
Revenues	$	1,902,575	$	-
Net gain from discontinued operations	$	39,179	$	-

NOTE 4—ACCOUNTS RECEIVABLE

Accounts receivable consisted of the following:

	June 30,		December 31,
	2012		2011
Accounts receivable	$	127,265	$	126,866
Less: Allowance for doubtful accounts		-		-
	$	127,265	$	126,866

TIANLI AGRITECH, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2012 AND 2011

(UNAUDITED)

NOTE 5—INVENTORIES

Inventories consisted of the following:

	June 30,		December 31,
	2012		2011
Raw materials	$	1,430,741	$	1,208,405
Work in process—biological assets		4,196,192		4,613,624
Infant hogs		3,580,672		3,756,011
Finished goods	$	9,207,605	$	9,578,040

Management compares the cost of inventories with the market value, and allowance is made for writing down the inventories to their market value, if lower. As of June 30, 2012 and December 31, 2011, the Company determined that no such write downs were necessary. The term “Work in process—biological assets” has the meaning set forth above in Note 2—Biological Assets.

NOTE 6—ADVANCES TO SUPPLIERS

The Company makes advances for materials or services the Company uses in its operations. As of June 30, 2012 and December 31, 2011, advances to suppliers amounted to $226,648 and $0, respectively.

The balance as of June 30, 2012 included deposits of $172,597 and $42,141 for the purchase of breeding hogs and water waste treatment equipment, respectively.

NOTE 7—OTHER RECEIVABLES

At June 30, 2012 and December 31, 2011, the Company reported other receivables of $251,182 and $154,775, respectively, including an allowance for doubtful receivables of $55,478 and $55,079.

NOTE 8—LOAN TO AN PULUO

As of June 30, 2012 and December 31, 2011, the Company had a loan to An Puluo of $0 and $1,101,582, respectively. The loan receivable was non-interest bearing, unsecured and due on demand. This loan was collected on May 2012.

TIANLI AGRITECH, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2012 AND 2011

(UNAUDITED)

NOTE 9—PLANT AND EQUIPMENT

Plant and equipment consist of the following:

	June 30,			December 31,
	2012			2011
Buildings	$	21,243,499		$	17,321,424
Vehicles		685,988			681,067
Office equipment		100,256			262,679
Production equipment		2,863,100			2,765,132
		25,141,023			21,030,302
Less: Accumulated depreciation		(4,109,159	)		(3,353,303	)
	$	21,031,864		$	17,676,999

On May 12, 2011, the Company acquired from An Puluo its eleventh farm, which is located in Enshi Tujia and Miao Autonomous Prefecture of Hubei Province, for a purchase price of approximately $2.2 million. The consideration was allocated to long-term rental prepayments for parcels of land of $1,765,130 (RMB 11,216,518) and plant and equipment of $469,507.

Depreciation expense was $732,338 and $526,252 for the six month periods ended June 30, 2012 and 2011, respectively. For the three months ended June 30, 2012 and 2011, depreciation expense was $376,820 and $281,123, respectively.

TIANLI AGRITECH, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2012 AND 2011

(UNAUDITED)

NOTE 10—CONSTRUCTION IN PROGRESS

Construction in progress consists of amounts expended for the construction of new breeding and animal rearing facilities. Once construction is completed and the facilities are approved to be used for breeding and animal rearing activity, the construction in progress assets are placed into production and transferred into plant and equipment, whereupon they are depreciated over their estimated useful lives. As of June 30, 2012 and December 31, 2011, the construction in progress was $1,358,505 and $3,126,317, respectively. Included in this amount were:

-	$89,820 for building up a new feed processing facility, a new refrigerator and the improvements of several of the Company’s hog farms; and

$1,268,685 funding to local independent farmers to construct small-scale hog farms. During the year ended December 31, 2011, the Company signed 7 joint development agreements, for periods of approximately 10 years, with 7 local cooperatives in the Enshi Autonomous Prefecture in Hubei Province whereby the Company, the relevant governmental agencies and the cooperatives will assist participating farmers to breed and raise Enshi black hogs which will be purchased by the Company for resale as meat hogs or retained or sold as breeders at the Company’s discretion. Under these agreements, the Company provides funds to local independent farmers to construct small-scale hog rearing facilities, within their cooperatives, which are sufficient for the Company’s requirements for these local farmers to grow black hogs for sale to the Company. Pursuant to these joint development agreements, title to the physical plants and equipment included in these small-scale hog rearing facilities belongs to the Company with the individual farmers having the right to use the constructed physical plant and equipment. As of June 30, 2012, the Company has expended a total of $6.22 million to build these hog rearing facilities. With respect to three of the cooperatives, the Company has purchased $1.19 million of hog rearing facilities and equipment that has been completed and is operational and included in plant and equipment as of June 30, 2012. With regard to four of the cooperatives, the Company has purchased $5.03 million of hog rearing facilities and equipment, including $3.76 million of hog rearing facilities and equipment that has been completed and recorded as part of plant and equipment as of June 30, 2012. The remaining balance of $1.27 million which has not been completed and is not operational is included in construction in progress as of June 30, 2012.

According to the joint development agreements, each participating farmer paid a deposit of approximately one-third of the construction cost of the hog farm to the Company upon completion of the respective hog farm. The deposit is amortized against the depreciation expense over a period of 10 years. Should the farmer withdraw from the program within this period, the deposit will be refunded proportionately. As of June 30, 2012 and December 31, 2011, deposits from farmers were $1,828,672 and $600,157, respectively, and were included in other payables.

TIANLI AGRITECH, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2012 AND 2011

(UNAUDITED)

NOTE 11—BIOLOGICAL ASSETS

Biological assets consist of the following:

	June 30,			December 31,
	2012			2011
Breeding hogs	$	6,358,385		$	4,977,039
Less: Accumulated amortization		(1,713,325	)		(1,090,459	)
	$	4,645,060		$	3,886,580

Amortization of the biological assets, included as a component of inventory, for the six month periods ended June 30, 2012 and 2011 was $615,589 and $418,582, respectively, and for the three months ended June 30, 2012 and 2011 was $303,474 and $238,940.

NOTE 12—LONG-TERM PREPAID EXPENSES

Long-term prepaid expenses primarily consist of prepaid rental expenses for three parcels of land comprising the Company’s eleventh farm. The prepaid rental expenses are being amortized using the straight-line method over the lease term of 21.33 years.

Long-term prepaid expenses at June 30, 2012 and December 31, 2011 are as follows:

	June 30,			December 31,
	2012			2011
Long-term prepaid rental expenses	$	1,777,888		$	1,765,130
Others		85,593			136,546
		1,863,481			1,901,676
Less: Accumulated amortization		(128,136	)		(83,277	)
	$	1,735,345		$	1,818,399

Amortization expense for the six months ended June 30, 2012 and 2011 was $96,293 and $13,397, respectively. For three months ended June 30, 2012 and 2011, the amortization expense was $27,940 and $13,397.

The estimated amortization expense of long-term prepaid expenses over each of the next five years and thereafter will be $192,586 per annum.

TIANLI AGRITECH, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2012 AND 2011

(UNAUDITED)

NOTE 13—INTANGIBLE ASSETS

According to the laws of PRC, the government owns all the land in PRC. Companies or individuals are authorized to possess and use land only through land use rights granted by the Chinese government. Land use rights are being amortized using the straight-line method over the lease term of 50 years.

Land use rights at June 30, 2012 and December 31, 2011 are as follows:

	June 30,			December 31,
	2012			2011
Land use rights	$	1,680,451		$	1,668,393
Less: Accumulated amortization		(171,626	)		(145,684	)
	$	1,508,825		$	1,522,709

For the six months ended June 30, 2012 and 2011, the amortization expense was $24,914 and $21,212, respectively. Amortization expense for the three month periods ended June 30, 2012 and 2011 was $12,447 and $10,655, respectively.

The estimated amortization expense of land use rights over each of the next five years and thereafter will be $49,828 per annum.

NOTE 14—SHORT-TERM LOANS

As of June 30, 2012 and December 31, 2011, the short-term loans are as follows:

	June 30,		December 31,
	2012		2011
Loan payable to Shanghai Pudong Development Bank, annual interest rate of 8.203%, due by May 31, 2012, guaranteed by Wuhan Agriculture Guarantee Co., Ltd., Fengze and Fengxin	$	-	$	3,147,376
Loan payable to Communication Bank of China, annual interest rate of 8.528%, due by November 25, 2012, guaranteed by Wuhan Agriculture Guarantee Co., Ltd., Fengze		1,585,062		1,573,688
Loan payable to Wuhan Rural Commercial Bank, annual interest rate of 9.184%, due by May 23, 2013.		760,830		4,721,064
	$	2,345,892	$	4,721,064

TIANLI AGRITECH, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2012 AND 2011

(UNAUDITED)

NOTE 15—ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

As of June 30, 2012 and December 31, 2011, accounts payable and accrued liabilities are as follows:

	June 30,		December 31,
	2012		2011
Accounts payable	$	135,685	$	153,058
Other taxes payable		546		19,483
Others	$	136,231	$	172,541

NOTE 16—DUE TO AN PULUO

As of June 30, 2012 and December 31, 2011, amounts due to An Puluo are as follows:

	June 30,		December 31,
	2012		2011
Payable for purchase of finished goods	$	-	$	35,951
Profit sharing payable		-		-
	$	-	$	35,951

In August 2011, the Company entered into a collaborative agreement (the “Agreement”) with an unrelated pork processor, An Puluo, to pursue retail business opportunities, under an exclusive right, selling An Puluo processed pork products. In conjunction with the Agreement the Company purchased processed pork from An Puluo, after which the collaborative aspect of the Agreement in retail marketing the pork products commenced.

At the inception of the collaborative retail business, the Company evaluated the facts and circumstances specific to the arrangement and has determined that it is the principal participant, and accordingly costs incurred and revenue generated from third parties are recorded on a gross basis in the Company’s financial statements.

As of June 15, 2012, this collaborative agreement had been canceled.

TIANLI AGRITECH, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2012 AND 2011

(UNAUDITED)

NOTE 17—OTHER PAYABLES

Other payables at June 30, 2012 and December 31, 2011 were $2,041,411 and $781,037, respectively. Included in other payables as of June 30, 2012 were deposit payables of $1,828,672 and a payable to an investment relationship consultant of $180,880. At December 31, 2011, other payables were comprised mainly of deposits payable of $600,157 and a payable to an investment relationship consultant of $180,880.

During the year ended December 31, 2011, the Company signed 7 joint development agreements with 7 local cooperatives in the Enshi Autonomous Prefecture in Hubei Province. Under these agreements, the Company provides funding to local independent farmers to construct small-scale hog farms on which the farmers will grow black hogs for sale to the Company.

The amortization of deposit payables for the six months ended June 30, 2012 and 2011 was $29,145 and $0. The following table sets forth the aggregate future amortization expected for the next five years:

	Amortization
2012	$	58,290
2013	$	58,290
2014	$	58,290
2015	$	58,290
2016	$	58,290
Thereafter	$	1,537,222

NOTE 18—RELATED PARTY TRANSACTIONS

Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operational decisions. Parties are also considered to be related if they are subject to common control or common significant influence. The amount due to related party was $125,725 and $120,326 as of June 30, 2012 and December 31, 2011, respectively. The amount represented the advances from the Company’s shareholder and chief executive officer, Hanying Li, for operating purposes. Such advances are non-interest bearing and due upon demand.

TIANLI AGRITECH, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2012 AND 2011

(UNAUDITED)

NOTE 19—CAPITAL STOCK

The Company is authorized to issue 50,000,000 shares of common stock, $0.001 par value, and as of June 30, 2012 and December 31, 2011, it had 10,135,000 shares issued and outstanding, respectively.

The Company granted to its investor relation firm 44,000 shares of the Company’s common stock for services to be rendered up through October 2011 pursuant to an agreement made in October 2010. The shares were valued at $234,080 and amortized over the service term. The amortization of this grant was $234,080 for the year ended December 31, 2011. As of July 2011, the Company issued 10,000 shares of the 44,000 shares to the investor relation firm.

The fair value of the director options and the placement agent warrants were estimated as of the grant date using the Black Scholes options pricing model. The determination of the fair value is affected by the price of the Company’s common stock at the date of the grant as well as assumptions made regarding the expected price volatility of the common stock over the terms of the grant, the risk-free interest rate and any expected dividends.

The table below provides the estimated fair value of the director options, and the significant assumptions used to determine their values.

	Director Options	Placement Agent Warrants
Estimated Fair Value Per Option or Warrant	$2.47	$0.56
Stock Price at Date of Grant	$5.66	$4.36
Assumptions:
Dividend Yield	0%	0%
Stock Price Volatility	50.8%	31.3%
Risk-Free Interest Rate	1.60%	1.40%

TIANLI AGRITECH, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2012 AND 2011

(UNAUDITED)

NOTE 19—CAPITAL STOCK (CONTINUED)

The following table summarizes the stock options and warrants outstanding as of June 30, 2012 and December 31, 2011 and the activity during the six months ended June 30, 2012.

	Options		Weighted Average Exercise Price		Warrants		Weighted Average Exercise Price
Outstanding as of December 31, 2011		26,000	$	6.00		210,000	$	7.21
Granted		-		-		-		-
Exercised		-		-		-		-
Forfeited		-		-		-		-
Outstanding at June 30, 2012		26,000	$	6.00		210,000	$	7.21
Exercisable at June 30, 2012		19,500	$	6.00		210,000	$	7.21

The weighted average remaining contractual life for the options and the warrants is 3.43 years and 2.95 years, respectively. The market value of the Company’s common stock was $1.20 and $1.26 as of June 30, 2012 and December 31, 2011, respectively. The intrinsic value of the outstanding options and the warrants as of June 30, 2012 and December 31, 2011 was $0.

NOTE 20—STATUTORY RESERVES

As stipulated by the Company Law of the PRC, net income after taxation can only be distributed as dividends after appropriation has been made for the following:

•

Making up cumulative prior years’ losses, if any;

•

Allocations to the “Statutory surplus reserve” of at least 10% of income after tax, as determined under PRC accounting rules and regulations, until the fund amounts to 50% of the Company’s registered capital;

•

Allocations to the discretionary surplus reserve, if approved by the stockholders;

•

The transfer to this reserve must be made before distribution of any dividend to shareholders. The surplus reserve fund is non-distributable other than during liquidation and can be used to fund previous years’ losses, if any, and may be utilized for business expansion or converted into share capital by issuing new shares to existing shareholders in proportion to their shareholdings or by increasing the par value of the shares currently held by them, provided that the remaining reserve balance after such issue is not less than 25% of the registered capital.

In accordance with the Chinese Company Law, the Company has allocated 10% of its net income as the statutory reserve contribution. The reserves amounted to $2,416,647 as of June 30, 2012 and December 31, 2011, respectively.

TIANLI AGRITECH, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2012 AND 2011

(UNAUDITED)

NOTE 21—CERTAIN RISKS AND CONCENTRATION

Credit risk and major customers

As of June 30, 2012 and December 31, 2011, 90% and 86% of the Company’s cash including cash on hand and deposits in accounts were maintained within the PRC where there is currently no rule or regulation in place for obligatory insurance to cover bank deposits in the event of a bank’s failure. However, the Company has not experienced any such losses and believes it is not exposed to any significant risks on its cash in bank accounts

The Company’s key customers are principally hog brokers, hog farmers and slaughterhouses, all of which are located in the PRC. The Company has not entered into long-term supply contracts with any of these major customers.

During the six months ended June 30, 2012 and 2011, there were two customers that accounted for more than 10% of the Company’s revenue, Wuhan Mingxiang Meat Factory Co. Ltd. and Wuhan Huangpi Hengdian Zhongxin slaughter house.

Risk arising from operations in foreign countries

Substantially all of the Company’s operations are conducted in China. The Company’s operations are subject to various political, economic, and other risks and uncertainties inherent in China. Among other risks, the Company’s operations are subject to the risks of restrictions on transfer of funds; changing taxation policies; foreign exchange restrictions; and political conditions and governmental regulations.

Risk arising from contractual arrangements with Fengze

The Company conducts substantially all of its operations, and generates substantially all of its revenues, through contractual arrangements with Fengze that provide the Company with effective control over Fengze. The Company depends on Fengze to hold and maintain contracts with its customers. Fengze owns substantially all of the Company’s intellectual property, facilities and other assets relating to the operation of the Company’s business, and employs the personnel for substantially all of its business. Neither Tianli, nor HCS nor WFOE has any ownership interest in Fengze. Although WFOE’s contractual arrangements with Fengze are valid, binding and enforceable under current PRC laws and regulations, these contractual arrangements may not be as effective in providing the Company with control over Fengze as direct ownership of Fengze would.

NOTE 22—GOVERNMENT SUBSIDIES

The Company received subsidies of $161,986 and $213,267 during the six months ended June 30, 2012 and 2011, respectively for recurring breeder hog subsidies and for an award from the provincial government for the Company becoming a public company in the United States. All such subsidies are recorded as “subsidy income” in the financial statements.

TIANLI AGRITECH, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2012 AND 2011

(UNAUDITED)

NOTE 23—COMMITMENTS AND CONTINGENCIES

General

The Company follows ASC 450, Accounting for Contingencies, in determining its accruals and disclosures with respect to loss contingencies. Accordingly, estimated losses from loss contingencies are accrued by a charge to income when information available prior to issuance of the financial statements indicates that it is probable that a liability could be been incurred and the amount of the loss can be reasonably estimated. Legal expenses associated with the contingency are expensed as incurred. If a loss contingency is not probable or reasonably estimable, disclosure of the loss contingency is made in the financial statements when it is at least reasonably possible that a material loss could be incurred. The Company has not accounted for any loss contingencies as of June 30, 2012 and December 31, 2011.

Lease obligations

The Company leases office space that has a remaining term of nine years. Also as a condition of being the holder of the land use rights for its hog farms, the Company makes rental payments to the government over the term of the land use rights, which range from 19 years to 50 years. The Company does not have capital leases. In most cases, management expects that, in the normal course of business, leases will be renewed or replaced. Net rental expense relating to the Company’s operating leases for the six month periods ended June 30, 2012 and 2011 was $43,126 and $80,139, respectively. For the three months ended June 30, 2012, the operating leases were $21,114 and $28,876.

The following table sets forth the aggregate minimum future annual rental commitments at June 30, 2012 under all non-cancelable leases for years ending December 31:

	Operating Leases
2012 (full year)	$	84,525
2013	$	82,799
2014	$	82,799
2015	$	82,799
2016	$	82,799
Thereafter	$	1,678,235

TIANLI AGRITECH, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2012 AND 2011

(UNAUDITED)

NOTE 23—COMMITMENTS AND CONTINGENCIES (CONTINUED)

Capital commitments

	June 30,		December 31,
	2012		2011
Capital commitments – contracted but not provided for:
Construction of buildings - within one year	$	-	$	533,480

Capital expenditures

As of June 30, 2012 and December 31, 2011, the Company had deposited $89,820 and $750,992, respectively, included in construction in progress, for building a new feed processing facility, new refrigerator, and the improvements of several of the Company’s hog farms. The remaining amount due will be paid upon completion.

The Company’s execution of the Enshi Black Hog program will require the Company to incur various costs and contribute various amounts to cover the costs of different aspects of the program as more fully described above. As of June 30, 2012, the Company provided funds totaling $6.22 million to construct small-scale hog farms for local hog farmers in which the farmers will grow black hogs for sale to the Company. Upon satisfactory completion of these farms, these farms would become fixed assets of the Company. The Company expects that further funding for this program will be required later this year, and management believes that such funds will be available out of the cash flow generated by operations.

Environmental matters

Environmental laws and regulations to which the Company is subject mandate additional concerns and requirements of the Company. Failure to comply with applicable laws, regulations and permits can result in injunctive actions, damages and civil and criminal penalties. The laws and regulations applicable to the Company's activities change frequently and it is not possible to predict the potential impact on the Company from any such future changes.

Although management believes that the Company is in material compliance with the statutes, laws, rules and regulations of every jurisdiction in which it operates, no assurance can be given that the Company’s compliance with the applicable statutes, laws, rules and regulations will not be challenged by governing authorities or private parties, or that such challenges will not lead to material adverse effects on the Company’s financial position, results of operations, or cash flows.

The Company is not involved in any legal matters. While incapable of estimation, in the opinion of the management, the individual regulatory and legal matters in which it might be involved in the future are not expected to have a material adverse effect on the Company’s financial position, results of operations, or cash flows.

TIANLI AGRITECH, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE SIX MONTHS ENDED JUNE 30, 2012 AND 2011

(UNAUDITED)

NOTE 24—SUBSEQUENT EVENT

On June 28, 2012, Wuhan Fengze Agricultural Science and Technology Development Co., Ltd., the Company’s variable interest entity (“Fengze”), entered into a Marketing Consulting Agreement with Yu Wang, Yan Liu, Xiaoxu Liu (collectively, the “Consultants”) with respect to its black hog products program. The Consultants have been engaged to promote the sales of Fengze’s black hog products in North China, with an emphasis on Beijing, Tianjin and neighboring areas. The agreement provides that the Consultants are responsible for (i) conducting market research and analysis of the market for black hogs in the North China area, establishing the marketing channel, and ensuring Fengze’s black hog products can be quickly entered into the principal supermarkets, farmers’ markets, state organizations, schools and high-grade hotels in Beijing and Tianjin within the cost parameters established by Fengze; and (ii) recommending the principal distributors of pork products and the slaughterhouses and other service providers to be utilized by Fengze in the North China area. In addition, the Consultants are to assist Fengze in establishing North China market cooperation networks to ensure the black hogs successfully enter the North China market. The term of the agreement is two years. In consideration for their services each of the Consultants is to receive 320,000 common shares of Tianli Agritech, Inc., subject to the obligation to return a portion of the shares if sales are less than 30,000 units by December 30, 2013. The agreement provides that if the sales volume of Fengze’s black hog products in Beijing, Tianjin and neighboring areas by December 30, 2013 is less than 30,000 units, the Consultants will forfeit that number of shares corresponding to the percentage of the difference between the actual sales volume of Fengze’s black hog products and 30,000. The 960,000 shares had not been issued as of June 30, 2012.

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited consolidated financial statements and the related notes included elsewhere in this report and with the consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011. This discussion contains forward-looking statements that involve risks and uncertainties. Actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements.

Overview

Our Company is in the business of breeding, raising, and selling hogs in the Wuhan City area of the People’s Republic of China (“PRC”). We control an affiliated entity, Wuhan Fengze Agricultural Science and Technology Development Co., Ltd. (“Fengze”), pursuant to a series of control agreements between Fengze and our wholly owned subsidiary, Wuhan Fengxin Agricultural Science and Technology Development Co., Ltd., a wholly foreign owned enterprise (“WFOE”). Fengze mainly produces and sells hogs for breeding stock and slaughter. As of June 30, 2012, Fengze owned and operated eleven commercial hog farms in the Wuhan City area with an annual production capacity of approximately 170,000 hogs when the most recently acquired tenth and eleventh farms reach full capacity.

On December 29, 2010, we completed the acquisition of the assets of the Hengdian Farm, located in Wuhan City, which represents our tenth farm and which will produce up to 20,000 hogs annually at full production. On May 12, 2011, we completed the acquisition from An Puluo Food, Inc. (“An Puluo”) of our eleventh farm, which is located in Enshi Tujia and Miao Autonomous Prefecture of Hubei Province. This farm also will produce up to 20,000 hogs annually once it reaches full production. Our tenth farm had achieved full production by the fourth quarter of 2011 but now is operating slightly below capacity due to the use of contaminated food which impacted a number of our farms in late 2011.

In the last two years, our business has grown rapidly as a result of the expansion of our annual capacity levels through the acquisition of farms and we intend to take other measures to increase the size and profitability of our business. As one part of this effort, in August, 2011, we entered into a collaborative agreement to distribute processed pork products at major retail stores in greater Wuhan City. This collaborative agreement was canceled at June 15, 2012.

In an effort to significantly increase the scale of our operations, we concluded a series of agreements (the “Exclusivity Agreements”) in 2011 with the Animal Husbandry and Veterinary Bureau of Enshi Tujia and Miao Autonomous Prefecture of Hubei Province, the Animal Husbandry and Veterinary Bureau of Xianfeng County of Hubei Province, the Xuwang Hog Farming Professional Cooperatives of Xianfeng County, and the Qiming Hog Farming Professional Cooperatives of Xianfeng County, whereby we were granted the exclusive right to breed and sell Enshi black hogs in Enshi Autonomous Prefecture in Hubei Province. Enshi black hog is one of the oldest hog species with a lineage that can be traced back to the year 1611. Enshi black hog originated in the Enshi Tujia and Miao Autonomous Prefecture in Hubei Province and the meat of the Enshi Black Hog is considered by many Chinese to be superior to that of many other breeds and for that reason, black hog meat generally sells for more than standard hog meat. The Company estimates that the price of Enshi black hog meat is currently approximately 35% above the price of typical lean pork meat. The agreements also call for the joint development, funding and operation of local cooperatives in the Enshi Autonomous Prefecture in Hubei Province whereby the Company, the relevant governmental agencies and the cooperatives will assist participating farmers to breed and raise Enshi black hogs which will be purchased by the Company for resale as meat hogs or retained or sold as breeders at the Company’s discretion. By entering into this arrangement, we hope to be able to develop a widely recognized brand of black hog meat and to profit from the sale of black hogs grown by independent farmers as well as those grown by us. If successfully implemented, this program should allow us to profit from the black hogs grown by the participating farmers who will be obligated to purchase feed, vaccines and other supplies from us and then sell us their hogs at a price which is comparable to the costs at which we currently grow our own hogs.

The Exclusivity Agreements envision that we, acting through Fengze’s wholly owned subsidiary, Tianzhili, will work with the Animal Husbandry and Veterinary Bureaus of Xianfeng County and Enshi Tujia and Miao Autonomous Prefecture, respectively, to develop a regional breeding and distribution program whereby local farmers will be trained and supervised by us, the relevant governmental agencies and their cooperatives in raising a breed of black hogs genetically developed and monitored by us with the approval of the local government agency. We will work with all of the farmers participating in the program to ensure that the quality of the breed is maintained and to develop standardized programs for the feed and care of the hogs. As part of this effort, we will develop an appropriate feed mix, which the farmers will purchase from us. To be eligible to participate in the program farmers will need to be able to maintain no less than 6 sows or produce at least 100 black hogs per year. It is envisioned that we will fund construction of up to 1,000 program farms by the end of this year, of which over 405 program farms have been completed and put into use as of June 30, 2012. The goal is to achieve a production capacity of 40,000 hogs during 2012 with a long run target of an annual capacity of 1 million hogs. Achievement of any of the program’s goals and the need for financing are dependent upon the participation, cooperation and skills of local farmers which are currently being evaluated. The agreements are generally for a period of ten years.

As noted above, we should benefit from this program in a number of ways, principally by reselling the black hogs purchased from the participating farmers and by providing the farmers with necessary supplies. The price which we will pay the farmers is approximately the price at which typical lean white pork meat sells. The price at which black hog meat sells has certain percentage premium above the price of white hog meat and the premium prices vary in different areas. We believe this will provide sufficient margin to us even if the relative prices change.

We believe that because this program offers many advantages to the participating farmers and the local governments, the number of farmers wanting to join the program will be significant ensuring the success of the program and will result in a significant increase in the volume of pork we sell. Enshi Autonomous prefecture is a relatively poor area of China. By joining this program participating farmers will benefit from our expertise in breeding and caring for hogs, and will be producing a breed which is generally considered superior to the meat of standard hogs. To develop our strain of black hog we will apply internationally recognized advanced molecular breeding strategies. The project will be supported by the Animal Husbandry Research Institution of Hubei, which has significant experience in hog breeding research. Moreover, the Enshi Autonomous Prefecture government has determined to emphasize hog farming in China’s current five-year development plan (2011-2015), which should cause it to cooperate with us to make the project a success. Significantly, the local governments have agreed that we are the only company with which it will undertake a project such as this.

In addition to the advantages of this program, we believe that some of the risks typical to hog farming will be minimized. For example, because individual farms will be relatively small and decentralized, and under strict supervision to employ disease control methods we determine are appropriate, the risk of disease should be lower than on traditional farms, Further, if a farm were to develop a problem, it should not spread since the farms are decentralized in the Prefecture’s mountainous region. In addition, because of the emphasis being placed on this project by the local government, we anticipate a high level of cooperation from the farmers who are being given the opportunity to profit from what is otherwise communal land.

We have agreed to contribute to the financial needs of the project in various ways and the local governments have agreed to provide us and the participating farmers with various subsidies, incentives and insurance. The precise demands upon us will depend upon the rate at which the project grows which, in turn, will be impacted by the availability of financing that may be necessary to modernize and support the participating farmers. Given the long term of this project, it is likely that there will be continued negotiation of various issues that arise during the life of the project.

As of June 30, 2012, we had completed construction of 405 farms participating in our Black Hog Program at a cost of approximately $4.95 million. The annual production capacity of these farms is approximately 40,000 hogs per annum. In addition, as of June 30, 2012, we had spent an additional $1.27 million on another 92 farms that will become operational during the third quarter. Thus, as of June 30, 2012, we had spent in excess of $6 million constructing farms as part of our Black Hog Program. We anticipate that some of the completed farms will have hogs ready to be sold at market during the third quarter and thus, we will begin to receive a return on this significant investment.

Principal Factors Affecting our Results of Operations

Revenues

We derive the bulk of our revenues from the sale of hogs to other hog farms for breeding purposes, to brokers who sell the hogs both to other hog farms for breeding purposes and to slaughterhouses, and directly to slaughterhouses. We breed and raise hogs that are eventually sold as either breeder or market hogs which will be sold to slaughter houses for conversion into pork products. Some of the hogs are bred and raised for the purpose of sale as market hogs, while others become market hogs because customers do not select them as breeder hogs. Also very few boars are required for breeding purposes, as compared with sows. As approximately half of a litter will be males, most of these males will be sold as market hogs. The average sales price for a breeder is significantly higher than that of a market hog, and since breeder hogs are sold at a younger age than market hogs and usually weigh about 110 pounds at the date sold, as compared to the average weight of about 220 pounds for a market hog on sale date, the direct cost of feeding and otherwise raising a breeder hog is less than a market hog. Thus the gross margin for breeder hogs is substantially higher than that of market hogs. Consequently, the Company has focused its operations to increase the proportion of its sales represented by breeder hogs, and its success in so doing has been a major contribution to its operating profit.

We receive some subsidies from the government for operating our farms. Some of these subsidies are non-recurring, such as the payment we receive when we reach specified annual production capacities, or for the acquisition of certain operating equipment. Others, such as subsidies for breeder hog insurance, are ongoing so long as we qualify. Of course, there is no assurance the government will continue any of its policies for granting subsidies.

Commencing in the third quarter of 2011, we began to derive revenue from our retail collaborative venture, Tianli An Puluo. In August 2011 Fengze and An Puluo signed a collaborative agreement to pursue a retail business, under which the venture had an exclusive right to sell An Puluo processed pork products at retail. We were the principal participant of this collaborative arrangement and accordingly the costs incurred and revenues generated from this business were recorded on a gross basis in our financial statements. According to the cooperative agreement, Fengzi and An Puluo shared the net profit (after tax) from this business on a ratio of 60% vs 40%. On June 15, 2012, Fengze and An Puluo terminated the collaborative arrangement at retail business.

Factors Affecting Revenues and Profitability

The following factors, among others, affect the revenues and profitability that we derive from our operations. For other factors affecting our revenues, see “Risk Factors—Risks Related to Our Business,” as included in the Company’s Annual Report on Form 10-K. for the fiscal year ended December 31, 2011 filed on March 15, 2012.

Consumer demand for pork products. Consumer demand for pork products is closely linked to the performance of the general Chinese economy and is sensitive to business and personal discretionary spending levels.

Declines in consumer demand may occur as a result of adverse general economic conditions. Lower consumer confidence and changes in consumer preferences for pork as compared with other meats can lower the revenues and profitability of our operations. As a result, changes in consumer demand and general business cycles can subject our revenues to volatility.

Revenues resulting from the sale of breeder hogs. A significant amount of our revenues and operating margin result from the sales of young breeder hogs for use by other hog farmers. Because these breeder hogs command a price significantly higher than market hogs, and are sold at a younger age, thus incurring less feed and related finishing expenses, the profitability of the sale of a breeder hog is higher than that for the sale of a market hog. A significant reduction in the proportion of our sales that are breeder hogs would very likely significantly reduce our overall profit margin.

Government action in our industry. Because pork occupies such a central role in the Chinese diet, the government has occasionally taken action to prevent the price of pork from dropping below specified levels and has provided subsidies to companies engaged in hog farming. We benefit from this protection and we could be harmed if the government terminated such practices. In addition, the government has taken actions to prevent the spread of diseases among livestock, including mandatory culls of affected animals. These actions have occasionally resulted in relative shortages, which tend to lead to higher prices for healthy animals, and could result in a reduction of our stock, thus reducing revenues and profit. Likewise it is possible that the government could implement some form of price controls that could adversely impact our ability to price our products high enough to recover increases in costs such as feed.

Competition and subsidies. While the hog farming industry in Hubei province and the Wuhan City area includes a large number of farms, many of those farms are smaller farms that sell relatively few hogs per year. We believe the incentives being given to farms that reach specified annual production capacities are likely to result in a consolidation of the industry. Our ability to increase our production capacity and thus to qualify for these incentives for our operations allows us to receive non-recurrent benefits from these subsidies, as well as to benefit from increased economies of scale in our operations.

Expansion. We believe we must continue to expand our production capacity to attain additional market share. Since 2006, we have acquired the assets of several hog farms including Hengdian farm (the Company’s tenth farm), which was acquired in December 29, 2010, and the assets of the An Puluo farm (the Company’s eleventh farm), which is located in Enshi Tujia and Miao Autonomous Prefecture of Hubei Province and was acquired in May 12, 2011. If we fail to make acquisitions or expand our production capacity, our revenue growth could slow down.

In an effort to increase our capacity we entered into the Exclusivity Agreements described above in “Overview.” Pursuant to these agreements we will assist local farmers to upgrade their facilities and breed and grow hogs by providing both our capital and expertise. If the program progresses as planned, we should increase the volume of hogs we sell by more than we would if we were to limit ourselves to buying farms to be operated by us. We believe this is an efficient way to leverage upon our expertise in breeding and raising quality hogs. Moreover, the hogs to be raised under this program will be the Enshi black hogs, which generally sell at a price significantly above the price of typical lean pork meat.

Epidemic outbreaks. The outbreak of animal diseases could adversely affect our revenues. An occurrence of serious animal diseases, such as foot-and-mouth disease, or any outbreak of other epidemics in the PRC affecting animals or humans might result in material disruptions to our sales.

Taxes. We believe that the provisions of the PRC’s Enterprise Income Tax law currently provide our hog breeding operations with an exemption from PRC income taxes, VAT taxes and business service taxes. If this understanding is incorrect or if the law or interpretations of the law change, this could significantly impact the Company’s net operating results.

Contractual arrangements with Fengze. We conduct substantially all of our operations, and generate substantially all of our revenues, through contractual arrangements with Fengze that provide us with effective control over Fengze. We depend on Fengze to hold and maintain contracts with our customers. Fengze owns substantially all of our intellectual property, facilities and other assets relating to the operation of our business, and employs the personnel for substantially all of our business. Neither Tianli, nor HCS nor WFOE has any ownership interest in Fengze. Although WFOE’s contractual arrangements with Fengze are valid, binding and enforceable under current PRC laws and regulations, these contractual arrangements may not be as effective in providing the Company with control over Fengze as direct ownership of Fengze would.

Costs and Expenses

We primarily incur the following costs and expenses:

Costs of goods sold. In raising hogs for sale, we incur a number of costs that represent the costs of goods sold. We must purchase hog feed, premix components, medicines and other supplies to grow our hogs and keep them healthy. In addition to these items, cost of goods sold includes expenses such as the amortization of the sows (referred to as biological assets), farm employee wages, water, electricity, equipment depreciation expense, maintenance expense, quarantine expense, equipment costs, insurance expense and sewage charges.

General and administrative expenses. General and administrative expenses consist primarily of compensation expense for our corporate staff, professional fees (including consulting, audit and legal fees), communication costs, research and development costs, gasoline, welfare expenses, education expenses, travel and business hospitality expenses, land rent, and other office administrative and related expenses.

Sales and marketing costs. Sales and marketing costs include advertisement and promotion expenses.

Factors Affecting Expenses

Supplies and commodity prices. The largest component of our expenses is the materials required to breed and raise hogs for sale. Specifically, while we ordinarily breed our own hogs, we periodically purchase breeding stock to continue to improve our genetic breeding pool. Similarly, the prices of corn and soybean husks in China are important to our operations, because corn and soybean husks are the primary components of our hogs’ diet. To the extent the prices of these materials vary, our cost of goods will fluctuate, and we may not be able to recover increased costs resulting from higher prices by increasing the prices for our products. For this reason, we may be affected by droughts, floods, crop diseases and the like, which tend to make feed scarcer and thus more expensive.

Transition to public company. As we are now a public company, our administrative costs have increased materially, including audit, legal, travel to the United States, investor relations and advisor costs as well as the need to comply with detailed reporting requirements.

Number of customers. The more customers we have, the greater the likelihood that related selling expenses, travel expenses and other similar costs will increase. At present, we sell substantially all of our hogs to a relatively small number of customers. We believe this concentration of customers has allowed us to focus our marketing and selling efforts.

Number of farms. We have acquired or constructed a number of hog farms in the last several years. As we operate more farms, our administrative expenses tend to increase in dollars terms.

Retail expenses. As we pursue a strategy of providing our branded product to retail outlets, we expect that we will face additional costs such as promotion and advertising expenses to establish our brand image and retail recognition.

In connection with the Enshi Black Hog program described above, we have agreed to incur various costs and contribute various amounts to cover the costs of different aspects of the program. During 2011, we signed 7 joint development agreements, for periods of 10 years, with 7 local cooperatives in the Enshi Autonomous Prefecture in Hubei Province whereby the Company, the relevant governmental agencies and the cooperatives will assist participating farmers to breed and raise Enshi black hogs which will be purchased by us for resale as meat hogs or retained or sold as breeders at our discretion. Under these agreements, we provide funding to local independent farmers to construct small-scale hog farms or hog rearing facilities in which the farmers will grow the black hogs for sale to us. Pursuant to these joint development agreements, title to these small-scale hog farms and rearing facilities belongs to us and the local cooperatives (and the individual farmers) have the right to use them. As of June 30, 2012, we have paid a total of $6.22 million to build these hog rearing facilities, including hog rearing facilities for 3 local cooperatives of $1.19 million which had been completed and are in use and other hog rearing facilities for another 4 local cooperatives of $5.03 million which $3.76 million of rearing facilities had been completed and are in use and the remaining of $1.27 million of facilities were not yet completed or put into use.

Comparison of the Results of Operations for the Three Months Ended June 30, 2012 and 2011

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

	For Three Months Ended June 30,									Percentage of
	2012			2011			Net Change			Change
Sales	$	6,391,343		$	7,670,429		$	(1,279,086	)		(16.68%)
Cost of goods sold		5,589,803			4,452,623			1,137,180			25.54%
Gross profit		801,540			3,217,806			(2,416,266	)		(75.09%)
Selling, general and administrative expenses		426,460			636,111			(209,651	)		(32.96%)
Income from operations		375,080			2,581,695			(2,206,615	)		(85.47%)
Interest expense, net		(85,692	)		(98,700	)		13,008			(13.18%)
Subsidy income		27,339			22,970			4,369			19.02%
Other expense		(44,927	)		(26,814	)		(18,113	)		67.55%
Net other expense		(103,280	)		(102,544	)		(736	)		0.72%
Income before income taxes		271,800			2,479,151			(2,207,351	)		(89.04%)
Income taxes		-			-			-			-
Net income from continuing operations		271,800			2,479,151			(2,207,351	)		(89.04%)
Discontinued operations:
Gain from operations of discontinued component, net of taxes		43,836			-			43,836			n/a
Net income	$	315,636		$	2,479,151		$	(2,163,515	)		(87.27%)

The tables below illustrate the sales of breeder hogs, market hogs, and processed pork products for the quarters ended June 30, 2012 and 2011.

Sales by Products

	Three Months Ended June 30,
	2012						2011
	No. of Hogs Sold		Average Price/Hog		Sales		No. of Hogs Sold		Average Price/Hog		Sales
Breeder Hogs		6,883	$	307	$	2,109,855		9,012	$	314	$	2,833,352
Market Hogs		21,151	$	202		4,281,488		18,577	$	260		4,837,077
Total		28,034	$	228	$	6,391,343		27,589	$	278	$	7,670,429

Revenues. Our revenues decreased by $1,279,086 or approximately 17% for the three months ended June 30, 2012 as compared to the three months ended June 30, 2011. This decrease was mainly caused by the decrease in selling prices for breeder hogs and market hogs. The reduction in sales included an 11% decrease in sales of our market hogs and a 26% decrease in sales of our breeder hogs. We sold approximately 14% more market hogs in the second quarter of 2012 than in the same period of 2011, at an average price per hog that was 22% less than that in the comparable 2011 period. As a result, sales revenue attributable to market hogs decreased by approximately 11%. During the first half of 2012, market demand for breeder hogs was soft as farmers elected not to maintain their capacity as a result of rising feed prices. We sold approximately 24% fewer breeder hogs in the second quarter of 2012 than we sold in the same period of 2011, at an average price per hog 2% less than in the comparable 2011 period. As a result, sales revenue attributable to breeder hogs slipped by approximately 26%.

Our revenues from sales of market hogs declined because of reduced selling prices which resulted from a glut of pork in the market in the first half of 2012, exacerbated by the decision of the Chinese government to allow increased imports into the market during this period. Pork prices in China reached record high levels last winter which caused hog farmers to increase their hog headcount, eventually leading to an increase in the number of hog for sale. Additionally, because of the importance of pork in the diet of Chinese citizens, China’s government allowed increased levels of imported pork to enter the market to release the price pressure on the price of pork. The oversupply of pork also resulted from rising feed prices, which caused farmers to send hogs to market that otherwise might have been kept as breeders. Our sales of breeder hogs decreased because while prices for hogs decreased, feeding costs increased during the second quarter of 2012 which caused hog farmers to reduce their purchases of breeder hogs.

Profit Margins. Our gross profit margins were 13% and 42% in the three months ended June 30, 2012 and 2011, respectively. The impact of the increased feed cost and weaker domestic hog demand from competition of cheaper imported hogs caused the decrease in our gross profit margin.

The gross margins for breeder hogs were 34% and 48% in the second quarter of 2012 and 2011, respectively, and the gross margins for market hogs was 2% and 38% in the second quarter of 2012 and 2011, respectively. The decrease in the gross margins for breeder hogs and market hogs is mainly due to reduced pork prices and increased feed costs in China. The falling pork price since January 2012 was caused by an oversupply of pork and competition from cheaper imported pork products. Comparing the second quarter of 2012 and 2011, the average selling price of our hogs fell from $278 to $228, 18%. Additionally, our cost of goods sold for market hogs has increased 40% because of a surge in hog feed costs.

Expenses. Selling, general and administrative expenses decreased by $209,651 in the second quarter of 2012 as compared to the same period in 2011. The decrease was primarily result of cost control over payroll, entertainment expense, and travel expense.

Net Other Expense. Net other expense increased from $102,544 in the second quarter of 2011 to $103,280 in the same period of 2012, a slight increase of $736.

Income Taxes. As an agricultural business, the Company is exempt from the Chinese income tax and our hog farming operations are exempt from VAT.

Net Income. Our net income for the three months ended June 30, 2012 and 2011 was $315,636 and $2,479,151, respectively. The 87% decrease in net income is primarily the result of our revenue decreased $1,279,086 and an increase of $1,137,180 at our cost of goods sold.

Comparison of the Results of Operations for the Six Months Ended June 30, 2012 and 2011

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

	For Six Months Ended June 30,									Percentage of
	2012			2011			Net Change			Change
Sales	$	13,097,764		$	13,577,395		$	(479,631	)		(3.53%)
Cost of goods sold		10,994,216			7,896,443			3,097,773			39.23%
Gross profit		2,103,548			5,680,952			(3,577,404	)		(62.97%)
Selling, general and administrative expenses		1,059,927			1,443,267			(383,340	)		(26.56%)
Income from operations		1,043,621			4,237,685			(3,194,064	)		(75.37%)
Interest expense, net		(179,358	)		(108,973	)		(70,385	)		64.59%
Subsidy income		161,986			213,267			(51,281	)		(24.05%)
Other income		(43,094	)		(25,359	)		(17,735	)		69.94%
Net other income (expense)		(60,466	)		78,935			(139,401	)		(176.60%)
Income before income taxes		983,155			4,316,620			(3,333,465	)		(77.22%)
Income taxes		-			-			-			-
Net income from continuing operations		983,155			4,316,620			(3,333,465	)		(77.22%)
Discontinued operations:
Gain from operations of discontinued component, net of taxes		39,179			-			39,179			n/a
Net income	$	1,022,334		$	4,316,620		$	(3,294,286	)		(76.32%)

The tables below illustrate the sales of breeder hogs, market hogs, and processed pork products for the six months ended June 30, 2012 and 2011.

Sales by Products

	Six Months Ended June 30,
	2012						2011
	No. of Hogs Sold		Average Price/Hog		Sales		No. of Hogs Sold		Average Price/Hog		Sales
Breeder Hogs		13,649	$	302	$	4,127,335		16,896	$	311	$	5,248,926
Market Hogs		41,480	$	216		8,970,429		33,713	$	247		8,328,469
Total		55,129	$	238	$	13,097,764		50,609	$	268	$	13,577,395

Revenues. Our revenues decreased by $479,631 or approximately 4% for the six months ended June 30, 2012 as compared to the six months ended June 30, 2011. This decrease was the result of decreased revenues from the sales of our breeder hogs. The sales of our breeder hogs were reduced from $5,248,926 to $4,127,335, a decrease of approximately $1.1 million. We sold 3,247 or 19% fewer breeder hogs at a per unit price slightly below prices for 2011. This decrease was offset partly by increased revenues from market hogs. The increase of $641,960 in revenues from market hogs was mixed as we sold 7.767 more market hogs at 13% less per unit.

Profit Margins. Our gross profit margins were 16% and 42% over the six months ended June 30, 2012 and 2011, respectively. The impact of the increased feed cost and weaker domestic hog demand from competition of cheaper imported hogs caused the decrease in our gross profit margin.

The gross margins for breeder hogs were 32% and 49% in the first half of 2012 and 2011, respectively, and the gross margins for market hogs was 9% and 37% in the same periods of 2012 and 2011, respectively. The decrease in the gross margins for breeder hogs and market hogs is mainly due to declining hog prices and soaring feed costs. The declining hog price was the result of an oversupply of hogs, actions taken by the China government to reduce prices, and competition from cheaper imported hogs from foreign countries.

Expenses. Selling, general and administrative expenses decreased by $383,340 in the first half of 2012 as compared to the same period in 2011. The decrease was primarily from the cost control over payroll, entertainment expense, and travel expense.

Net Other Income (Expense). Net other income decreased from $78,935 for the six months ended June 30, 2011 to ($60,466) net other loss for the six months ended June 30, 2012, a net decrease of $139,401, which was primarily due to the decrease of $51,281 in the subsidy income received from the Chinese government and an increase of $70,385 in interest expense.

Income Taxes. As an agricultural business, the Company is exempt from the Chinese income tax and our hog farming operations are exempt from VAT.

Net Income. Our net income for the six months ended June 30, 2012 and 2011 was $1,022,334 and $4,316,620, respectively. The 76% decrease in net income is primarily the result of an increase of $3,097,773 or 39% at our cost of goods sold.

Liquidity and Capital Resources

Liquidity is the ability of a company to generate funds to support its current and future operations, satisfy its obligations and otherwise operate on an ongoing basis. At June 30, 2012 our working capital was $11,060,845 as compared to $12,007,048 at December 31, 2011, reflecting cash generated from operations and collection of a loan from An Puluo of $1,101,582 which has been invested in our black hog rearing facilities construction. The cash and cash equivalent balance of $5,697,854 at June 30, 2012, was slightly below the balance of $6,507,742 at December 31, 2011. The decrease in cash resulted from our expenditures on our black hog program and the components of this decrease in cash of $809,888 are discussed below.

Consolidated Statement of Cash Flows

	Six Months Ended June 30,
	2012			2011
Net cash provided by (used in) operating activities	$	4,024,319		$	2,754,328
Net cash used in investing activities		(2,455,846	)		(7,377,894	)
Net cash used in financing activities		(2,411,655	)		2,751,831
Exchange rate effect on cash		33,304			137,456
Net cash inflow (outflow)	$	(809,888	)	$	(1,734,279	)

Cash Provided by Operating Activities

Net cash provided by operating activities in the six months ended June 30, 2012 totaled $4,024,319. Cash flow pertaining to operating activities included the Company’s net income for the first half of 2012 of $1,022,334, depreciation and amortization of $1,487,841, stock-based expense of $10,687, a decrease in inventories of $440,097, and an increase in other payables of $1,257,271. These favorable factors were offset by increases in advances to suppliers of $226,871 and prepaid expenses of $149,952, and a decrease in accounts payable of $37,595.

Net cash provided by operating activities in the six months ended June 30, 2011 totaled $2,754,328. Cash flow pertaining to operating activities included the Company’s net income for the first six months of 2011 of $4,316,620, depreciation and amortization of $979,443, bad debt allowance of $104,245, stock-based expense of $173,581 and a decrease in advances of $707,637. These favorable factors were offset by a gain on disposal of biological assets of $168,710, an increase in inventory of $2,324,369, resulting from higher levels of hogs in the process of being matured to market weights and higher levels of raw material inventory, and an increase in other receivables of $1,088,237.

Cash Used in Investing Activities

Net cash used in investing activities for the six months ended June 30, 2012 totaled $2,455,846. This included additions to construction in progress of ($2,628,812) for establishing and upgrading hog farms, primarily new farms for our black hog program, ($1,346,696) for additions to our breeder stock, a repayment of $1,110,635 collected from An Puluo to repay the loan to An Puluo, and proceeds from disposal of construction in progress.

Net cash used in investing activities for the six months ended June 30, 2011 totaled $7,377,894. This included additions to construction in progress of $2,198,927 for establishing and upgrading hog farms, $1,693,392 of plant and equipment investments, $2,152,543 for purchase of farms and $1,515,063 for additions to our breeder stock.

Cash Provided by Financing Activities

For the six months ended June 30, 2012, net cash used in financing activities was $2,411,655. The activity was comprised of repayment of short-term loans of ($3,173,243) and offset in part by proceeds from new short-term loans of $761,578.

For the six months ended June 30, 2011, the Company obtained $3,057,590 in proceeds from new short-term bank loan which was offset in part by a restricted cash balance of $305,759 required in relation to the new bank loan.

Commitments for Capital Expenditures

We have been actively upgrading our existing farms and building up hog rearing facilities for our Black Hog Program participants. As of June 30, 2012, the Company had deposited $89,820 for building a new feed processing facility and the improvement of several of our existing hog farms and $1,268,685 for building hog rearing facilities for our Black Hog Program participants. The remaining amounts due will be paid upon completion of the various projects which is expected to occur before the end of 2012.

Our participation in the Enshi Black Hog program will require us to incur various costs and contribute various amounts to cover the costs of different aspects of the program as more fully described above. As of June 30, 2012, we provided funding totaling $6.22 million to local independent farmers to construct hog rearing facilities in which the farmers will grow the black hogs for sale to the Company. We expect to commit further funding for this program during the second half of 2012, and we believe that such funds will be available out of the cash flow generated by operations. We also anticipate that we will begin to derive revenues from our Black Hog Program in the third quarter of 2012 and that a large portion of these revenues will be invested in constructing additional farms for our Black Hog Program. We currently anticipate that by the end of 2012 we will have constructed and farmers will have commenced operations at farms with an annual aggregate production capacity of approximately 40,000 black hogs per year.

Off Balance Sheet Items

Under SEC regulations, we are required to disclose off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, such as changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that are material to investors. An off-balance sheet arrangement means a transaction, agreement or contractual arrangement to which any entity that is not consolidated with us is a party, under which we have:

•

any obligation under certain guarantee contracts,

•

any retained or contingent interest in assets transferred to an unconsolidated entity or similar arrangement that serves as credit, liquidity or market risk support to that entity for such assets,

•

any obligation under a contract that would be accounted for as a derivative instrument, except that it is both indexed to our stock and classified in shareholder equity in our statement of financial position, and

•

any obligation arising out of a material variable interest held by us in an unconsolidated entity that provides financing, liquidity, market risk or credit risk support to us, or engages in leasing, hedging or research and development services with us.

We do not have any off-balance sheet arrangements that we are required to disclose pursuant to these regulations. In the ordinary course of business, we enter into operating lease commitments, purchase commitments and other contractual obligations. These transactions are recognized in our financial statements in accordance with generally accepted accounting principles in the United States.

Critical Accounting Policies

See “Note 2. Basis of Presentation and Summary of Significant Accounting Policies” in “Item 1. Financial Statements” herein for a discussion of the critical accounting policies and estimates adopted in this Quarterly Report on Form 10-Q.

Item 3.	Quantitative and Qualitative Disclosures about Market Risk. Not applicable as the Company is a smaller reporting company.
Item 4.	Controls and Procedures

Disclosure Controls and Procedures

Our disclosure controls and procedures are designed to ensure that information required to be disclosed in reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the United States Securities and Exchange Commission. Our Chief Executive Officer and Chief Financial Officer have reviewed the effectiveness of our “disclosure controls and procedures” (as defined in the Securities Exchange Act of 1934 Rules 13a-15(f) and 15d-15(f) as of the end of the period covered by this report and have concluded that the disclosure controls and procedures are effective.

Changes in Internal Control over Financial Reporting

There have been no changes in the Company’s internal control over financial reporting during the last quarterly period covered by this report that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II OTHER INFORMATION

Item 1A.

Risk Factors

Our business is subject to numerous risks and uncertainties including but not limited to those discussed in "Risk Factors" in our Annual Report on Form 10-K for fiscal year ended December 31, 2011, filed with the Securities and Exchange Commission on March 15, 2012 which are incorporated by reference into this report.

Item 6.

Exhibits

The following exhibits are filed herewith:

Exhibit Number		Document


31.1		Certifications pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2		Certifications pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1		Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

32.2		Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

SIGNATURES

In accordance with the requirements of the Exchange Act, the Company caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	TIANLI AGRITECH, INC.

August 10, 2012	By:	/s/ HANYING LI
		Hanying Li Chief Executive Officer (Principal Executive Officer)

August 10, 2012	By:	/s/ Guofu ZHANG
		Guofu Zhang Chief Financial Officer (Principal Financial and Accounting Officer)

Attached files

RENMIN TIANLI GROUP, INC. Reports

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