RENMIN TIANLI GROUP, INC. - FORM 10-Q

Attached files

file	filename
EXCEL - IDEA: XBRL DOCUMENT - RENMIN TIANLI GROUP, INC.	Financial_Report.xls
EX-31.1 - RENMIN TIANLI GROUP, INC.	e612850_ex31-1.htm
EX-10.1 - RENMIN TIANLI GROUP, INC.	e612850_ex10-1.htm
EX-31.2 - RENMIN TIANLI GROUP, INC.	e612850_ex31-2.htm
EX-10.2 - RENMIN TIANLI GROUP, INC.	e612850_ex10-2.htm
EX-32.1 - RENMIN TIANLI GROUP, INC.	e612850_ex32-1.htm
EX-32.2 - RENMIN TIANLI GROUP, INC.	e612850_ex32-2.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 September 30, 2014

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

AOXIN TIANLI GROUP, 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 K, 12th Floor, Building A, 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)

TIANLI AGRITECH, INC.

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


Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days.		Yes x No 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 November 13, 2014, the Registrant had outstanding 27,763,000 common shares, par value $0.001 per share.

AOXIN TIANLI GROUP, INC.

(FORMERLY KNOWN AS 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	37
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	56
Item 4.	Controls and Procedures	56
PART II OTHER INFORMATION		58
Item 1A.	Risk Factors	58
Item 6.	Exhibits	58

Table of Contents

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, 2013 filed March 13, 2014.

Table of Contents

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.

NASDAQ CORPORATE GOVERNANCE

We are a foreign private issuer, having been organized under the laws of the British Virgin Islands (“BVI”). Nasdaq Marketplace Rule 5615(a)(3) permits a foreign private issuer to follow its home country practice in lieu of most of the requirements of the 5600 Series of the NASDAQ Marketplace Rules. In order to claim such an exemption, we must disclose the significant differences between our corporate governance practices and those required to be followed by U.S. domestic issuers under NASDAQ’s corporate governance requirements.

Shareholder Approval Requirements

NASDAQ Marketplace Rule 5635 requires each issuer to obtain shareholder approval prior to certain dilutive events, including a transaction other than a public offering involving the sale of 20% or more of the issuer’s common shares outstanding prior to the transaction for less than the greater of book or market value of the stock and a transaction that would result in a change in control of the issuer. There are no comparable provisions under the laws of the BVI and we have determined to not follow these NASDAQ Marketplace Rules.

NASDAQ Marketplace Rule 5635(a)(2) requires each issuer to obtain shareholder approval prior to the issuance of its shares in connection with the acquisition of the stock or assets of another company if any director, officer or Substantial Shareholder (as defined by NASDAQ Marketplace Rule 5635(e)(3)) of the issuer has a 5% or greater interest (or such persons collectively have a 10% or greater interest) directly or indirectly, in the company or assets to be acquired or in the consideration to be paid in the transaction or series of related transactions and the present or potential issuance of common stock, or securities convertible into or exercisable for common stock, could result in an increase in common shares or voting power of 5% or more. The presence of this rule would preclude us from issuing shares of our common stock, or securities convertible into or exercisable for common stock, in connection with an acquisition if the issuance would result in an increase in common shares or voting power of 5% or more, and any of our directors or officers, or any shareholder owning 5% or more or group of shareholders owning 10% or more of our outstanding shares, had a 5% or greater interest in the company or assets to be acquired or the consideration to be paid. Our Chairman, Mr. Ping Wang, who currently is a “Substantial Shareholder,” and certain of our other directors hold interests in companies we may choose to acquire or whose assets we may choose to purchase.

In the British Virgin Islands, our jurisdiction of organization or home country, shareholder approval is not required for a transaction which would require shareholder approval pursuant to Rule 5635(a)(2), unless the transaction is with an “Interested Shareholder” as that term is defined in Article 23 of our Articles of Association. We have determined that neither Mr. Wang nor any of our other current directors or officers is an Interested Shareholder. Therefore, under the laws of the British Virgin Islands and our constituent documents, we would not be required to obtain shareholder approval if we engaged in a transaction in which one or more of such individuals had an interest in the company or assets to be acquired, or consideration to be paid, even if shareholder approval would be required by Rule 5635(a)(2) and, should we intend to engage in any such transaction, we intend to rely upon the exemption provided by NASDAQ Marketplace Rule 5615 from the requirements of NASDAQ Marketplace Rule 5635(a)(2) rather than put the matter to a shareholder vote.

From time to time we may consider whether it is appropriate to follow other requirements of the 5600 Series of the NASDAQ Marketplace Rules. Should we determine not to follow one or more of such Rules in favor of the laws of the BVI, we will advise our shareholders before doing so.

Table of Contents

PART I FINANCIAL INFORMATION

Item 1.

Financial Statements.

AOXIN TIANLI GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

	September 30,		December 31,
	2014		2013
	(Unaudited)
ASSETS
Current Assets:
Cash and cash equivalents	$	34,538,057	$	10,087,694
Notes receivable		747,554		-
Accounts receivable, net		1,107,564		256,607
Inventories		11,543,624		11,484,786
Advances to suppliers		1,133,717		1,612,492
Prepaid expenses		221,899		204,106
Other receivables, net		1,292,580		1,181,078
Loan receivable - related party		2,762,700		-
Due from related party		193,796		-
Total Current Assets		53,541,491		24,826,763

Long-term prepaid expenses, net		2,881,896		1,606,188
Plant and equipment, net		28,624,259		23,185,732
Construction in progress		50,541		50,897
Biological assets, net		2,242,513		3,276,840
Intangible assets, net		9,547,843		1,480,631

Total Assets	$	96,888,543	$	54,427,051

LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
Short-term loans	$	7,963,077	$	6,382,561
Accounts payable and accrued payables		765,689		48,896
Advances from customers		955,689		-
Deferred income		340,684		-
Special payables		182,046		-
Investment payable		487,535		-
Other payables		3,074,108		3,309,246
Other payable - related party		175,679		-
Due to related party		904,651		139,430
Total Current Liabilities		14,849,158		9,880,133

Stockholders' Equity:
Common shares, ($0.001 par value, 100,000,000 shares authorized as of September 30, 2014 and 50,000,000 shares authorized as of December 31, 2013,
27,763,000 and 13,964,000 shares issued and outstanding as of
September 30, 2014 and December 31, 2013, respectively)		27,763		13,964
Additional paid in capital		51,883,772		18,094,200
Statutory surplus reserves		2,416,647		2,416,647
Retained earnings		22,271,371		19,538,507
Accumulated other comprehensive income		3,853,357		4,046,055
Stockholders' Equity - Aoxin Tianli Group Inc. and Subsidiaries		80,452,910		44,109,373
Noncontrolling interest		1,586,475		437,545
Total Stockholders' Equity		82,039,385		44,546,918
Total Liabilities and Stockholders' Equity	$	96,888,543	$	54,427,051

See accompanying notes to unaudited consolidated financial statements

Table of Contents

AOXIN TIANLI GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(UNAUDITED)

	For the Three Months Ended September 30,						For the Nine Months Ended September 30,
	2014			2013			2014			2013


Sales	$	11,476,257		$	8,728,050		$	29,237,480		$	22,958,392
Cost of goods sold		8,843,378			7,824,400			24,551,822			21,525,720
Gross profit		2,632,879			903,650			4,685,658			1,432,672

Operating expenses:
General and administrative expenses		899,475			493,401			2,517,284			2,022,984
Selling expenses		170,520			179,173			561,018			299,423
Total operating expenses		1,069,995			672,574			3,078,302			2,322,407

Income (loss) from operations		1,562,884			231,076			1,607,356			(889,735	)

Other income (expense):
Interest expense		(188,571	)		(69,738	)		(417,386	)		(399,536	)
Subsidy income		449,075			8,634			468,620			103,972
Replacement compensation		-			-			987,057			-
Other income, net		79,422			3,483			87,535			43,622
Total other incomes (expenses)		339,926			(57,621	)		1,125,826			(251,942	)

Income (loss) before income taxes		1,902,810			173,455			2,733,182			(1,141,677	)

Income taxes		-			-			37,751			-
Net income (loss)		1,902,810			173,455			2,695,431			(1,141,677	)
Net loss (income) attributable to noncontrolling interest		(89,584	)		116,574			37,433			316,963
Net income (loss) attributable to Aoxin Tianli Group, Inc. common stockholders		1,813,226			290,029			2,732,864			(824,714	)

Other comprehensive income:
Unrealized foreign currency translation adjustment		24,578			529,925			(212,914	)		1,134,730

Comprehensive income	$	1,837,804		$	819,954		$	2,519,950		$	310,016

Earnings (losses) per share attributable to Aoxin Tianli Group Inc. common stockholders - basic and diluted:
Weighted-average shares outstanding, basic and diluted		24,387,167			11,204,000			19,338,389			11,198,444

Continuing operations - Basic & diluted	$	0.08		$	0.03		$	0.14		$	(0.07	)
Discontinued operations -Basic & diluted	$	-		$	-		$	-		$	-

See accompanying notes to unaudited consolidated financial statements

Table of Contents

AOXIN TIANLI GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)

	For the Nine Months Ended September 30,
	2014			2013


CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)	$	2,695,431		$	(1,141,677	)
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Depreciation and amortization		2,826,764			2,438,385
Amortization of prepaid expenses		248,341			243,850
Bad debt expense		35,509			-
Stock-based compensation		-			5,600
Subsidy income		(449,094	)		-
Loss from disposal of biological assets		66,593			-
Changes in operating assets and liabilities:
Notes receivable		(309,159	)		-
Accounts receivable		(184,483	)		(141,546	)
Inventories		2,006,292			(104,833	)
Advances to suppliers		565,772			(50,055	)
Prepaid expenses		(217,440	)		-
Other receivables		918,101			(976,600	)
Long-term prepaid expenses		(172,388	)		-
Accounts payable and accrued payables		530,941			(48,884	)
Advances from customers		102,368			-
Special payables		81,358			-
Other payables		(804,751	)		736,817
Total adjustments		5,244,724			2,102,734
Net cash provided by operating activities		7,940,155			961,057

CASH FLOWS FROM INVESTING ACTIVITIES
Cash paid for purchase of noncontrolling interest		(1,083,100	)		-
Cash paid for acquisitions		(6,100,219	)		-
Purchase of biological assets		-			(339,282	)
Purchase of plant and equipment		(58,932	)		(486,045	)
Net cash used in investing activities		(7,242,251	)		(825,327	)

CASH FLOWS FROM FINANCING ACTIVITIES
Increase at restricted cash		-			160,948
Proceeds from capital contribution		22,760,000			2,596,080
Due to (from) related party		627,068			-
Repayment of short-term loans		(2,082,757	)		(5,592,931	)
Proceeds from short-term loans		2,408,188			772,549
Net cash provided by financing activities		23,712,499			(2,063,354	)

EFFECT OF EXCHANGE RATE CHANGES ON CASH		39,960			167,577

NET INCREASE (DECREASE) IN CASH		24,450,363			(1,760,047	)

CASH, BEGINNING OF PERIOD		10,087,694			7,477,205

CASH, END OF PERIOD	$	34,538,057		$	5,717,158

SUPPLEMENTAL DISCLOSURES:
Cash paid during the period for:
Interest paid	$	478,123		$	343,832
Income tax paid	$	37,751		$	-

NON-CASH TRANSACTIONS OF INVESTING AND FINANCING ACTIVITIES
Property purchase with prepayments made through due from related party	$	4,723,858		$	-
Acquisition payments made through issuances of shares	$	9,909,742		$	-

See accompanying notes to unaudited consolidated financial statements

Table of Contents

AOXIN TIANLI GROUP, INC. AND SUBSIDIARIES

(FORMERLY KNOWN AS TIANLI AGRITECH, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2014 AND 2013

(UNAUDITED)

NOTE 1—ORGANIZATION AND DESCRIPTION OF BUSINESS

The consolidated financial statements include the financial statements of Aoxin Tianli Group, Inc. (referred to herein as “Aoxin Tianli”) (formerly known as Tianli Agritech, Inc.); 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”) which changed its name to “Wuhan Aoxin Tianli Enterprise Investment Management Co., Ltd.” on June 6, 2014; WFOE’s wholly-owned subsidiary, Wuhan Fengze Agricultural Science and Technology Development Co., Ltd., a Chinese limited liability company (“Fengze”), which had been controlled by WFOE through a series of contractual control agreements which were terminated on July 2, 2014, when WFOE acquired 100% of the equity interest of Fengze; and Fengze’s wholly-owned subsidiary, Hubei Tianzhili Breeder Hog Co., Ltd., a Chinese limited liability company (“Tianzhili”). On July 15, 2014, the Company acquired Hubei Hang-ao Servo-valve Manufacturing Technology Co., Ltd. (“Hang-ao”), a Chinese limited liability company located in Xiangyang, Hubei Province. In accordance with the acquisition agreement, Aoxin Tianli became the holder of 88% of the equity interest of Hang-ao Hang-ao is the sole shareholder of Beijing Sanqiang Tongwei Electromechanical Hydraulic Technology Development Co., Ltd. (“Sanqiang”) and engaged in the business of manufacturing and marketing electro-hydraulic servo-valves and related servo systems and components. On August 26, 2014, the Company entered into and consummated a stock purchase agreement whereby it acquired 95% of the outstanding equity of Wuhan Optical Valley Orange Technology Co., Ltd., a corporation organized under the laws of the People’s Republic of China (“OV Orange”), As a result of the completion of the transaction, OV Orange became a 95% owned subsidiary of the Company, with the remaining 5% equity interest owned by Hubei Aoxin Science & Technology Group Co. Ltd., a company whose Chairman and principal shareholder is Ping Wang, the Company’s Chairman and CEO. OV Orange is focused on delivering next-generation optical fiber hardware and software solutions for the security and protection industry and is also a sole shareholder of Wuhan Orange Optical Networking Technology Development Co., Ltd. (“Optical Networking.”) All of Aoxin Tianli’s operations are conducted by Fengze, Tianzhili, Hang-ao, and OV Orange. Fengze and Tianzhili’s results of operations are consolidated into those of Aoxin Tianli. The results of operations of Hang-ao, including its wholly owned subsidiary, Sanqiang, and OV Orange including its wholly owned subsidiary, Optical Networking, are reflected in the Company’s financial statements from July 15, 2014, and August 26, 2014, their respective dates of acquisition by the Company. HCS, WFOE Fengze, Tianzhili, Hang-ao, Sanqiang, OV Orange, and Optical Networking are sometimes referred to as the “subsidiaries”. Aoxin Tianli, its consolidated subsidiaries are collectively referred to herein as the “Company”, “we” and “us”, unless specific reference is made to an entity.

Tianli Agritech, Inc. 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 directly to certain outlets.. The Company operates ten production farms in areas around Wuhan City, within Hubei Province, People’s Republic of China (“PRC”). On July 18, 2014, Tianli Agritech., Inc. changed its name to “Aoxin Tianli Group, Inc.” 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 whereby HCS would acquire 100% of the 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 the 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.

On June 6, 2014, WFOE changed its name from “Wuhan Fengxing Agricultural Science and Technology Development Co., Ltd.” to “Wuhan Aoxin Tianli Enterprise Investment Management Co., Ltd.” and entered into a share purchase agreement with Fengze’s Principal Stockholders whereby WFOE would acquire 100% of the equity interest of Fengze. On June 20, 2014, the Wuhan Municipal Commission of Commerce approved the ownership change and it was declared effective by the Wuhan Administrator for Industry & Commerce. WFOE acquired Fengze and became the holder of 100% of the equity interest of Fengze, and Fengze effectively became the wholly-owned subsidiary of the Company.

On June 20, 2014, WFOE, Fengze, and Fengze’s former Principal Stockholders entered into a termination agreement to terminate the Entrusted Management Agreement, Pledge of Equity Agreement, and Option Agreement made on December 1, 2009.

Table of Contents

AOXIN TIANLI GROUP, INC. AND SUBSIDIARIES

(FORMERLY KNOWN AS TIANLI AGRITECH, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2014 AND 2013

(UNAUDITED)

NOTE 1—ORGANIZATION AND DESCRIPTION OF BUSINESS (CONTINUED)

On November 5, 2012, XMRJ LLP (“XMRJ”), a limited partner enterprise formed under Chinese law that engages in equity investments in China, agreed to invest RMB 10,000,000, or approximately $1,600,000, in Tianzhili. Until such investment, Tianzhili was a wholly-owned subsidiary of Fengze. Tianzhili conducts our black hog breeding operations. In consideration for its commitment to make the investment and an interest free loan, XMRJ received a 40% equity interest in Tianzhili. As of December 31, 2012, Tianzhili received $1,057,636 or RMB 6,666,700 from XMRJ. On March 22, 2014, Fengze entered into an equity purchase agreement with XMRJ to purchase the 40% minority equity interest in Tianzhili for RMB 6,666,700 or $1,083,100. As a result of this purchase, Tianzhili became the wholly owned subsidiary of the Company.

On January 16, 2013, Tianzhili established Hubei Tianzhili (Hefeng) Breeder Hog Co., Ltd (“Hefeng”), a wholly owned subsidiary of Tianzhili, in Enshi Tujia and Miao Autonomous Prefecture of Hubei Province, as a limited liability company. Hefeng will be engaged in managing black hog farming and operations in Hefeng county of Enshi Tujia and Miao Autonomous Prefecture.

On November 6, 2013, the Animal Husbandry and Veterinary Bureau of Caidian District, Wuhan City, directed us to close one of our farms located in the Caidian District (Farm 8). The Company was advised that all agricultural and manufacturing activities in the area of Dacha Lake in the Caidian District were ordered to shut down before the end of 2013 as part of the government's effort to restore the lake to its natural condition. We finished our evacuation of this farm during the first quarter of 2014 and received part of the relocation compensation of $988,021 on June 2014. However, the final amount of our evacuation cost and loss from the farm shutdown that we will be reimbursed by Caidian District is still undetermined. We still maintain minimum personnel in the Caidian Farm or Farm 8 awaiting the final determination and reimbursements of our evacuation cost and loss.

On July 15, 2014, the Company acquired Hubei Hang-ao Servo-valve Manufacturing Technology Co., Ltd. (“Hang-ao”), a Chinese limited liability company located in Xiangyang, Hubei Province. In accordance with the acquisition agreement, Aoxin Tianli became the holder of 88% of the equity interest of Hang-ao for consideration of $9,055,605, including RMB 42 million or approximately $6.8 million in cash and 1,047,000 common shares of Aoxin Tianli. Hang-ao is the sole shareholder of Beijing Sanqiang Tongwei Electromechanical Hydraulic Technology Development Co., Ltd. and engaged in the business of manufacturing and marketing electro-hydraulic servo-valves and related servo systems and components. The acquisition agreement includes a three year “earn out payment” provision which requires Hang-ao to reach certain levels of net income for the years 2014, 2015, and 2016 for the sellers to retain the 1,047,000 common shares of Aoxin Tianli. The net income targets are RMB 4.5 million ($733,000), 9 million ($1.5 million), and RMB 15 million ($2.4 million) for the years 2014, 2015, and 2016.

On October 6, 2014, the Company entered into a letter of intent with Mr. Fawei Qiu who held 12% of the equity of Hang-ao, to sell 100% of the equity of Sanqiang for consideration of RMB 24 million or $3.9 million. On November 10, 2014, the Company entered into a share sale agreement with Mr. Fawei Qiu to execute the letter of intent dated on October 6, 2014. On November 11, 2014, the consideration of RMB 24 million or $3.9 million had been collected

On August 26, 2014, the Company entered into and consummated a stock purchase agreement (the “Stock Purchase Agreement”) whereby it acquired 95% of the outstanding equity of Wuhan Optical Valley Orange Technology Co., Ltd., a corporation organized under the laws of the People’s Republic of China (“OV Orange”), from certain of the former shareholders of OV Orange in exchange for 2,552,000 of the Company’s common shares, of which 403,000 shares were deposited in escrow to be issued to Mr. Hai Liu, CEO of OV Orange and the former beneficial owner of 7,500,000 (representing 15% of the outstanding) OV Orange shares (the “Escrow Shares”), subject to the attainment by OV Orange of certain agreed upon net profit targets for the years ended December 31, 2014, 2015 and 2016. Specifically, Mr. Liu will be entitled to the Escrow Shares only if OV Orange achieves net profits equal to not less than 90% of RMB 2.6 million, RMB 6.8 million and RMB 10.5 million for the years ending December 31, 2014, 2015, and 2016, respectively. If the net profits of OV Orange in any of the three target years are less than 90% of the target, the number of Escrow Shares to be issued to Mr. Liu will be reduced in accordance with a formula set forth in the Stock Purchase Agreement.

If the net profit targets set forth in the Stock Purchase Agreement are achieved for all three years Mr. Liu and Mr. Jin Wu, the record holder of 806,000 shares of the Company’s common stock issued in exchange for 30% of the OV Orange shares, shall have the right to exchange shares of the Company’s common stock received in the acquisition for up to 7,500,000 and 15,000,000 shares, respectively, of OV Orange purchased by the Company during the three month period (the “Option Period”) commencing March 16 and terminating June 15, 2017. The ratio at which the OV Orange shares may-be acquired by Mr. Liu or Mr. Wu is based upon the relative fair market values of the shares of the Company and OV Orange at the time of the re-purchase, except that if the value of the shares of the Company issued to Mr. Liu or Mr. Wu is less than the value of the shares of OV Orange he is entitled to receive, he can receive all of the OV Orange shares by delivering all of his Company shares.

As a result of the completion of the transaction, OV Orange became a 95% owned subsidiary of the Company, with the remaining 5% equity interest owned by Hubei Aoxin Science & Technology Group Co. Ltd., a company whose Chairman and principal shareholder is Ping Wang, the Company’s Chairman and CEO. As a result of its acquisition of 1,075,000 common shares of the Company in exchange for the 22,500,000 (representing 40% of the outstanding) OV Orange shares pursuant to the Stock Purchase Agreement and its purchase from the Company of an additional 3,000,000 common shares on August 21, 2014 for a purchase price of $7,200,000, or $2.40 per share, Hubei Aoxin Science & Technology Group Co. Ltd. owns a total of 4,075,000 common shares, representing approximately 14.68% of the Company’s outstanding common shares.

Wuhan Optical Valley Orange Technology Co., Ltd. is focused on delivering next-generation optical fiber hardware and software solutions for the security and protection industry. OV Orange is also a sole shareholder of Optical Networking. On November 10, 2014, OV Orange had entered into a share sale agreement with Mr. Deming Liu and Hubei Aoxin Science & Technology Group Co. Ltd. to sell 100% of the equity of Optical Networking for consideration of RMB 1,000,000 or $161,030. On November 12, 2014, the consideration of RMB 1 million or $161,030 had been collected.

Table of Contents

AOXIN TIANLI GROUP, INC. AND SUBSIDIARIES

(FORMERLY KNOWN AS TIANLI AGRITECH, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2014 AND 2013

(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 these 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 periods. 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

We consolidate wholly-owned subsidiaries, HCS, WFOE, Fengze, Tianzhili, Hefeng, as well as Hang-ao, Sanqiang, OV Orange, and Optical Networking. All material intercompany accounts and transactions have been eliminated in consolidation. The 12% equity interest holders in Hang-ao and the 5% equity interest holder of OV Orange will be accounted as noncontrolling interest in the Company’s consolidation financial statements.

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.

Table of Contents

AOXIN TIANLI GROUP, INC. AND SUBSIDIARIES

(FORMERLY KNOWN AS TIANLI AGRITECH, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2014 AND 2013

(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 balance, the customer’s payment history, its current credit-worthiness and current economic trends.

The Company accrued allowance for doubtful accounts of $158,653 and $10,178 at September 30, 2014 and December 31, 2013.

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.

Advances to Suppliers

Advances to suppliers at September 30, 2014 and December 31, 2013 totaled $1,133,717 and $1,612,492, respectively, and includes prepayments to suppliers for merchandise and raw materials that had not yet been shipped to us. We recognize prepayments as inventory or expense as suppliers make delivery of goods in compliance with our accounting policy. Included in advances to suppliers as of September 30, 2014 and December 31, 2013, the Company had prepayments of $882,732 and $1,440,167, respectively, to its premix feed supplier.

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		5-10 years
Office equipment		3-5 years
Research equipment		3-20 years
Production equipment		3-20 years

Table of Contents

AOXIN TIANLI GROUP, INC. AND SUBSIDIARIES

(FORMERLY KNOWN AS TIANLI AGRITECH, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2014 AND 2013

(UNAUDITED)

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

Construction in Progress

Construction in progress consists of amounts expended for feeding facility upgrade. Once the upgrade is finished, the construction in progress assets are categorized as 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, they are 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.

Table of Contents

AOXIN TIANLI GROUP, INC. AND SUBSIDIARIES

(FORMERLY KNOWN AS TIANLI AGRITECH, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2014 AND 2013

(UNAUDITED)

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

Intangible Assets

Included in the intangible assets are land use rights, acquired distribution network and patents acquired as a result of the Hang-ao and OV-Orange acquisitions. 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. Intangible assets are being amortized using the straight-line method over their lease terms or estimated useful life.

The Company carries intangible assets at cost less accumulated amortization. In accordance with US GAAP, the Company examines the possibility of decreases in the value of intangible assets 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, the remaining lives of patents and 10 year life of acquired distribution network.

Intangible assets consisted of the following:

	September 30, 2014			December 31, 2013
Amortizable intangible assets:
Carrying amount:
Land use rights	$	1,722,917		$	1,735,042
Distribution network		1,926,980			-
Patents		7,364,122			-
Others		7,916			-
Total carrying amount		11,021,935			1,735,042

Accumulated amortization:
Land use rights		(291,257	)		(254,411	)
Distribution network		(96,349	)		-
Patents		(1,084,200	)		-
Others		(2,286	)		-
Total accumulated amortization		(1,474,092	)		(254,411	)
Total intangible assets, net	$	9,547,843		$	1,480,631

During the first quarter of 2014, we made cash payments totaling $1.1 million to acquire 40% noncontrolling interest of Tianzhili, one of our consolidated entities. These cash payments are reported as an investing activity in the “Cash paid for purchase of noncontrolling interest” caption of our consolidated statement of cash flows.

The estimated amortization expense of intangible assets for the next five years is as follow:

Year		Amount
2014	$	494,053
2015	$	1,014,363
2016	$	1,014,363
2017	$	1,014,363
2018	$	1,014,363
Thereafter	$	4,996,338

Activity related to intangible assets by business segments was as follows:

	Hog Farming			Retail			Emerging Business			Total
Land use rights	$	1,722,917		$	-		$	-		$	1,722,917
Distribution network		-			1,926,980			-			1,926,980
Patents		-			-			7,364,122			7,364,122
Others		-			-			7,916			7,916
Less: accumulated amortization		(291,257	)		(96,349	)		(1,086,486	)		(1,474,092	)
Balance as of September 30, 2014	$	1,431,660		$	1,830,631		$	6,285,552		$	9,547,843

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. For the nine months ended September 30, 2014 and 2013, the Company had recorded no impairment charges at its long-lived assets.

Table of Contents

AOXIN TIANLI GROUP, INC. AND SUBSIDIARIES

(FORMERLY KNOWN AS TIANLI AGRITECH, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2014 AND 2013

(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.

Deferred Income

Included in deferred income are the subsidy income payments due from the Chinese government to support the Company’s research projects. Those financial supports will be recognized as subsidy income based on the progress of Company’s research projects. The Company is using the percentage of completion method to account for its subsidy income from deferred incomes. As of September 30, 2014 and December 31, 2013, the Company reported deferred income of $340,684 and $0, respectively. During the nine months ended September 30, 2014 and 2013, the Company recognized subsidy income of $449,094 and $0 from its deferred incomes based on results of using the percentage of completion method.

Special Payables

Special payables are the subsidy received from the Chinese government which should be paid to cooperative organizations, individuals, or companies who participate in the Company’s research projects. Those payables are go-through payables. As of September 30, 2014 and December 31, 2013, the Company reported $182,046 and $0, respectively.

Table of Contents

AOXIN TIANLI GROUP, INC. AND SUBSIDIARIES

(FORMERLY KNOWN AS TIANLI AGRITECH, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2014 AND 2013

(UNAUDITED)

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

Non-controlling Interest

Non-controlling interests in the Company’s subsidiaries are recorded in accordance with the provisions of ASC 810 and are reported as a component of equity, separate from the parent’s equity. Purchase or sale of equity interests that do not result in a change of control are accounted for as equity transactions. Results of operations attributable to the non-controlling interest are included in our consolidated results of operations and, upon loss of control, the interest sold, as well as interest retained, if any, will be reported at fair value with any gain or loss recognized in earnings.

Revenue Recognition

Pursuant to the guidance of ASC Topic 605 and ASC Topic 360, the Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the purchase price is fixed or determinable and collectability is reasonably assured. The Company generates revenues from (1) 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, (2) selling electro-hydraulic servo devices and providing maintenance services, and (3) delivering optical fiber hardware and software solutions for the security and protection industry. From September 30, 2011 until June 15, 2012, the Company also generated revenue from selling specialty pork products to retailers. In the second quarter of 2013, the Company resumed selling specialty pork products to retailers.

Revenues generated from the sales of breeding and meat hogs and specialty 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 specialty 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.

Revenues generated from sales of electro-hydraulic servo devices, providing maintenance services, and sales of optical fiber hardware and software solutions are recognized upon shipment and transfer of title or performance of the maintenance service.. Electro-hydraulic servo devices generally are sold with a one-year warranty. Maintenance service revenue is based on an estimated of the number of service person hours necessary to render a service and is recognized when the labor has been completed and the equipment has been accepted by the customer, which is generally within a couple days of the delivery of the equipment. For the nine months ended September 30, 2014 and 2013, the amount allocated to maintenance service revenue was minimal. Based on historical experience, maintenance service calls and any related labor costs have been minimal. Revenues related to spare part sales are recognized upon shipment or delivery based on the trade terms.

Table of Contents

AOXIN TIANLI GROUP, INC. AND SUBSIDIARIES

(FORMERLY KNOWN AS TIANLI AGRITECH, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2014 AND 2013

(UNAUDITED)

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

Segment Information

Starting from the second quarters of 2013, the Company entered into distribution agreements with supermarkets whereby the Company is permitted to sell specialty pork products in the supermarkets’ retail facilities. Consequently, management has determined that as of the end of the second quarter, the Company is operating in two segments, hog farming and retail. However, after completion of the Hang-ao and OV Orange acquisitions, the Company has determined to establish another segment, the emerging business segment, in which it includes its operations in electro-hydraulic servo control and optical fiber hardware and software solutions. As of September 30, 2014, the Company is operating in three segments, hog farming, retail, and emerging business.

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 September 30, 2014 and December 31, 2013.

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’s operations in breeding, raising, and selling hogs for use in Chinese pork meat production and hog breeding, are exempt from the Chinese income tax. However, the Company’s operations in servo-valve products and optical fiber products and services are subject to the 25% enterprise income tax. Since OV Orange is certified as a new high technology company, OV Orange is enjoying a 15% preferential enterprise income tax rate until 2015. 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’s hog sales are not subject to the PRC’s 17% VAT tax or the 5% business tax levied on incomes from services rendered; the balance of the Company’s operations are subject to such taxes. According to the PRC tax regulations, companies engaging in the agricultural business are exempt from these taxes. With respect to the Company’s retail operations, the Company is engaged in breeding, processing, and distributing black hogs and black hog meats which are exempt from VAT taxes and corporate income tax as well.

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 nine month periods ended September 30, 2014 and 2013.

Table of Contents

AOXIN TIANLI GROUP, INC. AND SUBSIDIARIES

(FORMERLY KNOWN AS TIANLI AGRITECH, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2014 AND 2013

(UNAUDITED)

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

Related parties

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

Foreign Currency Translation

As of September 30, 2014 and December 31, 2013, the accounts of Aoxin 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 6.15 per US dollar and RMB 6.11 per US dollar as of September 30, 2014 and December 31, 2013, 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 nine months ended September 30, 2014 and 2013, the transactions of Aoxin Tianli were denominated and recorded in RMB and are translated at the average rates of exchange for the period. These rates were RMB 6.15 and RMB 6.21 per US dollar for the nine months ended September 30, 2014 and 2013, 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.

Table of Contents

AOXIN TIANLI GROUP, INC. AND SUBSIDIARIES

(FORMERLY KNOWN AS TIANLI AGRITECH, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2014 AND 2013

(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 September 30, 2014 and December 31, 2013, 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.

Table of Contents

AOXIN TIANLI GROUP, INC. AND SUBSIDIARIES

(FORMERLY KNOWN AS TIANLI AGRITECH, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2014 AND 2013

(UNAUDITED)

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

Recently Issued Accounting Pronouncements

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2014-9, “Revenue from Contracts with Customers” (“ASU 2014-9”). ASU 2014-9 provides for a single comprehensive principles-based standard for the recognition of revenue across all industries through the application of the following five-step process:

Step 1: Identify the contract(s) with a customer.

Step 2: Identify the performance obligations in the contract.

Step 3: Determine the transaction price.

Step 4: Allocate the transaction price to the performance obligations in the contract.

Step 5: Recognize revenue when (or as) the entity satisfies a performance obligation.

The updated guidance related to revenue recognition which affects any entity that either enters into contracts with customers to transfer goods or services or enters into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards. The guidance requires that an entity recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The guidance is effective for the Company starting on January 1, 2017. The Company is currently evaluating the impact this guidance will have on its combined financial position, results of operations and cash flows.

In April 2014, the Financial Accounting Standards Board (the “FASB”) issued an accounting standard that raises the threshold for disposals to qualify as discontinued operations and requires new disclosures of both discontinued operations and certain other disposals that do not meet the definition of a discontinued operation. The standard revised the definition of a discontinued operation to cover only asset disposals that are considered to be a strategic shift with a major impact on an entity's operations and finances, such as the disposal of a major geographic area or a significant line of business. Application of the standard, which is to be applied prospectively, is required for fiscal years beginning on or after December 15, 2014, and for interim periods within that year. The Company currently plans to adopt the standard in January 2015.

Based on the Company’s initial assessment of the standard, the Company expects that any potential future disposals of its hog farms will not be reported as discontinued operations and that the results of operations of any such disposed hog farms, including revenues, costs and any gains or losses on disposal, will be classified as continuing operations within the Consolidated Statements of Operations and Comprehensive Income for all periods presented through the date of disposition.

Table of Contents

AOXIN TIANLI GROUP, INC. AND SUBSIDIARIES

(FORMERLY KNOWN AS TIANLI AGRITECH, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2014 AND 2013

(UNAUDITED)

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

Repurchase of 40% Noncontrolling Interest

On March 22, 2014, the Company acquired the 40% minority equity interest in Hubei Tianzhili Breeder Hog Co., Ltd. (“Tianzhili”) for RMB 6,666,700 or $1,083,100. As a result of this purchase, Tianzhili became the wholly owned subsidiary of the Company.

Tianzhili, which is based in Hubei Province, China, is engaged in the business of raising and selling black hogs through several major Chinese retail channels located in Wuhan, Hubei.

The following table summarizes the fair values of the assets acquired and liabilities assumed as of the date of the acquisition of the noncontrolling interest in Tianzhili. The allocation of the purchase price reflects final values assigned and may differ from preliminary values reported in the consolidated financials for prior periods.

	March 22, 2014
Property, plant and equipment	$	10,129,629
Intangible asset – land use right		262,913
Intangible asset - distribution network		1,926,417
Other assets, including cash of $185,531		519,845
Assets acquired	$	12,838,804
Accounts payable and other liabilities		3,496
Other payables		3,153,447
Liabilities assumed	$	3,156,943
Net assets acquired	$	9,681,861

The intangible asset arising from the Tianzhili noncontrolling interest acquisition reflects the economic potential of the markets in which the acquired company operates as well as the synergies and economies of scale expected from operating the business as part of Aoxin Tianli.

Acquisitions

Table of Contents

AOXIN TIANLI GROUP, INC. AND SUBSIDIARIES

(FORMERLY KNOWN AS TIANLI AGRITECH, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2014 AND 2013

(UNAUDITED)

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

The following is a reconciliation of the purchase:

	Shares		Price per Share		Amount
Fair value of the Company’s stock issued		1,047,000	$	2.13	$	2,230,110
Cash						6,825,495
Total purchase price					$	9,055,605
Acquired assets and liabilities:
Cash					$	215,236
Current assets						8,121,512
Fixed assets						2,036,448
Intangible assets						3,684,084
Liabilities						(3,766,820	)
						10,290,460
Percentage of acquired equity						88	%
88% of acquired assets and liabilities						9,055,605
Purchase price						9,055,605
Goodwill					$	-

	Amount
Acquired assets and liabilities, net	$	10,290,460
Percentage of equity		12	%
Noncontrolling Interest	$	1,234,855

Table of Contents

AOXIN TIANLI GROUP, INC. AND SUBSIDIARIES

(FORMERLY KNOWN AS TIANLI AGRITECH, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2014 AND 2013

(UNAUDITED)

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

Wuhan Optical Valley Orange Technology Co., Ltd. is focused on delivering next-generation optical fiber hardware and software solutions for the security and protection industry.

Table of Contents

AOXIN TIANLI GROUP, INC. AND SUBSIDIARIES

(FORMERLY KNOWN AS TIANLI AGRITECH, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2014 AND 2013

(UNAUDITED)

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

The following is a reconciliation of the purchase:

	Shares		Price per Share		Amount
Fair value of the Company’s stock issued		2,552,000	$	1.95	$	4,976,400
Cash						-
Total purchase price					$	4,976,400
Acquired assets and liabilities:
Cash					$	690,990
Current assets						3,881,918
Long-term prepaid expenses						1,282,037
Fixed assets						376,075
Intangible assets						2,699,753
Liabilities						(3,692,458	)
						5,238,315
Percentage of acquired equity						95	%
95% of acquired assets and liabilities						4,976,400
Purchase price						4,976,400
Goodwill					$	-

	Amount
Acquired assets and liabilities, net	$	5,238,315
Percentage of equity		5	%
Noncontrolling Interest	$	261,915

Table of Contents

AOXIN TIANLI GROUP, INC. AND SUBSIDIARIES

(FORMERLY KNOWN AS TIANLI AGRITECH, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2014 AND 2013

(UNAUDITED)

NOTE 3—ACCOUNTS RECEIVABLE

Accounts receivable consisted of the following:

	September 30,			December 31,
	2014			2013
Accounts receivable	$	1,266,217		$	266,785
Less: Allowance for doubtful accounts		(158,653	)		(10,178	)
	$	1,107,564		$	256,607

The Company reviews the accounts receivable on a periodic basis and makes general and specific allowances when there is doubt as to the collectability of individual balances. After evaluating the collectability of individual receivable balances, the Company increased the allowance for doubtful accounts in the amount of $35,509 and $0 for the nine months ended September 30, 2014 and 2013, respectively.

NOTE 4—INVENTORIES

Inventories consisted of the following:

	September 30,			December 31,
	2014			2013
Raw materials—hogs	$	866,669		$	1,750,125
Work in process—biological assets		3,683,427			4,643,256
Infant hogs		4,468,356			4,968,112
Finished goods—specialty pork products		144,913			209,205
Raw materials		313,919			-
Work in process		1,527,491			-
Finished goods		624,162			-
Less: inventory reserve		(85,313	)		(85,912	)
	$	11,543,624		$	11.484,786

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 September 30, 2014 and December 31, 2013, the Company determined that there were write downs of $0 and $85,912, respectively. The term “Work in process—biological assets” has the meaning set forth above in Note 2—Biological Assets.

Table of Contents

AOXIN TIANLI GROUP, INC. AND SUBSIDIARIES

(FORMERLY KNOWN AS TIANLI AGRITECH, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2014 AND 2013

(UNAUDITED)

NOTE 5—ADVANCES TO SUPPLIERS

The Company makes advances for materials or services the Company uses in its operations. As of September 30, 2014 and December 31, 2013, advances to suppliers amounted to $1,133,717 and $1,612,492, respectively.

Included in advances to suppliers as of September 30, 2014 and December 31, 2013, the Company had prepaid $882,732 and $1,440,167 to the Company’s premix feed supplier.

NOTE 6—OTHER RECEIVABLES

At September 30, 2014 and December 31, 2013, the Company reported other receivables of $1,292,580 and $1,181,078, respectively, including an allowance for doubtful receivables of $162,626 and $61,485.

The balances as of September 30, 2014 and December 31, 2013 included a deposit of $162,512 and $163,655 to a professional loan guarantee service company for short-term loans from Shanghai Pudong Development Bank.

On September 30, 2014 and December 31, 2013, the Company loaned $859,476 and $0 to three of its customers. The loans bear no interest and are not collateralized. Those loans were expected to be collected in the fourth quarter of 2014.

In August 2013, the Company entered into a promotional agreement with a marketing company to prepare a series of nationwide promotional activities to promote “Tianli-Xiduhei” black hogs for the 2014 Chinese New Year holiday. According to the agreement, the Company provided a security deposit of $981,932 to the marketing company as of December 31, 2013. The deposit had been returned at March 7, 2014 after the end of the promotional activities.

NOTE 7—LOAN RECEIVABLES – RELATED PARTY

At September 30, 2014 and December 31, 2013, the Company reported loan receivables of $2,762,700 and $0 to a related party, Wuhan Blueeye Photo-electricity Industry Co., Ltd. (“Blueeye”) whose CEO and major shareholder has an indirect investment relationship with the Company.

On December 19 and December 24, 2013, OV Orange, engaged an agent bank, China Everbright Bank, to make entrusted loans of $812,559 and $1,950,141 to Blueeye. Those loans were due on December 18 and December 23, 2014 with 5% interest rate charge, but no collateral or guarantee offered.

NOTE 8—LONG-TERM PREPAID EXPENSES

Long-term prepaid expenses primarily consist of prepaid rental expenses for three parcels of land comprising the Company’s farm located in Enshi Prefecture and a prepayment to Huazhong University of Science and Technology for a research project.. The prepaid rental expenses and research expense are being amortized using the straight-line method over the lease term of 21.33 years and cooperative term of 15 years.

Long-term prepaid expenses at September 30, 2014 and December 31, 2013 are as follows:

	September 30,			December 31,
	2014			2013
Long-term prepaid rental expenses	$	1,910,573		$	1,835,644
Long-term prepaid research expenses	$	1,625,118		$	-
Less: Accumulated amortization		(653,795	)		(229,456	)
	$	2,881,896		$	1,606,188

Amortization expense for the nine months ended September 30, 2014 and 2013 was $167,488 and $63,467, respectively.

The estimated amortization expense of long-term prepaid expenses over each of the next five years and thereafter is $223,317 per annum.

NOTE 9—PLANT AND EQUIPMENT

Plant and equipment consist of the following:

	September 30,			December 31,
	2014			2013
Buildings	$	30,964,246		$	26,254,084
Vehicles		861,751			738,438
Office equipment		605,615			535,206
Production equipment		4,405,181			2,618,167
Research equipment		914,449			2,618,167
		37,751,242			30,145,895
Less: Accumulated depreciation		(9,126,983	)		(6,960,163	)
	$	28,624,259		$	23,185,732

Depreciation expense was $1,763,920 and $1,380,653 for the nine months ended September 30, 2014 and 2013, respectively.

Table of Contents

AOXIN TIANLI GROUP, INC. AND SUBSIDIARIES

(FORMERLY KNOWN AS TIANLI AGRITECH, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2014 AND 2013

(UNAUDITED)

NOTE 10—CONSTRUCTION IN PROGRESS

Construction in progress consists of amounts expended for upgrading the Company’s feed processing facility. Once construction is completed, 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 September 30, 2014 and December 31, 2013, the construction in progress was $50,541 and $50,897, respectively, for upgrading the feed processing facility.

NOTE 11—BIOLOGICAL ASSETS

Biological assets consist of the following:

	September 30,			December 31,
	2014				2013
Breeding hogs	$	6,789,399			$	7,120,342
Less: Accumulated amortization		(4,546,886	)			(3,843,502	)
	$	2,242,513			$	3,276,840

Amortization of the biological assets, included as a component of inventory, for the nine month periods ended September 30, 2014 and 2013 was $946,102 and $1,080,455, respectively.

Table of Contents

AOXIN TIANLI GROUP, INC. AND SUBSIDIARIES

(FORMERLY KNOWN AS TIANLI AGRITECH, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2014 AND 2013

(UNAUDITED)

NOTE 12—INTANGIBLE ASSETS

Included in the intangible assets are land use rights, acquired distribution network, and patents owned by Hang-ao and OV Orange. 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. Intangible assets are being amortized using the straight-line method over their lease terms or estimated useful life.

The Company carries intangible assets at cost less accumulated amortization. In accordance with US GAAP, the Company examines the possibility of decreases in the value of intangible assets 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 and 10 year life of acquired distribution network.

Intangible assets at September 30, 2014 and December 31, 2013 are as follows:

	September 30,			December 31,
	2014				2013
Land use rights	$	1,722,917			$	1,735,042
Distribution network		1,926,980				-
Patents		7,364,122				-
Others		7,916				-
Less: Accumulated amortization		(1,474,092	)			(254,411	)
	$	9,547,843			$	1,480,631

Amortization expense for the nine month periods ended September 30, 2014 and 2013 was $233,469 and $35,609, respectively.

The estimated amortization expense of intangible assets over each of the next five years and thereafter will be $1,014,363 per annum.

Table of Contents

AOXIN TIANLI GROUP, INC. AND SUBSIDIARIES

(FORMERLY KNOWN AS TIANLI AGRITECH, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2014 AND 2013

(UNAUDITED)

NOTE 13—SHORT-TERM LOANS

As of September 30, 2014 and December 31, 2013, the short-term loans are as follows:

	September 30, 2014		December 31, 2013
Loan payable to Wuhan Rural Commercial Bank, annual interest rate of 8.4%, due by June 19, 2014, guaranteed by Wuhan Science and Technology Guarantee Co., Ltd.	$	-	$	785,546
Loan payable to Shanghai Pudong Development Bank, annual interest rate of 7.2%, due by December 4, 2014, guaranteed by Wuhan Agriculture Guarantee Co., Ltd. and Tianzhili,, secured by certain assets of the Company.		1,625,118		1,636,554
Loan payable to Communication Bank of China, annual interest rate of 7.28%, due by December 16, 2014, guaranteed by Wuhan Science and Technology Guarantee Co., Ltd.		1,625,118		1,636,554
Loan payable to Wuhan Rural Commercial Bank, annual interest rate of 8.4%, due by November 6, 2014 with collateral provided by Mr. Xin Zhang.		845,061		851,008
Loan payable to Industrial and Commercial Bank of China, annual interest rate of 7.8%, due by December 3, 2014, with collateral provided by Wuhan East Lake Hi-Tech Innovation Center.		1,462,606		1,472,899
Loan payable to Shanghai Pudong Development Bank, annual interest rate of 8.4%, due by February 6, 2015, guaranteed by Wuhan Agriculture Guarantee Co., Ltd. and Tianzhili and secured by certain assets of the Company.		1,137,582		-
Loan payable to Shanghai Pudong Development Bank, annual interest rate of 8.4%, due by January 21, 2015, guaranteed by Wuhan Agriculture Guarantee Co., Ltd. and Tianzhili and secured by certain assets of the Company.		487,535		-
Loan payable to Wuhan Rural Commercial Bank, annual interest rate of 8.4%, due by August 4, 2015 guaranteed by Wuhan Aoxin Investment and Guarantee Services, Co., Ltd.		780,057		-
	$	7,963,077	$	6,382,561

During the nine months ended September 30, 2014, the Company paid $40,679 to a guarantee service provider for providing the guarantee of the loans from Shanghai Pudong Development Bank and $14,059 to Wuhan Aoxin Investment and Guarantee Services, Co., Ltd., a related party whose major shareholder has indirect investment relationship with the Company. No such payment was made during the nine months ended September 30, 2013. Amount of $54,738 and $114,122 were recorded as financial expense for the nine months ended September 30, 2014 and 2013, respectively.

Table of Contents

AOXIN TIANLI GROUP, INC. AND SUBSIDIARIES

(FORMERLY KNOWN AS TIANLI AGRITECH, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2014 AND 2013

(UNAUDITED)

NOTE 14—INVESTMENT PAYABLE

On April 9, 2014, one of the Company’s subsidiaries, Hang-ao, entered into a share purchase agreement with the shareholders of Beijing Sanqiang Tongwei Electromechanical Hydraulic Technology Development Co., Ltd. (“Sanqiang”) to obtain 100% of the equity of Sanqiang for compensation of RMB 6 million or $975,000 in cash. As of September 30, 2014 and December 31, 2013, the Company reported $487,535 and $0 as amounts remaining to be paid pursuant to this Agreement.

NOTE 15—OTHER PAYABLES

Other payables at September 30, 2014 and December 31, 2013 were $3,074,108 and $3,309,246, respectively. Included in other payables as of September 30, 2014 and December 31, 2013 were mainly deposit payables of $2,948,894 and $3,255,504.

Since December 31, 2011, the Company signed 8 joint development agreements with 8 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 in which the farmers will grow black hogs for sale to the Company.

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 September 30, 2014 and December 31, 2013, deposits from farmers were $2,948,894 and $3,255,504, respectively.

The amortization of deposit payables for the nine months ended September 30, 2014 and 2013 was $284,215 and $121,799, respectively. The following table sets forth the aggregate future amortization expected for the next five years:

	Amortization
2014	$	378,953
2015	$	378,953
2016	$	378,953
2017	$	378,953
2018	$	378,953
Thereafter	$	1,054,129

NOTE 16—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.

Due from related party

The amount due from related party was $193,796 and $0 as of September 30, 2014 and December 31, 2013, respectively. The amount due as of September 30, 2014 included a security deposit of $78,006 to Wuhan Aoxin Investment and Guarantee Serivce Co., Ltd. who provided a guarantee of a bank loan of $780,057 from Wuhan Rural Commercial Bank. Additionally, the Company also provided working capitals of $34,534 and $81,256 to Wuhan Blueeye Photo-electricity Industry Co., Ltd. and Hubei Ao-chang Investment Co., Ltd., respectively, for operating purposes. Such advances are non-interest bearing and due upon demand.

Other payable – related party

On October 10, 2013, Hang-ao entered into a real estate purchase agreement with Hubei Hang-ao Servo Technology Co., Ltd. to buy a two story office and a residential apartment for employee use. The total purchase price was RMB 30,112,439 or $4.9 million. Hang-ao had paid $4.7 million in 2013 and those apartments were transferred to the Company in 2014. As of September 30, 2014 and December 31, 2013, the Company reported an outstanding real estate payable of $175,679 and $0, respectively. The major shareholder of Hubei Hang-ao Servo Technology Co., Ltd. is a shareholder of the Company.

Due to related party

The amount due to related party was $904,651 and $139,430 as of September 30, 2014 and December 31, 2013, respectively. The amount represented the advances of $45,866 from the Company’s shareholder and former chief executive officer, Ms. Hanying Li, and $858,785 from Hubei Hang-ao Servo Technology Co., Ltd. for operating purposes. Such advances are non-interest bearing and due upon demand.

Issuance of common shares

On April 10, 2014, the Company entered into a subscription agreement with Mr. Ping Wang, the Chairman and CEO, for the issuance and sale of 2,600,000 of the common shares for a purchase price of $5,720,000, or $2.20 per share. After giving effect to the sale, Mr. Wang owned 5,600,000 common shares, representing approximately 28.6% of the Company’s outstanding common shares.

On August 18, 2014, the Company sold to Hubei Aoxin Science and Technology Group Co., Ltd., 3,000,000 common shares for a purchase price of $7,200,000, or $2.40 per share, pursuant to a Subscription Agreement. After giving effect to the sale, Hubei Aoxin Science and Technology Group Co., Ltd., owned approximately 11.90% of the Company’s outstanding common shares. As a condition of the sale, Hubei Aoxin Science and Technology Group Co., Ltd., agreed not to sell the shares for 12 months and thereafter at not less than $2.40 per share. The Company did not pay any brokerage or other commissions to an underwriter, broker-dealer or other person in connection with the sale. Mr. Ping Wang, the Company’s Chairman and CEO, is the Chairman and a principal shareholder of Hubei Aoxin Science and Technology Group Co., Ltd.

Table of Contents

AOXIN TIANLI GROUP, INC. AND SUBSIDIARIES

(FORMERLY KNOWN AS TIANLI AGRITECH, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2014 AND 2013

(UNAUDITED)

NOTE 17—CAPITAL STOCK

The Company is authorized to issue 100,000,000 common shares, $0.001 par value, and as of September 30, 2014 and December 31, 2013, it had 27,763,000 shares and 13,964,000 shares issued and outstanding, respectively.

On December 6, 2010 the Company granted 26,000 options with an exercise price of $6.00 to a director with vesting of one-third as of the date of grant, one-third vesting in December 2011, and the final one-third vesting in December 2012, contingent on the director continuing to serve as a board member. The option can be exercised through January, 2017. The Company recognizes the compensation cost over the award’s service period based on a Black Scholes valuation of the options as of the date of the grant.

On August 15, 2013, the Company issued 10,000 shares of the Company’s common stock to an investor relationship consulting firm for its 2013 consulting services. The shares were valued at $6,900 and recognized as compensation cost as part of the Company’s general and administrative expenses.

On October 28, 2013, the Company sold and issued 2,760,000 shares of the Company’s common stock to Mr. Wei Gong at $1.16 per share. The shares were valued at $3,201,600.

On March 24, 2014, the Company sold and issued 3,000,000 shares of the Company’s common stock to Mr. Ping Wang, who had been appointed as Chairman of the board of directors and Chief Executive Officer of the Company on March 28, 2014, at $2 per share. The shares were valued at $6,000,000.

On June 6, 2014, the Company sold and issued 1,600,000 shares of the Company’s common stock to Mr. Houliang Yu, an independent third party, at $2.4 per share. The shares were valued at $3,840,000.

On July 15, 2014, the Company acquired 88% of the equity of Hubei Hang-ao Servo-valve Manufacturing Technology Co., Ltd. (“Hang-ao”) for consideration of $9 million, including RMB 42 million or approximately $6.8 million in cash and 1,047,000 common shares of the Company.

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%

Table of Contents

AOXIN TIANLI GROUP, INC. AND SUBSIDIARIES

(FORMERLY KNOWN AS TIANLI AGRITECH, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2014 AND 2013

(UNAUDITED)

NOTE 17—CAPITAL STOCK (CONTINUED)

The following table summarizes the stock options and warrants outstanding as of September 30, 2014 and December 31, 2013 and the activity during the nine months ended September 30, 2014.

	Options		Weighted Average Exercise Price		Warrants		Weighted Average Exercise Price
Outstanding as of December 31, 2013		26,000	$	6.00		210,000	$	7.21
Granted		-		-		-		-
Exercised		-		-		-		-
Forfeited		-		-		-		-
Outstanding at September 30, 2014		26,000	$	6.00		210,000	$	7.21
Exercisable at September 30, 2014		26,000	$	6.00		210,000	$	7.21

The weighted average remaining contractual life for the options and the warrants is 2.25 years and 0.75 year, respectively. The market value of the Company’s common stock was $2 and $2.18 as of September 30, 2014 and December 31, 2013, respectively. The intrinsic value of the outstanding options and the warrants as of September 30, 2014 and December 31, 2013 was $0.

NOTE 18—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 dividends 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 contributions. The reserves amounted to $2,416,647 as of September 30, 2014 and December 31, 2013.

Table of Contents

AOXIN TIANLI GROUP, INC. AND SUBSIDIARIES

(FORMERLY KNOWN AS TIANLI AGRITECH, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2014 AND 2013

(UNAUDITED)

NOTE 19—CERTAIN RISKS AND CONCENTRATION

Credit risk and major customers

As of September 30, 2014 and December 31, 2013, all 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 nine months ended September 30, 2014 and 2013, no customer accounted for more than 10% of the Company’s revenue.

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 risk of restrictions on transfer of funds; changing taxation policies; foreign exchange restrictions; and political conditions and governmental regulations.

NOTE 20—GOVERNMENT SUBSIDIES

The Company reported $468,620 and $103,972 in subsidy income during the nine months ended September 30, 2014 and 2013. The subsidy income included $19,526 and $103,972 cash received in the nine months ended September 30, 2014 and 2013, respectively for recurring breeder hog subsidies. Additionally, the Company recognized subsidy income of $449,094 from its deferred incomes in September 2014 based on its research progress. The research project is scheduled to be finished in the middle of 2015.

Table of Contents

AOXIN TIANLI GROUP, INC. AND SUBSIDIARIES

(FORMERLY KNOWN AS TIANLI AGRITECH, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2014 AND 2013

(UNAUDITED)

NOTE 21—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 September 30, 2014 and December 31, 2013.

Lease obligations

The Company leases office space pursuant to a lease 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 nine month periods ended September 30, 2014 and 2013 was $64,296 and $64,745, respectively.

The following table sets forth the aggregate minimum future annual rental commitments at September 30, 2014 under all non-cancelable leases for years ending December 31:

	Operating Leases
2014 (full year)	$	85,728
2015	$	85,728
2016	$	85,728
2017	$	85,524
2018	$	84,914
Thereafter	$	1,634,241

Table of Contents

AOXIN TIANLI GROUP, INC. AND SUBSIDIARIES

(FORMERLY KNOWN AS TIANLI AGRITECH, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2014 AND 2013

(UNAUDITED)

NOTE 21—COMMITMENTS AND CONTINGENCIES (CONTINUED)

Capital expenditures

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 of September 30, 2014, the Company had provided funds totaling RMB 69,194,000 or $11.24 million to local independent farmers to construct small-scale hog farms in which the farmers will grow black hogs for sale to the Company. All construction had been completed in 2013 and became fixed assets of the Company. No additional investment was made after December 31, 2013.

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.

Table of Contents

AOXIN TIANLI GROUP, INC. AND SUBSIDIARIES

(FORMERLY KNOWN AS TIANLI AGRITECH, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2014 AND 2013

(UNAUDITED)

NOTE 22—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 evaluates their performance. As of September 30, 2014, the Company has three operating segments, “Hog Farming,” “Retail,” and “Emerging Business”. The hog farming segment consists of sales of breeder hogs and market hogs raised by the Company and participants in the black hog program that were sold to meat processors. The Company’s retail segment consists of the selling of specialty pork products through supermarkets, restaurants, and hotels. The emerging segment represents the Company’s operations in electro-hydraulic servo control and optical fiber hardware and software solutions

The Company primarily evaluates performance based on income before income taxes excluding non-recurring items.

Condensed financial information with respect to these reportable business segments for the nine months ended September 30, 2014 and 2013 is set forth below. The results of operations of Hang-ao and OV Orange are reflected in the Company’s financial statements and the information set forth below from July 15, 2014, and August 26, 2014, their respective dates of acquisition by the Company:

Nine Months Ended September 30, 2014	Hog Farming		Retail			Emerging Business		Consolidated
Segment revenues	$	26,456,089	$	874,593		$	1,906,798	$	29,237,480
Inter-segment revenues		-		-			-		-
Revenues from external customers	$	26,456,089	$	874,593		$	1,906,798	$	29,237,480
Segment income (loss)	$	2,036,308	$	(17,717	)	$	1,131,977	$	3,150,568
Unallocated corporate loss									(455,137	)
Income before income taxes									2,695,431
Income taxes									37,433
Net income								$	2,732,864
Other segment information:
Depreciation and amortization	$	2,475,949	$	171,793		$	179,022	$	2,826,764

Table of Contents

AOXIN TIANLI GROUP, INC. AND SUBSIDIARIES

(FORMERLY KNOWN AS TIANLI AGRITECH, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2014 AND 2013

NOTE 22—SEGMENT INFORMATION (CONTINUED)

Nine Months Ended September 30, 2013	Hog Farming			Retail			Emerging Business		Consolidated
Segment revenues	$	22,718,396		$	239,996		$	-	$	22,958,392
Inter-segment revenues		-			-			-		-
Revenues from external customers	$	22,718,396		$	239,996		$	-	$	22,958,392
Segment income (loss)	$	(698,892	)	$	(43,249	)	$	-	$	(742,141	)
Unallocated corporate loss										(399,536	)
Income before income taxes										(1,141,677	)
Income taxes										-
Net income									$	(1,141,677	)
Other segment information:
Depreciation and amortization	$	2,438,385		$	-		$	-	$	2,438,385

Condensed financial information with respect to these reportable business segments for the three months ended September 30, 2014 and 2013 is as follows:

Three Months Ended September 30, 2014	Hog Farming		Retail			Emerging Business		Consolidated
Segment revenues	$	9,324,484	$	244,975		$	1,906,798	$	11,476,257
Inter-segment revenues		-		-			-		-
Revenues from external customers	$	9,324,484	$	244,975		$	1,906,798	$	11,476,257
Segment income (loss)	$	962,349	$	(1,981	)	$	1,131,977	$	2,092,345
Unallocated corporate loss									(189,535	)
Income before income taxes									1,902,810
Income taxes									-
Net income								$	1,902,810
Other segment information:
Depreciation and amortization	$	855,301	$	46,156		$	179,022	$	1,080,479

Table of Contents

AOXIN TIANLI GROUP, INC. AND SUBSIDIARIES

(FORMERLY KNOWN AS TIANLI AGRITECH, INC.)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2014 AND 2013

NOTE 22—SEGMENT INFORMATION (CONTINUED)

Three Months Ended September 30, 2013	Hog Farming		Retail			Emerging Business		Consolidated
Segment revenues	$	8,539,829	$	188,221		$	-	$	8,728,050
Inter-segment revenues		-		-			-		-
Revenues from external customers	$	8,539,829	$	188,221		$	-	$	8,728,050
Segment income (loss)	$	244,314	$	(42,922	)	$	-	$	201,392
Unallocated corporate loss									(27,937	)
Income before income taxes									173,455
Income taxes									-
Net income								$	173,455
Other segment information:
Depreciation and amortization	$	828,278	$	-		$	-	$	828,278

Condensed financial status with respect to these reportable business segments as of September 30, 2014 and December 31, 2013 is as follows:

As of September 30, 2014	Hog Farming		Retail		Emerging Business		Consolidated
Total segment assets	$	72,754,241	$	528,787	$	23,505,517	$	96,788,545
Other unallocated corporate assets								99,998
							$	96,888,543
Other segment information:
Expenditures for segment assets	$	58,932	$	1,083,100	$	6,100,219	$	7,242,251

As of December 31, 2013
Total segment assets	$	53,991,058	$	414,078	$	-	$	54,405,136
Other unallocated corporate assets								21,915
							$	54,427,051
Other segment information:
Expenditures for segment assets	$	701,923	$	48,636	$	-	$	750,559

NOTE 23—SUBSEQUENT EVENTS

On October 6, 2014, the Company entered into a letter of intent with Mr. Fawei Qiu who held 12% of the equity of Hang-ao, to sell him 100% of the equity of Beijing Sanqiang Tongwei Electromechanical Hydraulic Technology Development Co., Ltd. for consideration of RMB 24 million or $3.9 million. On November 10, 2014, the Company entered into a share sale agreement with Mr. Fawei Qiu to execute the letter of intent dated on October 6, 2014. On November 11, 2014, the consideration of RMB 24 million or $3.9 million had been collected

During October, 2014, Hang-ao, one of the Company’s subsidiaries, entered into a confidentiality agreement with Mr. Fawei Qiu who held 12% of the equity of Hang-ao. According to the agreement, Mr. Fawei Qiu is forbidden to disclose any knowledge, business secret, technology, and information he learns from the Company to any third party without the Company’s pre-approval. Additionally, this agreement includes a non-compete clause to prevent Mr. Fawei Qiu from entering or starting a business or profession or trade in competition against Hang-ao.

On November 10, 2014, OV Orange, one of the Company’s subsidiaries, entered into a share sale agreement with Mr. Deming Liu and Hubei Aoxin Science & Technology Group Co. Ltd., a company whose Chairman and principal shareholder is Ping Wang, the Company’s Chairman and CEO, to sell 100% of the equity of Wuhan Orange Optical Networking Technology Development Co., Ltd. for consideration of RMB 1,000,000 or $161,030. On November 12, 2014, the consideration of RMB 1 million or $161,030 had been collected.

On October 1, 2014, options to purchase 70,000 common shares were granted to the non-employee directors of the Company at an exercise price of $2.50 per share, exercisable until October 1, 2021.

Table of Contents

Item 2.

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

The following discussion and analysis of our Company’s 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, 2013. 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 PRC, and has begun to distribute specialty processed black hog products through supermarkets and to restaurants, hotels and other outlets. We have also initiated sales of specialty processed black hog meat through the internet. On November 6, 2013, the Animal Husbandry and Veterinary Bureau of Caidian District, Wuhan City, directed us to close one of our farms located in the Caidian District or Farm 8. We were advised that all agricultural and manufacturing activities in the area of Dacha Lake in the Caidian District were ordered to shut down before the end of 2013 as part of the government's effort to restore the lake to its natural condition. We finished our evacuation of this farm during the first quarter of 2014 and received part of the relocation compensation of $988,021 on June 2014. However, the final amount of our evacuation costs and losses from the farm shutdown that will be reimbursed by Caidian District are still undetermined. We will maintain minimum personnel in the Caidian Farm or Farm 8 until the final determination of our evacuation cost and losses to be reimbursed have been determined.

On June 6, 2014, our wholly owned subsidiary, WFOE, entered into a share purchase agreement with the Principal Stockholders of Fengze, which we then controlled and consolidated as a VIE, whereby WFOE would acquire 100% of the equity of Fengze. On June 20, 2014, the Wuhan Municipal Commission of Commerce approved the ownership change and it was declared effective by the Wuhan Administrator for Industry & Commerce. WFOE acquired Fengze and became the holder of 100% of the equity interest of Fengze, and Fengze effectively became the wholly-owned subsidiary of the Company.

During 2014, Fengze owned and operated nine commercial farms in the Wuhan City area and one commercial farm in Enshi Autonomous Prefecture, Hubei Province. In addition, One of Fengze’s subsidiaries, Tianzhili, operates in the Enshi Autonomous Prefecture (“Enshi”). On March 22, 2014, Fengze entered into an equity purchase agreement with Tianzhili’s 40% interest holder, XMRJ LLP, to purchase the 40% interest of Tianzhili for RMB 6,666,700 or $1,083,100. As a result of this purchase, Tianzhili became Fengze’s wholly owned subsidiary. Tianzhili mainly raises and sells black hogs in conjunction with local hog farmers in Enshi. In addition, it will distribute black hogs through supermarkets, including Zhongbai, Xinyijia and Wushang Mart, and to restaurants, hotels and other Outlets in the greater Wuhan City area.

Since July this year, Our management has determined to diversify our operations by acquiring various emerging high technology companies. With the background and experience of our Chairman and CEO, we are confident we will be able to locate suitable target companies from different industries.

On July 15, 2014, we acquired Hubei Hang-ao Servo-valve Manufacturing Technology Co., Ltd. (“Hang-ao”), a Chinese limited liability company located in Xiangyang, Hubei Province. In accordance with the acquisition agreement, we became the holder of 88% of the equity of Hang-ao for consideration of $9,039,780, including RMB 42 million or approximately $6.8 million in cash and 1,047,000 common shares of Aoxin Tianli. Hang-ao was the sole shareholder of Beijing Sanqiang Tongwei Electromechanical Hydraulic Technology Development Co., Ltd. and engages in the business of manufacturing and marketing electro-hydraulic servo-valves and related servo systems and components. The acquisition agreement includes a three year “earn out payment” provision which requires Hang-ao to reach certain level of net income for the years 2014, 2015, and 2016 for the sellers to retain the 1,047,000 common shares of Aoxin Tianli. The target net incomes are RMB 4.5 million ($733,000), 9 million ($1.5 million), and RMB 15 million ($2.4 million) for the years of 2014, 2015, and 2016.

Table of Contents

On October 6, 2014, the Company entered into a letter of intent with Mr. Fawei Qiu who held 12% of the equity of Hang-ao, to sell 100% of the equity of Beijing Sanqiang Tongwei Electromechanical Hydraulic Technology Development Co., Ltd. for consideration of RMB 24 million or $3.9 million. On November 10, 2014, the Company entered into a share sale agreement with Mr. Fawei Qiu to execute the letter of intent dated on October 6, 2014. On November 11, 2014, the consideration of RMB 24 million or $3.9 million had been collected.

Wuhan Optical Valley Orange Technology Co., Ltd. is focused on delivering next-generation optical fiber hardware and software solutions for the security and protection industry. OV Orange was also a sole shareholder of Wuhan Orange Optical Networking Technology Development Co., Ltd. (“Optical Networking.”) On November 10, 2014, OV Orange had entered into a share sale agreement with Hubei Aoxin Science & Technology Group Co. Ltd. to sell 100% of the equity of Optical Networking for consideration of RMB 1,000,000 or $161,030. On November 12, 2014, the consideration of RMB 1 million or $161,030 had been collected.

The results of operations of Hang-ao and OV Orange are reflected in the Company’s financial statements and the information set forth below from July 15, 2014, and August 26, 2014, their respective dates of acquisition by the Company

Table of Contents

In an effort to significantly increase the scale of our operations, in 2012 we concluded a series of agreements (the “Exclusivity Agreements”) 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. The agreements 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. 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 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. By the end of the first quarter of 2014 we had funded and completed the construction of 798 farms for local farmers. Achievement of any of the program’s goals and the need for financing are dependent upon the participation, cooperation and skills of local 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. After providing the financing necessary for completion of the construction for 798 farms, we decided to temporarily stop providing capital to the program and focus on our black hog retail operations and now the acquisition of companies in other industries.

Table of Contents

Principal Factors Affecting our Results of Operations

Revenues

In our hog farming segment, we derive the bulk of our revenues from the sale of hogs to other hog farms for breeding purposes, to brokers who sell our 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 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 they are 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.

In our retail segment, we generate our revenues from selling black hogs to restaurants, hotels, and through supermarkets and the Internet.

In our emerging segment, we sell electro-hydraulic servo devices and provide maintenance services, and sell optical fiber hardware and software solutions for the security and protection industry. Revenues generated from the sales of electro-hydraulic servo devices, providing maintenance services, and optical fiber hardware and software solutions are recognized upon shipment and transfer of title or provision of the service. Electro-hydraulic servo devices generally are sold with a one-year warranty. Maintenance service revenue is recognized when the labor has been completed and the equipment has been accepted by the customer, which is generally within a couple days of the delivery of the equipment. For the nine months ended September 30, 2014, the amount allocated to maintenance service revenue was minimal. Based on historical experience, maintenance service calls and any related labor costs have been minimal. Revenues related to spare part sales are recognized upon shipment or delivery based on the trade terms.

We receive subsidies from the government for operating our farms, as well as financial support from the government for some of our research projects. Some of these subsidies are non-recurring, such as the payment we receive when we reach specified annual production capacities, for the acquisition of certain operating equipment, or for specific research projects. 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.

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,” included in the Company’s Annual Report on Form 10-K. for the fiscal year ended December 31, 2013 filed March 13, 2014.

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 sale 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.

Table of Contents

Revenues resulting from the sale of our emerging business segment. Part of our revenues and operating margin results from sales of electro-hydraulic servo devices and optical fiber hardware and software solutions for the security and protection industry. The market for products involved in the application of new technologies into the Chinese market continually evolves as Chinese manufacturing enterprises modernize their systems. Often, these products are initially introduced to the Chinese market by foreign developers. For Chinese producers of these products to be competitive they must demonstrate that they have mastered these products which generally require that they spend money on research and development and maintain staff to develop new technologies. At the same time, they need to build up brand awareness. A significant product defect or apparent inability to master relevant technology 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 adversely impact our ability to price our products so as 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. Additionally, the markets for electro-hydraulic servo devices and optical fiber products are mainly dominated by major foreign producers which constitute strong competition for Chinese companies seeking to enter these markets. Our products and technologies may not be able to compete with other competitors which have more experienced at developing new innovations. Our ability to receive certain subsidies from the government is dependent upon our being able to maintain our production technologies and thus to qualify for incentives for our research and development efforts.

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.

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. For our electro-hydraulic servo devices and optical fiber products, based on historical experience, maintenance service calls and any related labor costs have been minimal. However, a significant product defect would very likely significantly increase our cost of goods sold.

Table of Contents

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 salaries, wages, and promotion expenses.

Factors Affecting Expenses

Supplies and commodity prices. The largest component of our expenses relates to the price of materials required to breed and raise hogs for sale. Specifically, while we ordinarily breed our own hogs, we periodically purchase breeding stock 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 component of the 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 higher costs by charging higher 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.

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, electro-hydraulic servo devices and optical fiber products to a relatively small number of customers. We believe this concentration of customers in our hog sales has allowed us to focus our marketing and selling efforts. However, we believe we will have to devote substantial marketing efforts to build our brand awareness with customers for our servo valves and optical fiber products, which may require substantial expenditures.

Number of farms and business we operate. 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. While we do not anticipate substantial expansion of our hog business, we do anticipate acquiring new businesses with emerging technologies, the acquisition of such businesses will also increase our administrative expenses.

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. Since 2011, we signed 8 joint development agreements, generally for periods of 10 years, with 8 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 rearing facilities on which the farmers will grow black hogs for sale to us. Pursuant to these joint development agreements, title to these small-scale hog rearing facilities belongs to us and the local cooperatives (and the individual farmers) have the right to use them. As of September 30, 2014, we have constructed or purchased $11.24 million dollars of hog rearing facilities and equipment that has been completed and is operational and included in plant and equipment. After providing the financing necessary for completion of the construction for 798 farms, we decided to temporarily stop providing capital to the program and focus on our black hog retail operations and the acquisition of companies in other industries.

Table of Contents

Results of Operations

The results of operations of Hang-ao and OV Orange and their wholly owned subsidiaries, are reflected in the Company’s financial statements and the information set forth below from July 15, 2014, and August 26, 2014, their respective dates of acquisition by the Company.

Comparison of the Results of Operations for the Three Months Ended September 30, 2014 and 2013

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

	For Three Months Ended September 30,									Percentage of
	2014			2013			Net Change			Change
Sales	$	11,476,257		$	8,728,050		$	2,748,207			32%
Cost of goods sold		8,843,378			7,824,400			1,018,978			13%
Gross profit		2,632,879			903,650			1,729,229			191%
Selling, general and administrative expenses		1,069,995			672,574			397,421			59%
Income from operations		1,562,884			231,076			1,331,808			576%
Interest expense, net		(188,571	)		(69,738	)		(118,833	)		(170%)
Subsidy income		449,075			8,634			440,441			5101%
Relocation compensation from Farm 8 shutdown		-			-			-			n/a
Other income		79,422			3,483			75,939			2180%
Net other income (expense)		339,926			(57,621	)		397,547			(690%)
Income before income taxes		1,902,810			173,456			1,729,355			997%
Income taxes		-			-			-			n/a
Net income	$	1,902,810		$	173,456		$	1,729,355			997%

The following table sets forth information as to the gross margin for our three business segments for the three months ended September 30, 2014 and 2013 (dollars in thousands).

	Three Months Ended September 30, 2014
	Hog Farming			Retail			Emerging Business			Total
Revenues	$	9,324		$	245		$	1,907		$	11,476
Cost of goods sold	$	7,638		$	207		$	998		$	8,843
Gross profit	$	1,686		$	38		$	909		$	2,633
Gross margin %		18	%		16	%		48	%		23	%

	Three Months Ended September 30, 2013
	Hog Farming			Retail			Emerging Business		Total
Revenues	$	8,540		$	188		$	-	$	8,728
Cost of goods sold	$	7,668		$	156		$	-	$	7,824
Gross profit	$	872		$	32		$	-	$	904
Gross margin %		10	%		17	%		-		10	%

Revenues. For the three months ended September 30, 2014, we had revenues of $11,476,257, as compared to revenues of $8,728,050 for the same period of 2013. Our revenues increased by $2,748,207 or approximately 32%. This growth in revenues was primarily attributable to (1) sales of black hogs raised by farmers participating in our black hog program, which increased $2 million, partly offset by the reduced market demand for our regular breeder and market hogs which decreased over $1.2 million, and (2) sales from our new acquired subsidiaries Hang-ao and OV Orange, which were included in our emerging business segment and contributed $1.9 million in our revenues,.

Table of Contents

The tables below illustrate our sales of breeder hogs, market hogs, black hogs and specialty pork products for the three months ended September 30, 2014 and 2013.

Sales by Products

	Three Months Ended September 30,
	2014						2013
	No. of Hogs Sold		Average Price/Hog		Sales		No. of Hogs Sold		Average Price/Hog		Sales
Breeder Hogs – regular hogs		7,126	$	259	$	1,844,085		7,605	$	282	$	2,144,008
Market Hogs – regular hogs		20,696	$	205		4,246,077		21,245	$	219		4,646,502
Market Hogs – black hogs		14,325	$	226		3,234,322		8,029	$	218		1,749,319

Total		42,147	$	221	$	9,324,484		36,879	$	232	$	8,540,229

	Three Months Ended September 30,
	2014						2013
	Kilogram		Average Price/kg		Sales		Kilogram		Average Price/kg		Sales
Market Hogs – specialty black hog pork products		52,750	$	5	$	244,975		47,055	$	4	$	188,221
Total		52,750	$	5	$	244,975		47,055	$	4	$	188,221

We sold approximately 6% less breeder hogs and 3% less market hogs in the third quarter of 2014 than in the 2013 quarter. The selling price for breeder hogs in the third quarter of 2014 decreased 8% and the selling price for regular market hogs decreased 6% as compared to the prior year. As a result, sales revenue attributable to breeder hogs decreased by 14% and sales attributable to market hogs decreased by 9%. The decreases in our regular hog sales were primarily attributable to: (1) the shutdown of our Farm 8 (Or Caidian Farm), which reduced our capacity; (2) an apparent decline in China pork market demand impacted by H7N9 avian flu; (3) preferential policies for hog raising instituted by the government of China since 2011, such as government subsidies, which attracted more investment into the hog farming industry and resulted in an increase in the supply of market hogs over the past years, and (4) the central government’s new policies to promote frugality and thrift, which forbid extravagance by government personnel which has reduced binge spending on gifts and unnecessary parties. This gradually changed food consumption habits and reduced pork demand as well. The decline in our breeder hog sales was primarily because after almost a 3 year downturn in the China pork market, more and more hog farmers were shrinking their farm sizes resulting in lower demand for breeder hogs.

For the third quarter of 2014, we generated $3,479,297 in revenues through the sale of black hogs and black hog specialty pork products. We sold 14,325 black hogs as breeder and market hogs and 52,750 kilograms of black hog meat were used to produce the specialty pork products sold in our retail business. In the same period of 2013, we sold 8,029 black hogs as breeder and market hogs which contributed $1,749,319 to our revenues and 47,055 kilograms of black hog meat were used to produce the specialty pork products sold in our retail business which also contributed $188,221 in our revenues. The growth in our black hog operations was derived from our successful marketing and promoting activities since the fourth quarter of 2013 which helped us to build up brand awareness in consumers

Table of Contents

Since the fourth quarter of 2013 we have distributed specialty black hog products through supermarkets and to chain restaurants and hotels. Our black hog product portfolio includes fresh pork meats sold to supermarkets and meat shops, various vacuumed pork meats sold in gift boxes or portable thermo coolers.

The sales from our new acquired subsidiaries Hang-ao and OV Orange from their respective dates of acquisition, which were included in our emerging business segment, contributed $1.9 million to our revenues during the three months ended September 30, 2014.

Cost of goods sold. Cost of goods sold includes the cost of raw materials, feed, labor, depreciation, amortization, processing costs and other overhead costs. For the three months ended September 30, 2014, cost of goods sold was $8,843,378 as compared to $7,824,400 for the same period of 2013, an increase of $1,018,978, or 13%. Cost of goods sold related to the hog farming segment was $7,638,219 for the third quarter of 2014 as compared to $7,690,631 for 2013. Cost of goods sold for the retail segment was $206,727 for the third quarter of 2014 and $133,769 for the same period of 2013. Cost of goods sold for the emerging business segment was $998,432 for the third quarter of 2014. The major reason for our cost of goods sold increase was our newly acquired subsidiaries, Hang-ao and OV Orange. The year over year growth rate in our revenues from hog farming and retail segment was 10%.The year over year growth rate in our cost of goods sold was flat and benefited from reductions in feed prices. For example, the price of corn dropped 7% or RMB 0.2 per kilogram comparing the third quarter of 2014 and 2013. This reduction resulted in 24% and 29% decreases in our cost of goods sold for breeder hogs and regular market hogs.

Profit Margins. Our gross margin increased to 23% in the third quarter of 2014 from 10% in 2013. Our gross profit was $2,632,879 for the 2014 quarter as compared to $903,650 for the 2013 quarter. This increase in our gross profit reflected the contribution of $908,366 from our newly acquired subsidiaries and the impact of lower prices for feed costs discussed in the cost of goods sold section. The increase in our profit margin reflects both the improvement in our hog business and our newly acquired subsidiaries which operate at much higher profit margins than the hog business.

Our gross margin from hog farming was 18% in the third quarter of 2014 as compared to 10% in the 2013 quarter. The gross margins for breeder hogs were 37% and 29% in the third quarter of 2014 and 2013, respectively, and the gross margins for regular market hogs were 17% and 3% in the same periods of 2014 and 2013. The gross margins for black market hogs were 9% and 6% in the third quarters of 2014 and 2013. The gross margins from our specialty black hog pork products was 16% and 29% for the third quarter of 2014 and 2013. The increase in our gross margin for our regular breeder hogs, regular market hogs, and black hogs was a result of reduced feed purchase prices. Our sales from regular breeder hogs and market hogs decreased 14% and 9%, respectively. However, at the same time, our cost of goods sold decreased 24% and 22%, resulting in the growth in our gross margins. Although we are gradually building up the brand awareness of our specialty pork product, our market share did not allow us to enjoy economies of scale. Therefore, we continue to have low margins from specialty pork product sales.

Our gross margin from the emerging business segment was 48% in the third quarter of 2014, 42% from the sales of electro-hydraulic servo devices operated by Hang-ao and 73% from the sales of optical fiber products operated by OV Orange.

Expenses. Selling, general and administrative expenses increased by $397,421 in the third quarter of 2014 as compared to the same period in 2013. The increase was primarily the result of additional amortization of $96,470 for the acquired distribution network as a result of the repurchase of 40% noncontrolling interest, $35,509 from bad debt expense, , and $231,944 from the new acquired subsidiaries, Hang-ao and OV Orange.

Table of Contents

Net Other Income (Expense). Net other expense increased from ($57,621) for the three months ended September 30, 2013 to net other income of $339,926 for the three months ended September 30, 2014, an increase of $397,547, which was primarily due to an increase of $449,094 from our subsidy income contributed from one of our research projects conducted by OV Orange, partially offset by the increase of $118,833 in our interest expense.

Income Taxes. Our hog farming and retail segments are exempt from the Chinese income tax and VAT. Our operations in electro-hydraulic servo devices and optical fiber products are subject to VAT taxes and corporate income tax. Our operations in optical fiber products are enjoy a preferential income tax rate of 15% which will be expired by 2015.

Net Income. Our net income for the three months ended September 30, 2014 and 2013 was $1,902,810 and173,455, respectively. The improvement to net income is primarily the result of our new acquisitions which contributed net income of approximately $1.2 million during the third quarter of 2014, and stable hog feed costs which helped us control our cost of goods sold and higher margin contributed by black hog sales, specifically black market hogs and specialty black hog meat sales.

Table of Contents

Comparison of the Results of Operations for the Nine Months Ended September 30, 2014 and 2013

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

	For Nine Months Ended September 30,									Percentage of
	2014			2013			Net Change			Change
Sales	$	29,237,480		$	22,958,392		$	6,279,088			27%
Cost of goods sold		24,551,822			21,525,720			3,026,102			14%
Gross profit		4,685,658			1,432,672			3,252,986			227%
Selling, general and administrative expenses		3,078,302			2,322,407			755,895			33%
Income (loss) from operations		1,607,356			(889,735	)		2,497,091			(281%)
Interest expense, net		(417,386	)		(399,536	)		(17,850	)		4%
Subsidy income		468,620			103,972			364,648			351%
Relocation compensation for shutdown Farm 8		987,057			-			987,057			n/a
Other income		87,535			43,622			43,913			101%
Net other income (expense)		1,125,826			(251,942	)		1,377,768			(547%)
Income (loss) before income taxes		2,733,182			(1,141,677	)		3,837,108			(336%)
Income taxes		37,751			-			37,751			n/a
Net income (loss)	$	2,695,431		$	(1,141,677	)	$	3,837,108			(336%)

The following table sets forth information as to the gross margin for our two business segments for the nine months ended September 30, 2014 and 2013 (dollars in thousands).

	Nine Months Ended September 30, 2014
	Hog Farming			Retail			Emerging Business			Total
Revenues	$	26,456		$	875		$	1,907		$	29,238
Cost of goods sold	$	22,924		$	630		$	998		$	24,552
Gross profit	$	3,532		$	245		$	909		$	4,686
Gross margin %		13	%		28	%		48	%		16	%

	Nine Months Ended September 30, 2013
	Hog Farming			Retail			Emerging Business		Total
Revenues	$	22,718		$	240		$	-	$	22,958
Cost of goods sold	$	21,318		$	208		$	-	$	21,526
Gross profit	$	1,400		$	32		$	-	$	1,432
Gross margin %		6	%		13	%		-		6	%

Revenues. For the nine months ended September 30, 2014, we had revenues of $29,237,480, as compared to revenues of $22,958,392 for the same period of 2013. Our revenues increased by $6,279,088 or approximately 27%. This growth in revenues was primarily attributable to (1) sales of black hogs raised by farmers participating in our black hog program which increased $5.6 million, and the initiation of our retail sales of specialty black hog products which increased $0.6 million, partially offset by a decrease of over $1.8 million from our sales of regular market hogs and breeder hogs, and (2) sales from our new acquired subsidiaries Hang-ao and OV Orange, which were included in our emerging business segment since the date of their respective acquisitions and contributed $1.9 million in our revenues. The impact of our newly acquired businesses on our results of operations was greater on our results of operations for the three months as opposed to the nine months ended September 30 as both of the businesses were acquired in the third quarter.

Table of Contents

The tables below illustrate our sales of breeder hogs, market hogs, black hogs and specialty pork products for the nine months ended September 30, 2014 and 2013.

Sales by Products

	Nine Months Ended September 30,
	2014						2013
	No. of Hogs Sold		Average Price/Hog		Sales		No. of Hogs Sold		Average Price/Hog		Sales
Breeder Hogs – regular hogs		21,133	$	264	$	5,574,850		23,013	$	271	$	6,229,923
Market Hogs – regular hogs		63,492	$	193		12,227,382		65,415	$	197		12,880,184
Market Hogs – black hogs		39,180	$	221		8,653,857		17,213	$	210		3,608,689

Total		123,805	$	214	$	26,456,089		105,641	$	215	$	22,718,796

	Nine Months Ended September 30,
	2014						2013
	Kilogram		Average Price/kg		Sales		Kilogram		Average Price/kg		Sales
Market Hogs – specialty black hog pork products		181,802	$	5	$	874,593		58,711	$	4	$	239,996
Total		181,802	$	5	$	874,593		58,711	$	4	$	239,996

We sold approximately 8% less breeder hogs and 3% less market hogs in the first nine months of 2014 than in the same period of 2013. The selling prices for breeder hogs and regular market hogs during the nine months ended September 30, 2014 were essentially flat as compared to the same period of 2013. As a result, sales revenue attributable to breeder hogs and market hogs decreased by 11% and 5%. The decreases in sales revenue from regular market hogs and breeder hogs were primarily attributable to: 1) the shutdown of our Farm 8 (Or Caidian Farm), which caused we have less regular hogs available for sales; (2) an apparent decline in China pork market demand impacted by H7N9 avian flu; (3) a number of preferential policies for hog raising instituted by the government of China since 2011, such as government subsidies, which attracted more investment into the hog farming industry and resulted in an increase in the supply of market hogs, and (4) the central government’s new policies to promote frugality and thrift, which forbid extravagance by government personnel which has reduced binge spending on gifts and unnecessary parties. This gradually changed food consumption habits and reduced pork demand. The decline in our breeder hog sales was primarily because after almost a 3 year downturn in the China pork market, more and more hog farmers were shrinking their farm sizes resulting in lower demand for breeder hogs.

For the nine months of 2014, we generated $9.5 million in revenues through the sale of black hogs and black hog specialty pork products. We sold 39,180 black hogs as breeder and market hogs and 181,802 kilograms of black hog meat were used to produce the specialty pork products sold in our retail business. In the same period of 2013, we sold 17,213 black hogs as breeder and market hogs which contributed $3.6 million to our revenues and 58,711 kilograms of black hog meat which contributed 0.2 million to our revenues.

Table of Contents

The sales from our new acquired subsidiaries Hang-ao and OV Orange, which were included in our emerging business segment, contributed $1.9 million in our revenues during the nine months ended September 30, 2014.

Cost of goods sold. Cost of goods sold includes the cost of raw materials, feed, labor, depreciation, amortization, processing cost, and other overhead costs. For the nine months ended September 30, 2014, cost of goods sold was $24,551,822 as compared to $21,525,720 for the same period of 2013, an increase of $3,026,102, or 14%. Cost of goods sold related to the hog farming segment was $22,923,519 for the nine months of 2014 as compared to $21,339,849 for 2013. Cost of goods sold for the retail segment was $629,871 for the nine months of 2014 and $185,871 for 2013. Cost of goods sold for the emerging business segment was $998,432 for the third quarter of 2014. The major reason for our cost of goods sold increase was our newly acquired subsidiaries, Hang-ao and OV Orange, which were included in the emerging business segment. The year over year growth rate in our revenues from hog farming and retail segments was 19%.The year over year growth rate in our cost of goods sold was 9% and benefited from reductions in the purchase prices for our feeds. The reduction in feed prices contributed 21% and 17% to the decrease in our cost of goods sold for breeder hogs and regular market hogs.

Profit Margins. Our gross margin increased to 16% in the nine months ended September 30, 2014 from 6% in 2013. Our gross profit was $4,685,658 for the nine months ended September 30, 2014 as compared to $1,432,672 for the comparable period in 2013. This increase in our gross profit reflected the margins $908,366 from our newly acquired subsidiaries and the impact of reduced feed costs. Because we acquired Hang-ao and OV Orange in the third quarter, the impact of their contributions to our results for the nine months ended September 30, 2014, was not as great as the impact of their contributions on our 3 month results.

Our gross margin from hog farming was 13% in 2014 as compared to 6% in 2013. Our retail margin was 28% in 2014 and 13% in 2013. The gross margins for breeder hogs were 36% and 27% in the nine months ended September 30, 2014 and 2013, respectively, and the gross margins for regular market hogs were 7% and (2%) in the same period of 2014 and 2013. The gross margins for black market hogs were 8% and (1%) in 2014 and 2013. The gross margin from our specialty black hog pork products was 28% and 23% in 2014 and 2013. The increase in our gross margin for our regular breeder hogs was a result of reduced feed prices. Our revenues from regular breeder hogs and market hogs decreased 11% and 9%, respectively. However, at the same time, our cost of goods sold dropped 21% and 17%, resulting in the growth in our gross margins. Our black hog sales, whether as market hogs or specialty black hog products, benefited from our growing brand awareness and reduced feed costs. The gross margins from black market hogs and specialty pork products benefitted from increases of 181% and 264% in our revenues from sales of market black hogs and specialty pork products, comparing the nine months ended September 30, 2014 to the comparable period of 2013. Additionally, our cost of goods sold for both sections of our black hog business increased 158% and 239%, respectively, less than the growth rates in revenues.

Expenses. Selling, general and administrative expenses increased by $755,895 in the nine months ended September 30, 2014 as compared to the same period in 2013. The increase was primarily the result of additional amortization of $96,470 from the acquired distribution network resulting from the repurchase of 40% noncontrolling interest in Tianzhili, $35,509 from bad debt expense, $39,000 from payroll for increased personnel in our retail segment and our black hog retail operations which used an additional $270,248 in promoting and marketing expenses, and $231,944 from the new acquired subsidiaries, Hang-ao and OV Orange..

Net Other Income (Expense). Net other expense increased from ($251,942) for the nine months ended September 30, 2013 to net other income of $1,125,826 for the nine months ended September 30, 2014, an increase of $1,377,768, which was primarily due to relocation compensation of $987,057 for the shutdown of Farm 8 and an increase of $449,094 from our subsidy income contributed from one of our research projects conducted by OV Orange, which was partially offset by an increase in interest expense payment of $17,850.

Table of Contents

Income Taxes. Our hog farming and retail segments are exempt from the Chinese income tax and VAT. With respect to our operations in electro-hydraulic servo devices and optical fiber products, we are subject to VAT taxes and corporate income tax. Our operations in optical fiber products enjoy a preferential income tax rate of 15% which will expire in 2015.

Net Income (Loss). Our net income (loss) for the nine months ended September 30, 2014 and 2013 was $2,695,431 and ($1,141,677), respectively. The improvement from a net loss to net income is primarily the result of the relocation compensation for the shutdown of Farm 8 and improved gross margin from our breeder hogs and regular market hogs resulting from stable hog feed costs which helped us control our cost of goods sold. Our new acquisitions also contributed net income of approximately $1.2 million during the nine months ended September 30, 2014,

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 September 30, 2014 our working capital was $38,692,333 as compared to $14,946,630 at December 31, 2013, reflecting the $22.76 million capital contribution from a private placement concluded during the nine months ended September 30, 2014. These funds are deposited in financial institutions located as follows:

	September 30, 2014					December 31, 2013
Country	Dollar		%			Dollar		%
United States	$	-		-		$	-		-
China		34,538,057		100	%		10,087,694		100	%
	$	34,538,057		100	%	$	10,087,694		100	%

Consolidated Statement of Cash Flows

	Nine Months Ended September 30,
	2014			2013
Net cash provided by operating activities	$	7,940,155		$	961,057
Net cash used in investing activities		(7,242,251	)		(825,327	)
Net cash provided by (used in) financing activities		23,712,499			(2,063,354	)
Exchange rate effect on cash		39,960			167,577
Net cash inflow (outflow)	$	24,450,363		$	(1,760,047	)

Cash Provided by Operating Activities

Net cash provided by operating activities in the nine months ended September 30, 2014 totaled $7,940,155. Cash flow pertaining to operating activities benefited from depreciation and amortization of $2,826,764, amortization of prepaid expenses of $248,341, an increase in bad debt expense of $35,509, a decrease in inventory of $2,006,292 and reduction in other receivables of $918,101 and were partially offset by non-cash subsidy income of $449,094, and the repayment of $804,751 of other payables.

Net cash provided by operating activities in the nine months ended September 30, 2013 totaled $961,057. Cash flow pertaining to operating activities reflected the Company’s net loss from continuing operations for the nine months ended September 30, 2013 of ($1,141,677), benefitted by depreciation and amortization of $2,438,385, stock-based expense of $5,600, and an increase in other payables of $736,817. These favorable factors were partially offset by increases in accounts receivable of $141,546, inventories of $104,833, advances to suppliers of $50,055, and a decrease in accounts payable of $976,600.

Table of Contents

Cash Used in Investing Activities

Net cash used in investing activities for the nine months ended September 30, 2014 totaled $7,242,251. This included $1,083,100 paid for the purchase of a 40% interest in one of our subsidiaries, Tianzhili, a cash payment of $6,100,219 for the Hang-ao acquisition, and $58,932 in equipment investment.

Net cash used in investing activities for the nine months ended September 30, 2013 totaled $825,327. This included $339,282 for additions to our breeder stock and $486,045 for purchases of new equipment.

Cash Provided by (Used in) Financing Activities

For the nine months ended September 30, 2014, we had net cash provided by financing activities of $23,712,499. This included proceeds of $22.76 million from the sale of 10.2 million shares to our current Chairman and CEO, Mr. Ping Wang, and a related party, Hubei Aoxin Science and Technology Group Co., Ltd., and proceeds from renewed short-term loans of $2,408,188. These favorable factors were partially offset by the repayment of $2,082,757 in short-term loans.

For the nine months ended September 30, 2013, net cash used in financing activities was $2,063,354. The activity was comprised of a repayment of short-term loans of $5,592,931, proceeds from new share issuance of $2,596,080, and proceeds from new short-term loans of $772,549.

Commitments for Capital Expenditures

Our capital requirements for the next twelve months relate to purchasing breeder hogs as well as additional investment in our retail segment to expand our marketing and distribution channels. We also expect to incur modest expenses in maintaining our hog farms. We believe that our cash flow from operations will be sufficient to meet our anticipated cash requirements for the next twelve months.

In July and August 2014 we acquired Hubei Hang-ao Servo-valve Manufacturing Technology Co., Ltd. and Wuhan Optical Valley Orange Technology Co., Ltd. as the initial steps in our plan to diversify our operations. We anticipate that we will make additional acquisitions of growth companies in China in industries other than hog farming. The consummation of such acquisitions will require that we deploy our capital and, possibly, seek to borrow funds or raise additional equity from the sale of our securities. There is no guarantee that such debt or equity will be available on terms acceptable to us, if at all. The sale of our equity will dilute the interests of or current shareholders.

Contractual Obligations and Off Balance Sheet Items

Contractual Obligations

We have certain fixed contractual obligations that include future estimated payments. Changes in our business needs, cancellation provisions, changing interest rates, and other factors may cause actual payments to diff from the estimates. We cannot provide certainty regarding the timing and amounts of payments. We have presented below a summary of the most significant assumptions used in our determination of amounts presented in the tables, in order to assist in the review of this information within the context of our consolidated financial position, results of operations, and cash flows. The following tables summarize our contractual obligations as of September 30, 2014 (dollars in thousands), and the effect these obligations are expected to have on our liquidity and cash flows in future periods.

Table of Contents

	Payments Due by Period
	Total		Less than 1 Year		1 – 3 Years		3 – 5 Years		Over 5 Years
Contractual obligations
Bank loans	$	7,963	$	7,963	$	-	$	-	$	-
Others		-		-		-		-		-
	$	7,963	$	7,963	$	-	$	-	$	-

Bank loans consist of short term bank loans. Historically, we have refinanced these bank loans for an additional term of one year and we expect to continue to refinance these loans upon expiration.

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

Our discussion and analysis of our financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of our financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. We continually evaluate our estimates, including those related to bad debts, inventories, recovery of long-lived assets, income taxes, and the valuation of equity transactions. We base our estimates on historical experience and on various other assumptions that we believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Any future changes to these estimates and assumptions could cause a material change to our reported amounts of revenues, expenses, assets and liabilities. Actual results may differ from these estimates under different assumptions or conditions. While our significant accounting policies are described in Note 2 to our consolidated financial statements, we believe the following accounting policies are the most critical to aid you in fully understanding and evaluating our financial statements and our management’s discussion and analysis.

Table of Contents

Accounts Receivable

We have a policy of reserving for uncollectible accounts based on our best estimate of the amount of probable credit losses in our existing accounts receivable. We periodically review our accounts receivable to determine whether an allowance is necessary based on an analysis of past due accounts and other factors that may indicate that the realization of an account may be in doubt. Account balances deemed to be uncollectible are charged to the allowance after all means of collection have been exhausted and the potential for recovery is considered remote.

As a basis for estimating the likelihood of collection has been established, we consider a number of factors when determining reserves for uncollectable accounts. We believe that we use a reasonably reliable methodology to estimate the collectability of our accounts receivable. We review our allowances for doubtful accounts on at least a quarterly basis. We also consider whether the historical economic conditions are comparable to current economic conditions. If the financial condition of our customers or other parties that we have business relations with were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required.

Inventories

Inventories, consisting principally of our hogs held for sale, are stated at the lower of cost, as determined by the weighted-average method, or market. We compare 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. The price of hogs could fluctuate upward or downward. If prices were to decrease below the amounts we use in determining the carrying value of our inventory, any profit we might achieve on the sale of our inventories would be less than anticipated. If inventory costs exceed expected market value due to obsolescence or quantities in excess of expected demand, we will record additional reserves for the difference between the cost and the market value. These reserves are recorded based on estimates. We review inventory quantities on hand and on order and record, on a quarterly basis, a provision for excess and obsolete inventory, if necessary. If the results of the review determine that a write-down is necessary, we recognize a loss in the period in which the loss is identified, whether or not the inventory is retained. Our inventory reserves establish a new cost basis for inventory and are not reversed until we sell or dispose of the related inventory. Such provisions are established based on historical usage, adjusted for known changes in demands for such products, or the estimated forecast of product demand and production requirements.

Plant and Equipment

Property and equipment are stated at cost less accumulated depreciation. Depreciation is computed using straight-line method over the estimated useful lives of the assets. The estimated useful lives of the assets are as follows:

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

		Useful Life
Buildings		20 years
Vehicles		5-10 years
Office equipment		3-5 years
Research equipment		3-20 years
Production equipment		3-20 years

Table of Contents

The cost of repairs and maintenance is expensed as incurred; major replacements and improvements are capitalized. When assets are retired or disposed of, the cost and accumulated depreciation are removed from the accounts, and any resulting gains or losses are included in income in disposition.

We examine the possibility of decreases in the value of fixed assets when events or changes in circumstances reflect the fact that their recorded value may not be recoverable. We recognize 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

Construction in Progress

Construction in progress consists of amounts expended for building construction of new breeding and animal rearing facilities. Once construction of a building is completed and the facilities are approved for adequate breeding and animal rearing activity, and have commenced of animal rearing activities, the construction in progress assets are categorized as buildings and production equipment and accounted for in plant and equipment, whereupon they are depreciated over their estimated useful lives.

Included in construction in progress are new breeding and animal rearing facilities under construction and machinery pending installation and includes the costs of construction, machinery and equipment, and any interest charges arising from borrowings used to finance these assets during the period of construction or installation. No provision for depreciation is made on construction-in-progress until such time as the relevant assets are completed and ready for their intended use.

Biological Assets

Biological assets consist primarily of hogs purchased or selected from the Company’s own production for breeding and farrowing. The costs to purchase and cultivate breeding hogs and the expenditures related to labor and materials to feed breeding hogs until they become commercially productive and breedable are capitalized. When breeding hogs are entered into breeding and farrowing, amortization of the costs incurred until they became commercially productive commences. The estimated production life for breeding hogs is three years, and the costs are amortized to a residual value, currently $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. Similar to other assets, the failure of our biological assets to be serviceable over the entirety of their anticipated useful lives or to be sold at their anticipated residual value, will negatively impact our operating results.

Deferred Income

Table of Contents

Special Payables

Revenue Recognition

Currency Exchange Rates

Our functional currency is the U.S. dollar, and the functional currency of our operating subsidiaries and VIE is the RMB. All of our sales are denominated in RMB. As a result, changes in the relative values of U.S. dollars and RMB affect our reported levels of revenues and profitability as the results of our operations are translated into U.S. dollars for reporting purposes. In particular, fluctuations in currency exchange rates could have a significant impact on our financial stability due to a mismatch among various foreign currency-denominated sales and costs. Fluctuations in exchange rates between the U.S. dollar and RMB affect our gross and net profit margins and could result in foreign exchange and operating losses.

Our exposure to foreign exchange risk primarily relates to currency gains or losses resulting from timing differences between signing of sales contracts and settling of these contracts. Furthermore, we translate monetary assets and liabilities denominated in other currencies into RMB, the functional currency of our operating subsidiaries. Our results of operations and cash flow are translated at average exchange rates during the period, and assets and liabilities are translated at the unified exchange rate at the end of the period. Translation adjustments resulting from this process are included in accumulated other comprehensive income in our statement of shareholders’ equity. We have not used any forward contracts, currency options or borrowings to hedge our exposure to foreign currency exchange risk. We cannot predict the impact of future exchange rate fluctuations on our results of operations and may incur net foreign currency losses in the future.

Table of Contents

Our financial statements are expressed in U.S. dollars, which is the functional currency of our parent company. The functional currency of our operating subsidiaries and affiliates is RMB. To the extent we hold assets denominated in U.S. dollars, any appreciation of the RMB against the U.S. dollar could result in a charge in our statement of operations and a reduction in the value of our U.S. dollar denominated assets. On the other hand, a decline in the value of RMB against the U.S. dollar could reduce the U.S. dollar equivalent amounts of our financial results.

Stock Based Compensation

Stock based compensation is accounted for based on the requirements of the Share-Based Payment topic of ASC 718 which requires recognition in the financial statements of the cost of employee and director services received in exchange for an award of equity instruments over the period the employee or director is required to perform the services in exchange for the award. The Accounting Standards Codification also requires measurement of the cost of employee and director services received in exchange for an award based on the grant-date fair value of the award.

Pursuant to ASC Topic 505-50, for share-based payments to consultants and other third-parties, compensation expense is determined at the “measurement date.” The expense is recognized over the period of services or the vesting period, whichever is applicable. Until the measurement date is reached, the total amount of compensation expense remains uncertain. We record compensation expense based on the fair value of the award at the reporting date. The awards to consultants and other third-parties are then revalued, or the total compensation is recalculated based on the then current fair value, at each subsequent reporting date.

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

As of the end of the period covered by this Quarterly Report on Form 10-Q, our management evaluated the effectiveness of our “disclosure controls and procedures” (“Disclosure Controls”). Disclosure Controls, as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), are procedures that are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure Controls are also designed with the objective of ensuring that such information is accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Our management, including the Chief Executive Officer and Chief Financial Officer, does not expect that our Disclosure Controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.

Based upon their evaluation, our management, including the Chief Executive Officer and Chief Financial Officer, has concluded that our Disclosure Controls are not effective as of the end of the period covered by this report, due to a material weakness identified below.

Table of Contents

During this evaluation, the Company identified a material weakness in its internal control over financial reporting. A material weakness is a deficiency, or combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. The identified material weakness consists of, as of the end of the period covered by this report, an understaffed financial and accounting function and the need for additional personnel to prepare and analyze financial information in a timely manner and to allow review and on-going monitoring and enhancement of our controls.

Based on our assessment and the criteria discussed above, our management, including the Chief Executive Officer and Chief Financial Officer has concluded that, as of September 30, 2014, the Company’s internal control over financial reporting was not effective as a result of the aforementioned material weakness.

In an effort to remedy the foregoing material weaknesses in the future, we intend to develop a comprehensive training and development plan for our accounting personnel, including our Chief Financial Officer, in the principles and rules of U.S. GAAP, SEC reporting requirements and the application thereof.

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.

Table of Contents

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, 2013, filed with the Securities and Exchange Commission on March 13, 2014 which are incorporated by reference into this report.

Item 6.

Exhibits

The following exhibits are filed herewith:

Exhibit Number		Document

10.1		Equity Transfer Agreement dated November 10, 2014 among Wuhan Optical Valley Orange Technology Co., Ltd., Wuhan Aoxin Science & Technology Group Co., Ltd. and Mr. Deming Liu with respect to Wuhan Orange Optical Networking Technology Development Co., Ltd.

10.2		Equity Transfer Agreement dated November 10, 2014 among Wuhan Fengze Agricultural Science and Technology Development Co., Ltd., Hubei Hang-ao Servo-valve Manufacturing Technology Co., Ltd. and Fawei Qiu with respect to Beijing Sanqiang Tongwei Electromechanical Hydraulic Pressure Sci. & Tech. Development Co., Ltd.

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.

Table of Contents

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.


	AOXIN TIANLI GROUP, INC.

November 12, 2014	By:	/s/Ping Wang
		Ping Wang Chief Executive Officer (Principal Executive Officer)

November 12, 2014	By:	/s/Jun WANG
		Jun Wang Chief Financial Officer (Principal Financial and Accounting Officer)

RENMIN TIANLI GROUP, INC. - FORM 10-Q - November 12, 2014

Attached files

RENMIN TIANLI GROUP, INC. Reports