China For-Gen Corp. - FORM S-1/A

As filed with the Securities and Exchange Commission on September 3 , 2010

Registration No. 333-166868

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

AMENDMENT NO. 2 TO

FORM S-1/A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933

CHINA FOR-GEN CORP.

(Exact name of registrant as specified in its charter)

Delaware

(State or other jurisdiction of incorporation or organization)

800

(Primary Standard Industrial Classification Code Number)

11-3840621

(IRS Employer Identification No.)

Tengao District, Haicheng City

Liaoning Province, P.R.China 114000

+0412-2988160

( Address, including zip code, and telephone number,

including area code, of registrant’ s principal executive offices )

Sherry Li

c/o China For-Gen Corp.

87 Dennis Street

Garden City Park, NY 11040

(212) 240-0707

(Name, address, including zip code, and telephone number,

including area code, of agent for service)

Copies to :		Copies to :
Barry I. Grossman, Esq.		Mitchell Nussbaum, Esq.
Adam Mimeles, Esq.		Giovanni Caruso, Esq.
Ellenoff Grossman & Schole LLP		Loeb & Loeb LLP
150 East 42 nd Street		345 Park Avenue
New York, NY 10017		New York, NY 10154
Tel: (212) 370-1300		Tel: (212) 407-4159
Fax: (212) 370-7889		Fax: (212) 407-4990

Approximate date of commencement of proposed sale to the public: As soon as practicable after the Registration Statement has been declared effective.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933 check the following box: ¨

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

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

Large accelerated filer ¨	Accelerated filer ¨

Non-accelerated filer (Do not check if a smaller reporting company) ¨	Smaller reporting company x

CALCULATION OF REGISTRATION FEE

Title of each class of securities to be registered	Amount to be Registered(1)			Proposed maximum offering price per share(1)		Proposed maximum aggregate offering price (1)		Amount of registration fee

Common stock, par value $0.001 per share		4,600,000	(2)	$	5.00	$	23,000,000	$	1,639.90
Common stock, par value $0.001 per share (3)		8,068,698			5.00		40,343,490		2,876.49
Representative’s Warrant		1			—		—		—
Common stock, par value $0.001 per share, underlying warrants held by the Representative (4)(5)		360,000			5.00		1,800,000		128.34

Total		13,028,699			—	$	65,143,490	$	4,644.73	(6)

(1)

The registration fee for securities to be offered by the Registrant is based on an estimate of the Proposed Maximum Aggregate Offering Price of the securities, and such estimate is solely for the purpose of calculating the registration fee pursuant to Rule 457(o). Includes shares which the underwriter has the option to purchase to cover over-allotments.

(2)

Includes 600,000 shares of common stock, which may be sold upon exercise of a 45-day option granted to the Underwriter to cover over-allotments if any.

(3)

Reflects shares of common stock being registered for resale by the selling stockholders set forth herein.

(4)

The 360,000 shares of common stock being registered in this registration statement consist of shares issuable by the registrant upon the exercise of the Representative’s common stock purchase warrants issued in connection with this offering.

(5)

Pursuant to Rule 416, this registration statement also covers such number of additional ordinary shares to prevent dilution resulting from stock splits, stock dividends and similar transactions.

(6)

$4,020.80 previously paid.

The Registrant amends this registration statement on such date or dates as may be necessary to delay its effective date until the Registrant shall file a further amendment which specifically states that this registration statement shall hereafter become effective in accordance with Section 8(a) of the Securities Act of 1933, or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to Section 8(a), may determine.

Explanatory Note

This Registration Statement contains two prospectuses, as set forth below.

Public Offering Prospectus. A prospectus to be used for the public offering by the Registrant of up to 4,000,000 shares of the Registrant’s common stock (in addition, up to 600,000 shares of the Registrant’s common stock may be sold upon exercise of the underwriters’ over-allotment option and 360,000 shares of the Registrant’s common stock may be sold upon exercise of the Representative’s Warrant) (the “Public Offering Prospectus”) through the underwriter named on the cover page of the Public Offering Prospectus.

Resale Prospectus. A prospectus to be used for the resale by the selling stockholders set forth therein of an aggregate of 8,068,698 of the Registrant’s common stock, of which 2,370,947 are currently issued and outstanding and 5,697,751 are issuable upon (i) conversion of outstanding preferred stock and promissory notes and (ii) exercise of outstanding warrants (the “Resale Prospectus”).

The Resale Prospectus is substantively identical to the Public Offering Prospectus, except for the following principal points:

they contain different outside and inside front covers and back covers;

they contain different offering sections than in the Prospectus Summary section beginning on page 1 (page SS-1);

they contain different Use of Proceeds sections (page SS-2);

a Selling Stockholder section is included in the Resale Prospectus (page SS-2);

references in the Public Offering Prospectus to the Resale Prospectus will be deleted from the Resale Prospectus;

the Underwriting section from the Public Offering Prospectus on page 77 is deleted from the Resale Prospectus and a Plan of Distribution is inserted in its place (page SS-6); and

the Legal Matters section in the Resale Prospectus on page SS-7 deletes the reference to counsel for the underwriters.

The Registrant has included in this Registration Statement a set of alternate pages after the back cover page of the Public Offering Prospectus (the “Alternate Pages”) to reflect the foregoing differences in the Resale Prospectus as compared to the Public Offering Prospectus. The Public Offering Prospectus will exclude the Alternate Pages and will be used for the public offering by the Registrant. The Resale Prospectus will be substantively identical to the Public Offering Prospectus except for the addition or substitution of the Alternate Pages and will be used for the resale offering by the selling stockholders.

The information in this preliminary prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities and is not soliciting an offer to buy these securities in any state where the offer or sale is not permitted.

Preliminary Prospectus

Subject To Completion, dated [ ], 2010

CHINA FOR-GEN CORP.

4,000,000 SHARES OF

COMMON STOCK

We are offering 4,000,000 shares of common stock, $0.001 par value per share. Prior to this offering, there has been no public market for our securities. The public offering price of the shares was determined by negotiation between us and the underwriters.

The public offering price of the common stock is $[ ] per share. We intend to apply to have our shares listed on the NYSE AMEX Stock Exchange concurrent with this offering.

The purchase of the securities involves a high degree of risk. See section entitled “Risk Factors” beginning on page [ ].

	Per Share	Total

Public offering price	$	$
Underwriting discounts and commissions	$	$
Non- accountable expense (1)	$	$
Proceeds, before expenses, to China For-Gen Corp.	$	$

(1) The non-accountable expense allowance of 1.0% of the gross proceeds of the offering is not payable with respect to the shares sold upon exercise of the underwriters’ over-allotment option.

We have agreed to issue to the representative of the underwriters a common stock purchase warrant to purchase a number of shares of our common stock equal to an aggregate of 9% of the shares sold in the offering at an exercise price equal to 110% of the public offering price per share.

The underwriters have a 45-day option to purchase up to 600,000 additional shares of common stock from us solely to cover over-allotments, if any.

The underwriters expect to deliver the shares to purchasers on or about [ ], 2010.

Neither the U.S. Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete. Any representation to the contrary is a criminal offense.

Maxim Group LLC

The date of this prospectus is [ ], 2010

TABLE OF CONTENTS

Prospectus Summary	1
The Offering	3
Risk Factors	5
Cautionary Note Regarding Forward-Looking Statements and Other Information Contained in this Prospectus	19
Use of Proceeds	20
Dividend Policy	21
Capitalization	22
Market Price of and Dividends of Common Equity and Related Stockholder Matters	23
Determination of Offering Price	24
Dilution	25
Exchange Rate Information	26
Selected Consolidated Financial and Operating Data	27
Management’s Discussion and Analysis of Financial Condition and Results of Operations	29
Industry Overview	39
Business	45
Facilities	47
Legal Proceedings	51
Our History and Corporate Structure	53
Directors and Executive Officers	55
Executive Compensation	58
Security Ownership of Certain Beneficial Owners and Management	59
Certain Relationships and Related Transactions	60
Description of Our Securities	61
Shares Eligible for Future Sale	64
Material PRC Income Tax Considerations	65
Underwriting	68
Transfer Agent and Registrar	71
Legal Matters	71
Experts	71
Interests of Named Experts and Counsel	71
Service of Process and Enforcement of Judgments	71
Where You Can Find More Information	71
Disclosure of Commission Position on Indemnification for Securities Act Liabilities	72
Index to Financial Statements	F-1

ABOUT THIS PROSPECTUS

You should rely only on the information contained in this prospectus. We have not authorized anyone to provide you with any information or to make any representations about us, the securities or any matter discussed in this prospectus, other than the information and representations contained in this prospectus. If any other information or representation is given or made, such information or representation may not be relied upon as having been authorized by us.

The information contained in this prospectus is accurate only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of our common stock. Neither the delivery of this prospectus nor any distribution of securities in accordance with this prospectus shall, under any circumstances, imply that there has been no change in our affairs since the date of this prospectus. This prospectus will be updated and updated prospectuses made available for delivery to the extent required by the federal securities laws.

iii

PROSPECTUS SUMMARY

This summary highlights selected information appearing elsewhere in this prospectus. While this summary highlights what we consider to be the most important information about us, you should carefully read this prospectus and the registration statement of which this prospectus is a part in their entirety before investing in our securities, especially the risks of investing in our securities, which we discuss later in the section of this prospectus entitled “Risk Factors,” and our consolidated financial statements and related notes beginning on page F-1.

Unless otherwise specified or required by context, references to “we,” “our,” “us” and the “Company” refer collectively to China For-Gen Corp., a Delaware corporation (“China For-Gen”), and the subsidiaries of China For-Gen Corp., which are (i) Liaoning Shengsheng Biotechnological Co., Ltd., a PRC company formerly known as Anshan Xinfang Gardening Limited Company (“Liaoning Shengsheng” or the “WFOE”), which is wholly owned by China For-Gen, and (ii) Karamai Pusheng Forest and Wood Industry, LLC, a PRC limited liability company (“Pusheng”), which is wholly owned by Liaoning Shengsheng Biotechnological Co., Ltd. For convenience, certain amounts in Chinese Renminbi (“RMB”) have been converted to United States dollars at an exchange rate in effect at the date of the related financial statements. Assets and liabilities are translated at the exchange rate as of balance sheet date. Income and expenditures are translated at the average exchange rate of the period.

This prospectus assumes the over-allotment has not been exercised, unless otherwise indicated. Share numbers included herein reflect the 1:1.5 reverse stock split of all of the Company’s outstanding common stock, which occurred on May 12, 2010, unless otherwise indicated.

Our Company

China For-Gen is a Delaware corporation formed on February 26, 2008 solely for the purpose of acquiring all of the equity interests of Liaoning Shengsheng, a company incorporated in the People’s Republic of China (“China” or the “PRC”) on November 24, 2000. Since its inception, Liaoning Shengsheng has been an agricultural and forestry company engaged in the breeding, cloning and sale of plant seedlings and specialized transgenic plant seedlings, and the research and development of seedling breeding technologies.

The Company’s primary product is fast growing poplar saplings. These trees are grown in the far northwest regions of China, in Xinjiang province near the city of Karamai. The Company grows two distinct types of poplar saplings: Shengsheng No. 1 and Shengsheng No. 2. Each product is separated into 5 different subcategories (1-5 years old trees) according to their age. These varieties of poplar trees have been genetically modified for faster growth, pest resistance, low water requirements and high fiber strength. The poplar seedlings mature in 3-5 years instead of the normal maturation time of 13-15 years. The saplings are sold primarily to distributors who then resell our products to independent third parties for various uses, including re-forestation in Western China. As of December 31, 2009, our planted plantations under management consisted of approximately 8,300 mu in Xinjiang Province. Internally generated cash flow and the potential capital from this offering are expected to finance our entry into a more traditional lumber market . For its 2009 fiscal year, the Company’s two major clients were Karamai Teng Lin Farming Co., Ltd. and Liaoning Dongran Landscape Engineering Co., Ltd. (each of which are independent third party distributors), contributing 53.37% and 29.94%, respectively, of the Company’s 2009 revenues.

The Company is rapidly growing in the forestry/lumber industry. The majority of revenues currently come from the sale of poplar saplings. For the calendar year ended 2009 we generated $23,615,957 revenues and $12,795,675 net income versus 2008 revenues of $22,146,254 and net income of $6,688,771, respectively. For the six months ended June 30, 2010 we generated revenues of $16,243,275 and net income of $10,112,564 versus the first six months of 2009 $12,916,318 and $4,783,495, respectively.

Structure

In connection with the acquisition of the WFOE, certain officers and directors of Lioaning Shengsheng (the “Call Option Stockholders”) entered into a call option agreement (the “Call Option Agreement”) with Ms. Sherry Li (“Ms. Li”), then the sole officer, director and shareholder of China For-Gen, wherein Ms. Li agreed to transfer 12,000,000 shares of common stock to the Call Option Stockholders after our initial public offering. The call option may be exercised by the Call Option Stockholders for nominal consideration of $0.001 per share (the “Call Option”). The Call Option Agreement provides that Ms. Li may not dispose of any China For-Gen shares owned by her without the prior written consent of the Call Option Stockholders. The Call Option Agreement was amended and restated in its entirety on May 12, 2010 to comply with PRC laws, including, without limitation, laws with respect to acquisitions by foreign entities and ownership by PRC citizens in a foreign enterprise (the “Amended Call Option Agreement”). The percentage ownership of the Company to be granted to the Call Option Stockholders remains unchanged. Assuming the offering to which this prospectus relates is completed prior thereto, the Call Option Stockholders have indicated they intend to exercise their rights under the Amended Call Option Agreement with respect to 50% of the shares subject to the call option on or by December 31, 2010 and on or by December 31, 2011 with respect to the remaining 50%. Upon exercise of the Call Option, neither the ownership structure of the Company nor the number of shares of common stock outstanding is expected to change from the current structure as the shares underlying the Call Option are currently issued and outstanding and beneficially owned by the Call Option Stockholders. Please see the section titled “Security Ownership of Certain Beneficial Owners and Management” on page 59 for the percentage ownership of the common stock owned by the Call Option Stockholders.

Business Strategy

We plan to expand our business in the following ways:

Expand existing seedling operations – we plan to expand our existing poplar nursery to potentially increase sales to new and existing customers, while simultaneously expanding our geographic base of operations. Our goal is to increase our harvesting of poplar plant seedlings in greater numbers.

Increase Plantation in Xinjiang Province – since land costs are very low and water resource management has improved in the area, we believe we can become one of the leading tree planting companies and suppliers of genetically modified poplar seedlings in China. Further, we seek to enter into co-forestation agreements with local governments throughout Western and Northern China to cultivate, process and distribute timber resources. We can accelerate forestation utilizing our transgenic poplar seedling technology.

Acquisitions – should compliment our internal growth. Our primary acquisition strategy focuses on several entities in the Daxinganling Forest, as set forth elsewhere herein, which is located in the northern part of the Helongjiang Province . Acquisitions, including forestry rights, will allow us to expand into logging/timber sales, wood processing of medium-density fiberboard (“MDF”) and recycling and refurbishing of lumber.

Physical expansion – We also intend to construct a manufacturing facility capable of producing MDF and begin the manufacture and sale of MDF, although no material efforts in this regard have begun.

Historically, we have maintained a strong relationship with our local government and provincial government. We believe the relationship is strong and mutually beneficial. We believe this offering and the expansion and development of existing and new properties will only improve our relationship with the government.

Funds from this offering should accelerate our business strategy. We further anticipate that internally generated cash flow over the next 18 months will help complement and finance our growth plans. A more detailed description of our business and strategy is located in the “Description of Business” section.

Risks Associated With Our Business

Investing in our common stock involves a high degree of risk. Please see the section entitled “Risk Factors” starting on page 6 of this prospectus to read about risks that you should consider carefully before buying shares of our common stock.

Our Industry

The global forestry industry provides timber resources and processed wood products for numerous industries. The industry is generally divided into upstream and downstream activities. Upstream activities focus on forest resource management, including forest planning, planting, stand tending and/or management of the forest, as well as harvesting and transportation of logs. The wood-based downstream activities consist of processing of logs into products such as sawn timber, plywood, reconstituted panel products, pulp and paper, as well as further value-added processing activities, including production of housing and building materials, including flooring and furniture.

The State Forestry Administration, or the SFA, is the state bureau in charge of the national forestry industry in the PRC. Its principal functions include the formulation of policies and regulations for the national forestry industry, forest management and forestry resources protection and the supervision of their implementation. Under the PRC Forest Law, the PRC strictly implements a quota system for the logging of forest wood. The forestry bureaus at the provincial level are responsible for compiling annual logging quotas. The annual quota is reviewed by the local government at the same level and is submitted to the PRC State Council for approval. Domestic log supply is ultimately determined by the planted area and standing volume of resources inside the PRC.

Our Competitive Strengths

The Chinese forestry industry is highly competitive and possesses high barriers to entry. While we believe there are approximately five enterprises in the PRC that have fast-growing poplar seedling capacity of over 10 million seedlings, we do not believe these are their main products. Our business model relies on the fact that seedlings for large-scale forestation projects (more than 10,000 mu) can be bred in a relatively short period of time. Although we are not the only company that can produce fast-growing poplar seedlings on a large-scale using tissue culture technology, we believe there are only a few that have been successful in securing contracts for forestation projects of more than 10,000 mu.

In our opinion, we have a built-in competitive advantage due to the genetic make-up of our fast-growing poplar seedlings. The seedling technology will allow us to come one step closer to becoming a vertically integrated operator in the forestry/lumber industry. The anticipated financing is expected to reflect the synergies of our expanded business model and operational goals.

Company Information

Our executive offices are located at Tengao District, Haicheng City, Liaoning Province, P.R.China 114000 and our telephone number is 0412-2988160. The website of our primary operating subsidiary is http://www.biosheng.com. Information contained on or accessed through our website is not intended to constitute and shall not be deemed to constitute part of this prospectus.

THE OFFERING

Securities offered:		4,000,000 shares of common stock, with an over-allotment option for an additional 600,000 shares, plus an additional 8,068,698 shares to be registered by the selling stockholders listed herein.

Common stock outstanding before the offering:		13,854,281 shares

Common stock to be outstanding after the offering:		18,870,948 shares (1)

Offering price:		$[ ] per share

Use of proceeds:		We intend to use the net proceeds from the offering substantially as follows:

		· approximately $3.18 million to pay the remaining unpaid purchase price to the Shengsheng Shareholders who shall immediately transfer such amount to Liaoning Shengsheng for working capital purposes, which may include acquisitions in the ordinary course of business; and

		· approximately $5.03 million to expand and construct our Karamai MDF production facilities/capabilities; and

		· approximately $3-$5 million to pay the balance for the acquisition of Beijisong, with the final price to be determined by an appraisal of Beijisong to be conducted later in 2010 (as set forth herein). This estimate is based in part on our estimation that (i) Beijisong owns net assets worth not more than $6.6 million, (ii) we are only purchasing 80% of Beijisong, (iii) we have already paid $877,693 for such acquisition and (iv) we may also purchase additional raw materials owned by Beijisong; and

		· approximately $2.64 million to pay for the acquisition of Yuying (as set forth herein); and

		· approximately $1.5 million to be used as working capital for Beijisong and Yuying after their respective acquisitions; and

		· approximately $2.0 million for transaction expenses related to this offering; and

		· approximately $0.5 million for an escrow account to fund the initial expenses of being a public company; and

		· the remaining balance to expand our poplar seedling business and for working capital and general corporate purposes.

		The amount and timing of our actual expenditures will depend on numerous factors, including the status of our acquisition and development efforts, sales and marketing activities, and the amount of cash generated or used by our operations. We may find it necessary or advisable to use portions of the proceeds for other purposes, and we will have broad discretion in the application of the net proceeds. Additionally, we may choose to expand our current business through acquisition of complimentary businesses using cash or shares, as set forth herein. However, we have not entered into any negotiations, agreements or commitments with respect to any such acquisitions at this time. See the section of this prospectus entitled “Use of Proceeds” for more information on the use of proceeds.

Risk factors:		Investing in our securities involves a high degree of risk. As an investor you should be able to bear a complete loss of your investment. You should carefully consider the information set forth in the section of this prospectus entitled “Risk Factors.”

Listing		We intend to apply to have our common stock listed on the NYSE AMEX under the symbol CFG.

(1) The number of shares of common stock to be outstanding immediately after this offering is based on 13,854,281shares of common stock outstanding as of September 1, 2010 and includes 416,667 shares issuable upon cashless exercise of the warrants issued in our May 30, 2008 private placement, but excludes:

444,119 shares of our common stock issuable upon conversion of Series A Convertible Preferred Stock issued May 30, 2008; and

5,186,964 shares of common stock issuable upon the conversion of those certain Promissory Notes and warrants issued pursuant to the Note Purchase Agreement between us and certain investors dated February 12, 2010.

SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA

The following table is derived from and summarizes the relevant financial data for our business and should be read in conjunction with our audited financial statements and the related notes, which are included elsewhere in this prospectus and which account for the 1:1.5 reverse stock split of all of the Company’s outstanding common stock, which occurred on May 12, 2010.

	Year ended		Year ended		Six months ended			Six months ended
	December 31,		December 31,		June 30,			June 30,
	2009		2008		2010			2009

Sales revenues	$	23,615,957	$	22,146,254	$	16,243,275		$	12,916,318

Cost of goods sold	$	6,351,073	$	10,428,042	$	3,475,168		$	5,197,326

Gross profit	$	17,264,884	$	11,718,212	$	12,768,107		$	7,718,992

Operating expenses
Selling expense	$	3,561,550	$	4,206,849	$	1,722,143		$	2,562,200
General and administrative expenses	$	912,870	$	830,813	$	807,720		$	376,715
Total operating expenses	$	4,474,020	$	5,037,662	$	2,529,863		$	2,938,915

Net operating income	$	12,790,464	$	6,680,550	$	10,238,244		$	4,780,077

Other income (expense)
Interest income	$	5,211	$	8,221	$	4,090		$	3,649
Gain on change of fair value of derivative liabilities						80,918			-
Interest expense						(209,915	)		-
Other expense						(773	)		(231	)
Total other income (expense)	$	5,211	$	8,221	$	(125,680	)	$	3,418

Net income before taxes	$	12,796,075	$	6,688,771	$	10,112,564		$	4,783,495

Taxes	$	-	$	-	$	-		$	-

Net income	$	12,795,675	$	6,688,771	$	10,112,564		$	4,783,495

Foreign Currency Translation Adjustment	$	34,412	$	1,138,567	$	101,920		$	(33,422	)

Comprehensive Income	$	12,830,087	$	7,827,338	$	10,214,484		$	4,750,073

Balance Sheet Data (at end of Period)	December 31				June 30,
	2009		2008		2010
Cash	$	843,358	$	612,971	$	3,569,434
Total Current Assets	$	28,258,086	$	21,552,444	$	31,879,709
Total Assets	$	30,981,287	$	24,529,932	$	37,382,794
Total Liabilities	$	1,556,016	$	1,796,182	$	1,830,077
Total Stockholder's Equity	$	29,424,671	$	22,733,750	$	35,552,717
Total Liabilities & Shareholder's Equity	$	30,981,287	$	24,529,932	$	37,382,794

RISK FACTORS

An investment in our common stock involves a high degree of risk. You should carefully consider the risks described below and the other information contained in this prospectus before deciding to invest in our common stock. Our business, financial condition or results of operations could be materially adversely affected by any of these risks. The trading price of our securities could decline due to any of these risks, and you may lose all or part of your investment.

Risks Associated With Our Business

Our limited operating history may not serve as an adequate basis to judge our future prospects and results of operations.

We have only limited audited financial results on which you can evaluate us and our operations. We have operated our business in our current corporate structure only since April 2000 and are subject to, and may be unable to address, the risks typically encountered by companies operating in a rapidly evolving marketplace, including those risks relating to:

the failure to develop brand name recognition and reputation;

the failure to achieve market acceptance of our products;

an inability to grow and adapt our business and technology to evolving consumer demand.

If we are unable to address any or all of these or related risks, our business and results of operations may be materially and adversely affected.

Our operating results may fluctuate, which makes our results difficult to predict and could cause our results to fall short of expectations.

Our operating results may fluctuate as a result of a number of factors, many outside of our control. As a result, comparing our operating results on a period-to-period basis may not be meaningful, and you should not rely on our past results as an indication of our future performance. Our quarterly, year-to-date and annual expenses as a percentage of our revenues may differ significantly from our historical or projected rates. Because our business is changing and evolving, our historical operating results may not be useful to you in predicting our future operating results.

Our operating results in future quarters may fall below expectations. Any of these events could cause our stock price to fall. Each of the risk factors listed in this prospectus, as well as the following factors, may affect our operating results:

our ability to continue to develop fast growing poplar saplings;

the results of the implementation of our intended business plan;

the quality of our products;

our ability to generate revenue;

the amount and timing of operating costs and capital expenditures related to the maintenance and expansion of our businesses, operations and infrastructure;

our focus on long-term goals over short-term results; and

our ability to keep our facilities operational at a reasonable cost.

We are dependent on a single product for substantially all of our revenues.

Our revenues are substantially dependent on our fast growing poplar saplings, which account for 99% of our business revenue. These trees are grown in the far northwest regions of China, in Xinjiang province near the city of Karamai and we grow two distinct types of poplar saplings: Shengsheng No. 1 and Shengsheng No. 2. No assurances can be given that customers and potential customers will continue to seek our genetically modified poplar saplings. For example, other products may be introduced into the marketplace which our customers prefer or there may be other reasons, many of which are expected to be beyond our control, for a switch away from our products. In the event sales of our saplings decrease, our revenues, results of operations and future growth prospects can be expected to be materially harmed. Accordingly, unless and until we diversify and expand our product offerings, our future success will significantly depend upon our genetically modified poplar saplings.

Because of the capital-intensive nature of our business, we may have to incur additional indebtedness or issue new equity securities, and if we are not able to obtain additional capital our ability to operate or expand our business may be impaired and our results of operations could be adversely affected.

We require significant levels of capital to acquire additional forest area, to finance the development of our facilities and for the construction and acquisition of new facilities, and we therefore expect we will need additional capital, over and above what we raise in this offering, to fund our future growth. If cash from available sources is insufficient or unavailable due to restrictive credit markets, or if cash is used for unanticipated needs, we may require additional capital sooner than anticipated. Our ability to obtain additional capital on acceptable terms or at all is subject to a variety of uncertainties, including:

investors’ perceptions of, and demand for, companies in the Chinese timber industry;

investors’ perceptions of, and demand for, companies operating in China;

conditions of the U.S. and other capital markets in which we may seek to raise funds;

our future results of operations, financial condition and cash flows;

governmental regulation of foreign investment in China;

economic, political and other conditions in the United States, China, and other countries; and

governmental policies relating to foreign currency borrowings.

In the event we are required or choose to raise additional funds, we may be unable to do so on favorable terms or at all.

We may be required to pursue sources of additional capital through various means, including joint venture projects and debt or equity financings. There is no assurance we will be able to secure suitable financing in a timely fashion or at all. In addition, there is no assurance we will be able to obtain the capital we require by any other means. Future financings through equity investments are likely to be dilutive to our existing stockholders. Also, the terms of securities we may issue in future capital transactions may be more favorable for our new investors. Newly issued securities may include preferences, superior voting rights, the issuance of warrants or other derivative securities, and the issuances of incentive awards under equity employee incentive plans, which may have additional dilutive effects. Further, we may incur substantial costs in pursuing future capital and/or financing, including investment banking fees, legal fees, accounting fees, printing and distribution expenses and other costs. We may also be required to recognize non-cash expenses in connection with certain securities we may issue, such as convertible notes and warrants, which will adversely impact our financial condition.

If we cannot raise additional funds on favorable terms or at all, we may not be able to carry out all or parts of our strategy to maintain our growth and competitiveness or to fund our operations. If the amount of capital we are able to raise from financing activities, together with our revenues from operations, is not sufficient to satisfy our capital needs, even to the extent that we reduce our operations accordingly, we may be required to cease operations.

Our revenues are highly dependent on a limited number of customers and the loss of any one of our major customers could materially and adversely affect our growth and our revenues.

During the years ended December 31, 2009 and 2008, our two largest customers collectively accounted for 87% and 69%, respectively, of our accounts receivable and 81% and 94% of sales, respectively. As a result of our reliance on a limited number of customers, we may face pricing and other competitive pressures which may have a material adverse effect on our growth and our revenues. We do not have an exclusivity arrangement with any of our customers. In addition, there are a number of factors, other than our performance, that could cause the loss of a customer or a substantial reduction in revenue from any single customer and that may not be predictable. For example, the government could determine not to make utilization of forestry resources a high priority or may reduce the sale and license of forestry resources to private businesses. The loss of any one of our major customers can be expected to result in a decrease in our sales volume and could materially adversely affect our growth and our revenues. Moreover, the loss of any one of our major customers could require us to layoff employees, which in turn could make it more difficult for us to attract and retain professionals in the future, which could further materially adversely affect our growth and our revenues. If our customers seek to negotiate their agreements on terms less favorable to us and we accept such unfavorable terms, such unfavorable terms may have a material adverse effect on our business, financial condition and results of operations. Accordingly, unless and until we diversify and expand our customer base, our future success will significantly depend upon the timing and volume of business from our largest customers.

We do not have any current sales contracts with our customers.

All of our sales contracts are seasonal in nature and are generally valid for less than nine months. We customarily execute contracts in the late summer or early fall. Such contracts typically require performance by all parties not later than May, at which time the contracts terminate. Accordingly, as of the date hereof, we do not have sales contracts with any of our customers, and there is no assurance that our customers will enter into new agreements with us in the future. Failure to enter into any such contracts would significantly reduce our revenue.

We may not be able to attract and retain a sufficient number of clients to maintain or expand our business.

Our business depends on our ability to attract and retain clients, and we cannot assure you that our marketing efforts will lead to more companies purchasing our genetically modified saplings. In the event we are successful in acquiring additional forest area, in developing our timber processing operations or in our manufacturing of MDF, we will need to find substantial sources of revenue for each of these business operations as well. There are numerous factors that could lead to a decline in business or a failure to obtain clients for our expanded operations, including general economic conditions, market maturity or saturation, a decline in our ability to deliver quality products at a competitive price, direct and indirect competition and a decline in the demand for timber and manufactured wood products. Any decrease in our client base or any failure to attract clients to our new businesses may adversely impact our operating margins and future growth prospects.

If we do not continue to develop new products or if our products do not continue to appeal to the market, we may not remain competitive, and our revenues and operating results could suffer.

The genetically modified saplings that we offer are subject to changing customer demands. Our future operational and financial performance depends on our ability to develop and market new services and products and to enhance our existing services and products, each on a timely basis to respond to new and evolving customer demands, to achieve market acceptance and keep pace with new developments. We may be unable to develop, introduce on a timely basis (or at all) or market any new or enhanced services or products, and we cannot assure you that any new or enhanced services or products will appeal to the market. Our failure to develop new services and products and to enhance our existing services and products or the failure of our services and products to continue to appeal to the market could have an adverse impact on our business, financial condition, results of operations and future operating prospects.

We may be unable to make acquisitions or enter into joint ventures, which could impair our growth prospects, and we may be unable integrate, operate or realize the anticipated benefits of such businesses.

As part of our growth strategy, we intend to pursue selected acquisitions or joint ventures. We cannot assure you we will be able to effect these transactions on commercially reasonable terms, or at all. Any future acquisitions or joint ventures may require access to additional capital, and we cannot assure you we will have access to such capital on commercially reasonable terms, or at all. Even if we enter into these transactions, we may not realize the benefits we anticipate or we may experience difficulties in integrating any acquired companies and products into our existing business; attrition of key personnel from acquired businesses; significant charges or expenses; higher costs of integration than we anticipate; or unforeseen operating difficulties that require significant financial and managerial resources that would otherwise be available for the ongoing development or expansion of our existing operations.

Consummating these transactions could also result in the incurrence of additional debt and related interest expense, as well as unforeseen contingent liabilities, all of which could have a material adverse effect on our business, financial condition or results of operations. We may also issue additional equity in connection with these transactions, which would dilute our existing stockholders.

We face competition from other research and development companies and timber processing companies which could erode our market share, brand recognition and profitability.

We face formidable competition in every aspect of our business, and particularly from other timber processors and wood products manufacturers. Our competitors may be better capitalized, have more experience and have more established or deeper relationships with relevant government authorities, vendors, suppliers, distributors or customers than us. Our competitors may make acquisitions or invest more aggressively in marketing or product development. We cannot assure you our competitors will not attempt to copy our business model, or portions thereof, and that this will not erode our market share and brand recognition, and impair our growth rate and profitability. If our competitors are able to provide similar or better services and products than ours, we could experience a significant decline in revenue. Any such decline could negatively affect our profitability and future growth prospects.

Third parties may infringe on our brand and other intellectual property rights, and we may be unable to protect ourselves against such infringement for competitive and legal reasons, any of which could have a material adverse impact on our business.

We do not currently hold any registered trademarks or patents for our products, names or symbols. Moreover, intellectual property rights and related laws in China are still developing, and there are uncertainties involved in the protection and the enforcement of such rights. There is a risk that third parties may infringe on, misappropriate or misuse our brand and other intellectual property rights. If we are unable to protect or enforce our intellectual property rights, the value of our brand, services and products could be diminished and our business may suffer. Our precautions may not prevent misappropriation of our intellectual property. Any legal action that we may bring to protect our brand and other intellectual property may not achieve the desired results, may be very expensive and could divert management’s attention from other business concerns.

Our failure to protect our intellectual property rights under applicable law could lead to the loss of a competitive advantage that could not be compensated by our damages award.

We may be sued by third parties who claim that our products, and formulations, methods of manufacture or methods of use infringe on their intellectual property rights.

We may be exposed to future litigation by third parties based on claims that our technologies, processes, formulations, methods or products infringe the intellectual property rights of others or that we have misappropriated the trade secrets of others. Any litigation or claims against us, whether or not valid, would result in substantial costs, could place a significant strain on our financial and human resources and could harm our reputation. Such a situation may force us to do one or more of the following:

incur significant costs in legal expenses for defending against an intellectual property infringement suit;

cease selling, making, importing, incorporating or using one or more or all of our technologies and/or formulations or products that incorporate the challenged intellectual property, which would adversely affect our revenue;

obtain a license from the holder of the infringed intellectual property right, which license may be costly or may not be available on reasonable terms, if at all; or

redesign our formulations or products, which would be costly and time-consuming.

Moreover, the possibility exists that a patent could be issued that would cover one or more of our products, requiring us to defend a patent infringement suit or necessitating a patent validity challenge that would be costly, time consuming and possibly unsuccessful. If a lawsuit were to be filed against us for patent infringement, we would incur significant legal costs to defend ourselves.

If we fail to effectively manage our anticipated growth, our business and operating results could be adversely effected.

We intend to pursue a strategy of growth and expansion that is expected to place strain on our management personnel, systems and resources. To accommodate our intended growth, we anticipate that we will need to implement a variety of new and upgraded research and development, manufacturing and processing and other operational facilities, as well as financial systems, procedures and controls and the improvement of our accounting and other internal management systems, all of which require substantial management efforts and financial resources. We will also need to continue to expand, train, manage and motivate our workforce, and develop and manage our relationships with our existing and target client base. All of these endeavors will require substantial management effort and skills, and the incurrence of additional expenditures. We cannot assure you we will be able to efficiently or effectively implement our growth strategies and manage the growth of our operations, and any failure to do so may limit our future growth and hamper our business strategy.

We depend on key personnel and our business may be severely disrupted if we lose the services of our key executives and employees.

Our future prospects are heavily dependent upon the continued service of our key executives, particularly Mr. Baoquan Wang, our President and Chairman, and a major shareholder of our company. We rely on his expertise in our business operations, and on the personal relationships he has with the relevant regulatory authorities, customers and suppliers. On January 1, 2010 we renewed employment agreements with our key officers through December 31, 2012, but we have not entered into non-competition or non-solicitation agreements with our officers. If one or more of our key executives and employees are unable or unwilling to continue in their present positions, we may not be able to replace them easily and our business may be severely disrupted. In addition, if any of our key executives or employees joins a competitor or forms a competing company, we may lose customers and suppliers and incur additional expenses to recruit and train personnel. Further, we do not maintain key-man life insurance for any of our key executives.

We rely on highly skilled personnel and if we are unable to retain or motivate key personnel or hire qualified personnel, we may not be able to grow effectively.

Our performance largely depends on the talents and efforts of highly skilled individuals. Our continued ability to compete effectively depends on our ability to attract, retain and motivate our existing personnel. The market for highly skilled personnel is highly competitive as a result of the limited availability of such personnel. The inability to hire or retain such qualified personnel may hinder our ability to implement our business strategy and may harm our business.

We rely on third party service or product providers and research partners and the failure of these third parties to deliver high level of service and support required in our business or the loss of a relationship with them will adversely impact our business and future operating prospects.

Our ability to increase sales, retain current and future memberships and strengthen our brand will depend in part upon our relationships with third parties, including the various government agencies that purchase our services. The termination of these relationships could lead to the loss of a competitive advantage or even the loss of customers and revenue. Moreover, if such third parties are unable to satisfy their commitments to us, our business would also be adversely affected. Additionally, due to our association with such third parties, poor performance by our strategic partners outside of their relationship with us, a decline in the quality of the products supplied by them or deterioration of their reputation or other negative publicity about them could adversely impact our reputation and business performance.

Because we may not be able to obtain business insurance in the PRC, we may not be protected from risks that are customarily covered by insurance in the United States.

Business insurance is not readily available in the PRC and we may suffer a loss of a type which would normally be covered by insurance in the United States, such as business interruption insurance and third party liability insurance to cover claims related to personal injury, or property damage arising from accidents during our operations. We would incur significant expenses in both defending any action and in paying any claims that result from a settlement or judgment. We have not obtained fire or casualty insurance, and there is no insurance coverage for our equipment, furniture and buildings in China. Any losses incurred by us will have to be borne by us without any assistance, and we may not have sufficient capital to cover material damage to, or the loss of, our facility due to fire, severe weather, flood or other cause, and such damage or loss would have a material adverse effect on our financial condition, business and prospects.

We could be subject to claims related to health or safety risks.

Our timber harvesting, processing and manufacturing business, if and when entered into, may pose potential health or safety risks to our employees and there is a risk that claims will be asserted against us for injury or death. Personal injury claims and lawsuits can result in significant legal defense costs, settlement amounts and awards, and could have an adverse effect on our business, financial condition and result of operations or cash flow. In addition to the risks of liability exposure and increased costs of defense, claims may produce publicity that could hurt our reputation and business.

If we fail to establish and maintain an effective system of internal controls, we may not be able to report our financial results accurately or to prevent fraud. Any inability to report and file our financial results accurately and timely could harm our business and adversely impact the trading price of our common stock.

We are required to establish and maintain internal controls over financial reporting, disclosure controls, and to comply with other requirements of the Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”) and the rules promulgated by the SEC thereunder. Our management, including our Chief Executive Officer and Chief Financial Officer, cannot guarantee that our internal controls and disclosure controls will prevent all possible errors or 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. In addition, the design of a control system must reflect the fact that there are resource constraints and the benefit of controls must be relative to their costs. Because of the inherent limitations in all control systems, no system of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our 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. Further, controls can be circumvented by individual acts of some persons, by collusion of two or more persons, or by management override of the controls. 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. Over time, a control may become inadequate because of changes in conditions or the degree of compliance with policies or procedures may deteriorate. Because of inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and may not be detected.

As of June 30, 2010, our management has not conducted a comprehensive review to determine whether our internal control over financial reporting has significant deficiencies. However, we lack sufficient personnel with the appropriate level of knowledge, experience and training in the application of US generally accepted accounting principles (“GAAP”) standards, especially related to complicated accounting issues. This could cause us to be unable to fully identify and resolve certain accounting and disclosure issues that could lead to a failure to maintain effective controls over preparation, review and approval of certain significant account reconciliation from Chinese GAAP to US GAAP and necessary journal entries. We have a relatively complicated corporate structure, which consists of multiple facilities and subsidiaries. The relatively small number of professionals we employ in our bookkeeping and accounting functions prevents us from appropriate segregating duties within our internal control system. The inadequate segregation of duties is a weakness because it could lead to the untimely identification and resolution of accounting and disclosure matters or could lead to a failure to perform timely and effective reviews.

To date, we have not determined whether our internal controls over financial reporting are sufficient, nor have we undertaken any remedial steps to remedy the deficiencies set forth above. In the event our review demonstrates further internal control deficiencies, any remedial measures we undertake may be insufficient to address our material weaknesses, and there can be no assurance that significant deficiencies or material weaknesses in our internal controls over financial reporting will not be identified or occur in the future. If additional material weaknesses or significant deficiencies in our internal controls are discovered or occur in the future, we may fail to meet our future reporting obligations on a timely basis, our consolidated financial statements may contain material misstatements, we may be required to again restate our prior period financial results, we may be subject to litigation and/or regulatory proceedings, and our business and operating results may be harmed.

The legal requirements associated with being a public company, including those contained in and issued under the Sarbanes-Oxley Act, may make it difficult for us to retain or attract qualified officers and directors, which could adversely affect the management of our business and our ability to obtain or retain listing of our common stock.

We may be unable to attract and retain qualified officers, directors and members of our board of directors and committees required to provide for our effective management because of the rules and regulations that govern publicly held companies, including, but not limited to, certifications by principal executive officers. The actual and perceived personal risks associated with compliance with the Sarbanes-Oxley Act and other public company requirements may deter qualified individuals from accepting roles as directors and executive officers. Further, the requirements for board or committee membership, particularly with respect to an individual’s independence and level of experience in finance and accounting matters, may make it difficult to attract and retain qualified board members. If we are unable to attract and retain qualified officers and directors, the management of our business and our ability to obtain or retain the listing of our common stock on any stock exchange (assuming we are able to obtain such listing) could be adversely affected.

Our business will suffer if we cannot obtain, maintain or renew necessary permits or licenses.

All PRC enterprises in the timber industry are required to obtain from various PRC governmental authorities certain permits and licenses, including, without limitation, a License of Forest Seed Distribution, a License of Forest Seed Production and an Urban Landscaping Enterprise Qualification Certificate. We have obtained permits and licenses required for Forest Seed Distribution and Production and Urban Landscaping. Failure to obtain all necessary approvals/permits may subject us to various penalties, such as fines or being required to vacate from the facilities where we currently operate our business or even cease operations.

These permits and licenses are subject to periodic renewal and/or reassessment by the relevant PRC government authorities and the standards of compliance required in relation thereto may from time to time be subject to change. We intend to apply for renewal and/or reassessment of such permits and licenses when required by applicable laws and regulations; however, we cannot assure you we can obtain, maintain or renew the permits and licenses or accomplish the reassessment of such permits and licenses in a timely manner. Any changes in compliance standards, or any new laws or regulations that may prohibit or render it more restrictive for us to conduct our business or increase our compliance costs may adversely affect our operations or profitability. Any failure by us to obtain, maintain or renew the licenses, permits and approvals, may have a material adverse effect on the operation of our business. In addition, we may not be able to carry on business without such permits and licenses being renewed and/or reassessed.

There are unique risks in the MDF industry that we may not face in the seedling and harvesting industries.

In addition to investing in the construction of manufacturing facilities, there are also other investments related to land acquisition, environmental impact assessment, infrastructure construction, transportation, product and environmental testing and quality assurance, among others. Accordingly, entering the MDF processing industry involves financial risks and unique obstacles than the other industries in which we are already active, i.e. the forestry and seedling industries.

Risks Relating to the Our Corporate Structure

Our corporate structure is subject to significant risks, as set forth in the following risk factors.

We are a holding company that depends on cash flow from its subsidiaries to meet our obligations.

We are a holding company with no material assets other than the stock of Liaoning Shengsheng, which conducts all our operations. We currently expect that the earnings and cash flow of Liaoning Shengsheng will primarily be retained and used for their continued business operations.

Our controlling shareholder has potential conflicts of interest with our company which may adversely affect our business.

Mr. Baoquan Wang is our primary controlling shareholder as well as our chairman and president. Given his significant interest in our company, there is a risk that when conflicts of interest arise, Mr. Wang will not act completely in the best interests of our stockholders (as opposed to his personal interest) or that conflicts of interests will be resolved in our favor.

Additionally, in the event you believe your rights have been infringed under the securities laws or otherwise as a result of any one of the circumstances described above, it may be difficult or impossible for you to bring an action against us or our officers or directors who reside within China. Even if you are successful in bringing an action, the laws of the PRC may render you unable to enforce a judgment against our assets and management, all of which are located in China.

Risks Associated With Doing Business in China

Our operations and assets in China are subject to significant political and economic uncertainties over which we have little or no control, and we may be unable to alter our business practice in time to avoid the possibility of reduced revenues.

Doing business outside the United States, particularly in China, subjects us to various risks including changing economic and political conditions, major work stoppages, exchange controls, currency fluctuations, armed conflicts and unexpected changes in United States and foreign laws relating to tariffs, trade restrictions, transportation regulations, foreign investments and taxation. Changes in the PRC laws and regulations, or their interpretation, or the imposition of confiscatory taxation, restrictions on currency conversion, imports and sources of supply, devaluations of currency or the nationalization or other expropriation of private enterprises could have a material adverse effect on our business, results of operations and financial condition. Under its current leadership, the Chinese government has been pursuing economic reform policies that encourage private economic activities and greater economic decentralization. There is no assurance, however, that the Chinese government will continue to pursue these policies, or that it will not significantly alter these policies from time to time without notice. We have no control over most of these risks and may be unable to anticipate changes in international economic and political conditions. Therefore, we may be unable to alter our business practice in time to avoid the possibility of reduced revenues.

We derive all of our sales in China and a slowdown or other adverse developments in the PRC economy may materially and adversely affect our business.

All of our assets are located in China and all of our revenue is derived from our operations in China. We anticipate that our revenues generated in China will continue to represent all of our revenues in the near future, including upon the expansion of our business. Accordingly, our results of operations and prospects are subject, to a significant extent, on the economic, political and legal developments in China. We are therefore subject to the risks associated with an economic slowdown or other adverse developments in the PRC. Moreover, the industry in which we are involved in the PRC is growing and transitioning from government-owned to privately owned so we cannot be sure of the laws, rules, regulations, policies and processes the various PRC government entities may impose as our industry evolves. In addition, the Chinese government also exercises significant control over Chinese economic growth through the allocation of resources, controlling payment of foreign currency-denominated obligations, setting monetary policy and providing preferential treatment to particular industries or companies. Efforts by the Chinese government to slow the pace of growth of the Chinese economy could result in reduced demand for our services and products. A slowdown in overall economic growth, an economic downturn or recession or other adverse economic developments in the PRC may materially reduce the demand for our products or otherwise materially and adversely affect our business, results of operations and future growth prospects.

The Chinese government exerts substantial influence over the manner in which we must conduct our business activities.

We are dependent on our relationship with the local governments in the provinces in which we operate our business. The Chinese government has exercised and continues to exercise substantial control over virtually every sector of the Chinese economy through regulation and state ownership. Our ability to operate in China may be harmed by changes in its laws and regulations, including those relating to taxation, environmental regulations, land use rights, property and other matters. The central or local governments of the various PRC jurisdictions may impose new, stricter regulations or interpretations of existing regulations that would require additional expenditures and efforts on our part to ensure our compliance with such regulations or interpretations. Accordingly, government actions in the future, including any decision not to continue to support recent economic reforms and to return to a more centrally planned economy or regional or local variations in the implementation of economic policies, could have a significant effect on economic conditions in China or particular regions thereof, and could require us to divest ourselves of any interest we then hold in Chinese properties.

If relations between the United States and China worsen, investors may be unwilling to hold or buy our stock and our stock price may decrease.

At various times during recent years, the United States and China have had significant disagreements over political and economic issues. Controversies may arise in the future between these two countries. Any political or trade controversies between the United States and China, whether or not directly related to our business, could reduce the price of our common stock.

Inflation in China may inhibit our ability to conduct business in China.

In recent years, the Chinese economy has experienced periods of rapid expansion and high rates of inflation. Rapid economic growth can lead to growth in the money supply and rising inflation. If prices for our services and products rise at a rate that is insufficient to compensate for the rise in the costs of supplies, it may have an adverse effect on profitability. These factors have led to the adoption by the Chinese government, from time to time, of various corrective measures designed to restrict the availability of credit or regulate growth and contain inflation. High inflation may in the future cause the Chinese government to impose controls on credit and/or prices, or to take other action, which could inhibit economic activity in China, and thereby harm the market for our services and products.

Currency fluctuations and restrictions on currency exchange may adversely affect our business, including limiting our ability to convert Chinese Renminbi into foreign currencies and, if Chinese Renminbi were to decline in value, reducing our revenue in U.S. dollar terms.

Our reporting currency is the U.S. dollar and our operations in China use their local currency as their functional currencies. Substantially all of our revenue and expenses are in Chinese Renminbi. We are subject to the effects of exchange rate fluctuations with respect to these currencies. For example, the value of the Renminbi depends to a large extent on Chinese government policies and China’s domestic and international economic and political developments, as well as supply and demand in the local market. Since 1994, the official exchange rate for the conversion of Renminbi to the U.S. dollar had generally been stable and the Renminbi had appreciated slightly against the U.S. dollar. However, on July 21, 2005, the Chinese government changed its policy of pegging the value of Chinese Renminbi to the U.S. dollar. Under the new policy, Chinese Renminbi may fluctuate within a narrow and managed band against a basket of certain foreign currencies. It is possible that the Chinese government could adopt a more flexible currency policy, which could result in more significant fluctuation of Chinese Renminbi against the U.S. dollar. We can offer no assurance that Chinese Renminbi will be stable against the U.S. dollar or any other foreign currency.

Our financial statements are translated into U.S. dollars at the average exchange rates in each applicable period. To the extent the U.S. dollar strengthens against foreign currencies, the translation of these foreign currency denominated transactions results in reduced revenue, operating expenses and net income for our international operations. Similarly, to the extent the U.S. dollar weakens against foreign currencies, the translation of these foreign currency denominated transactions results in increased revenue, operating expenses and net income for our international operations. We are also exposed to foreign exchange rate fluctuations as we convert the financial statements of our foreign consolidated subsidiaries into U.S. dollars in consolidation. If there is a change in foreign currency exchange rates, the conversion of the foreign consolidated subsidiaries’ financial statements into U.S. dollars will lead to a translation gain or loss which is recorded as a component of other comprehensive income. Changes in the functional currency value of these assets and liabilities create fluctuations that will lead to a transaction gain or loss. We have not entered into agreements or purchased instruments to hedge our exchange rate risks, which could leave us exposed to the potential adverse effects of currency fluctuations. Moreover, the availability and effectiveness of any hedging transaction, should such transactions be available to us on reasonable terms and should we choose to engage in such transactions (of which no assurances can be given), may be limited and we may not be able to hedge our exchange rate risks.

The State Administration of Foreign Exchange (“SAFE”) restrictions on currency exchange may limit our ability to receive and use our sales revenue effectively and to pay dividends.

All of our sales revenue and expenses are denominated in Chinese Renminbi. Under PRC law, the Renminbi is currently convertible under the “current account,” which includes trade and service-related foreign exchange transactions and dividends, but not under the “capital account,” which includes foreign direct investments and loans. Currently, our PRC operating subsidiaries may purchase foreign currencies for settlement of current account transactions, including for payment of dividends to us, without the approval of SAFE, by complying with certain procedural requirements. However, the relevant PRC government authorities may limit or eliminate our ability to purchase foreign currencies in the future. Since a significant amount of our future revenue will be denominated in Renminbi, any existing and future restrictions on currency exchange may limit our ability to pay dividends or utilize revenue generated in Renminbi to fund any business activities outside China that are denominated in foreign currencies.

Foreign exchange transactions by PRC operating subsidiaries under the capital account continue to be subject to significant foreign exchange controls and require the approval of or need to register with PRC government authorities, including SAFE. These limitations could affect our PRC operating subsidiaries’ ability to obtain foreign exchange through debt or equity financing. If the foreign exchange control system prevents us from obtaining foreign currency, we may be unable to pay the interest and principal on any debentures we may issue, pay dividends on our equity or meet obligations that may be incurred in the future that require payment in foreign currency.

The PRC government also may at its discretion restrict access in the future to foreign currencies for current account transactions.

Because our principal assets are located outside of the United States and a majority of our directors and our officers will reside outside of the United States, it may be difficult for you to enforce your rights based on the United States federal securities laws against us and our officers and directors in the United States or to enforce judgments of United States courts against us or them in the PRC.

All of our officers and directors reside outside of the United States. In addition, our operating subsidiaries are located in the PRC and all of their assets are located outside of the United States. China does not have a treaty with United States providing for the reciprocal recognition and enforcement of judgments of courts. It may therefore be difficult for investors in the United States to enforce their legal rights based on the civil liability provisions of the United States federal securities laws against us in the courts of either the United States or the PRC, and even if civil judgments are obtained in courts of the United States, to enforce such judgments in the PRC courts. Further, it is unclear if extradition treaties now in effect between the United States and the PRC would permit effective enforcement of criminal penalties against us or our officers and directors under the United States federal securities laws or otherwise.

Because the assets of our wholly-owned subsidiaries are located overseas, stockholders may not receive distributions that they would otherwise be entitled to if we were declared bankrupt or insolvent.

Because all of the assets of our wholly-owned subsidiaries are located in the PRC, they may be outside of the jurisdiction of U.S. courts to administer if we are the subject of an insolvency or bankruptcy proceeding. As a result, our stockholders may not receive distributions on liquidation under U.S. Bankruptcy laws that they would otherwise be entitled to if our assets were located within the U.S.

The PRC legal system contains uncertainties which could limit the legal protections available to us and you, or could lead to penalties on us.

The PRC legal system is a civil law system based on written statutes. Unlike common law systems, it is a system in which decided legal cases have little precedential value. In 1979, the PRC government began to promulgate a comprehensive system of laws and regulations governing economic matters in general. Our PRC operating subsidiaries are subject to laws and regulations applicable to foreign investment in China. In addition, all of our subsidiaries are incorporated in China and subject to all applicable Chinese laws and regulations. Because of the relatively short period for enacting such a comprehensive legal system, it is possible that the laws, regulations and legal requirements are relatively recent, and their interpretation and enforcement involve uncertainties. These uncertainties could limit the legal protections available to us and other foreign investors, including you, and may lead to penalties imposed on us because of the different understanding between the relevant authority and us. In addition, we cannot predict the effect of future developments in the PRC legal system, including the promulgation of new laws, changes to existing laws or the interpretation or enforcement thereof, or the preemption of local regulations by national laws.

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

The Chinese government has enacted significant laws and regulations dealing with matters such as corporate organization and governance, foreign investment, commerce, taxation and trade. However, their experience in implementing, interpreting and enforcing these laws and regulations is limited, and our ability to enforce commercial claims or to resolve commercial disputes is unpredictable. If our new business ventures are unsuccessful, or other adverse circumstances arise from these transactions, we face the risk that the parties to these ventures may seek ways to terminate the transactions, or may hinder or prevent us from accessing important information regarding the financial and business operations of these acquired companies. The resolution of these matters may be subject to the exercise of considerable discretion by agencies of the Chinese government, and forces unrelated to the legal merits of a particular matter or dispute may influence their determination. Any rights we may have to specific performance, or to seek an injunction under the PRC laws, in either of these cases, are severely limited, and without a means of recourse by virtue of the Chinese legal system, we may be unable to prevent these situations from occurring. The occurrence of any such events could have a material adverse effect on our business, financial condition and results of operations. Although legislation in China over the past 30 years has significantly improved the protection afforded to various forms of foreign investment and contractual arrangements in China, these laws, regulations and legal requirements are relatively new and their interpretation and enforcement involve uncertainties, which could limit the legal protection available to us, and foreign investors, including you. The inability to enforce or obtain a remedy under any of our future agreements could result in a significant loss of business, business opportunities or capital and could have a material adverse impact on our operations.

PRC regulations relating to acquisitions of PRC companies by foreign entities may create regulatory uncertainties that could restrict or limit our ability to operate.

In November 2005, SAFE issued a public notice, known as Circular 75, concerning the use of offshore holding companies in mergers and acquisitions in China. The public notice provides that if an offshore company controlled by PRC residents intends to acquire a PRC company, such acquisition will be subject to registration with the relevant foreign exchange authorities. The public notice also suggests that registration with the relevant foreign exchange authorities is required for any sale or transfer by the PRC residents of shares in an offshore holding company that owns an onshore company. The PRC residents must each submit a registration form to the local SAFE branch with respect to their ownership interests in the offshore company, and must also file an amendment to such registration if the offshore company experiences material events, such as changes in the share capital, share transfer, mergers and acquisitions, spin-off transactions or use of assets in China to guarantee offshore obligations.

Our current PRC beneficial owners may fall within the ambit of Circular 75 and be required to register with the local SAFE branch as required under Circular 75. If so required, and if such PRC beneficial owners fail to timely register their SAFE registrations pursuant to the Circular 75, or if future shareholders and/or beneficial owners of our company who are PRC residents fail to comply with the registration procedures set forth in the Circular 75, this may subject such shareholders, beneficial owners and/or our PRC subsidiaries to fines and legal sanctions and may also limit our ability to contribute additional capital (including using the proceeds from this offering) into our PRC subsidiaries, limit our PRC subsidiaries’ ability to distribute dividends to our company, or otherwise adversely affect our business.

On August 8, 2006, MOFCOM, joined by the State-owned Assets Supervision and Administration Commission of the State Council, the State Administration of Taxation, the State Administration for Industry and Commerce, the China Securities Regulatory Commission and SAFE, released a substantially amended version of the Provisions for Foreign Investors to Merge with or Acquire Domestic Enterprises (the “Revised M&A Regulations”), which took effect September 8, 2006. These new rules significantly revised China’s regulatory framework governing onshore-to-offshore restructurings and foreign acquisitions of domestic enterprises. These new rules signify greater PRC government attention to cross-border merger, acquisition and other investment activities, by confirming MOFCOM as a key regulator for issues related to mergers and acquisitions in China and requiring MOFCOM approval of a broad range of merger, acquisition and investment transactions. Further, the new rules establish reporting requirements for acquisition of control by foreigners of companies in key industries, and reinforce the ability of the Chinese government to monitor and prohibit foreign control transactions in key industries.

Among other things, the revised M&A Regulations include new provisions that purport to require that an offshore special purpose vehicle, or SPV, formed for listing purposes and controlled directly or indirectly by PRC companies or individuals must obtain the approval of the CSRC prior to the listing and trading of such SPV’s securities on an overseas stock exchange. On September 21, 2006, the CSRC published on its official website procedures specifying documents and materials required to be submitted to it by SPVs seeking CSRC approval of their overseas listings. However, the application of this PRC regulation remains unclear with no consensus currently existing among the leading PRC law firms regarding the scope and applicability of the CSRC approval requirement.

We were advised by our PRC counsel that our restructuring is not subject to CSRC approval. However, we cannot exclude the possibility that the CSRC or another PRC regulatory agency subsequently determines that CSRC approval was required for our restructuring. If the CSRC or another PRC regulatory agency subsequently determines that CSRC approval was required for our restructuring, we may face regulatory actions or other sanctions from the CSRC or other PRC regulatory agencies. These regulatory agencies may impose fines and penalties on our operations in the PRC, limit our operating privileges in the PRC, or take other actions that could have a material adverse effect on our business, financial condition, results of operations, reputation and prospects, as well as the trading price of our common stock.

If later the CSRC requires that we obtain its approval, we may be unable to obtain a waiver of the CSRC approval requirements, if and when procedures are established to obtain such a waiver. Any uncertainties and/or negative publicity regarding this CSRC approval requirement could have a material adverse effect on the trading price of our common stock. Furthermore, published news reports in China recently indicated that the CSRC may have curtailed or suspended overseas listings for Chinese private companies.

It is uncertain how our business operations or future strategy will be affected by the interpretations and implementation of Circular 75 and its internal implementing guidelines and the Revised M&A Regulations. It is anticipated that application of the new rules will be subject to significant administrative interpretation, and we will need to closely monitor how MOFCOM and other ministries apply the rules to ensure that our domestic and offshore activities continue to comply with PRC law. Given the uncertainties regarding interpretation and application of the new rules, we may need to expend significant time and resources to maintain compliance.

Our partial payment of the acquisition price paid for Liaoning Shengsheng creates regulatory restrictions that limit Liaoning Shengsheng’s ability to pay dividends to us and may result in other regulatory restrictions.

Generally there is no SAFE approval required prior to remitting dividends of a foreign invested enterprise. However, according to the Notice on Relevant Issues concerning Improving Foreign Direct Investment Foreign Exchange Administration by SAFE, effective as of April 1, 2003, before the acquisition price of an acquisition of a PRC company by a foreign investor has been paid off, any dividend remittance abroad by such PRC company may only be in proportion to the actual payments made by such foreign investor. Since we have only paid $1.28 million of $5.12 million consideration due to the Liaoning shareholders, Liaoning Shengsheng can only remit 25% of its dividends or profits to us until we have paid all the acquisition consideration. This restriction is not affected by the timing of the exercise of the call option granted from Sherry Li to the original Shengsheng shareholders pursuant to the Amended and Restated Call Option Agreement dated May 12, 2010.

Our labor costs are likely to increase as a result of changes in Chinese labor laws.

We expect to experience an increase in our cost of labor due to recent changes in Chinese labor laws which are likely to increase costs further and impose restrictions on our relationship with our employees. In June 2007, the National People’s Congress of the PRC enacted new labor law legislation called the Labor Contract Law and more strictly enforced existing labor laws. The new law, which became effective on January 1, 2008, amended and formalized workers’ rights concerning overtime hours, pensions, layoffs, employment contracts and the role of trade unions. In addition, under the new law, employees who either have worked for a company for 10 years or more or who have had two consecutive fixed-term contracts should be given an “open-ended employment contract” upon the request of such employee that, in effect, constitutes a long term contract which is only terminable under certain limited circumstances. Should we become subject to such open-ended employment contracts, our employment related risks could increase significantly and we may be limited in our ability to downsize our workforce in the event of an economic downturn. No assurance can be given that we will not in the future be subject to labor strikes or that it will not have to make other payments to resolve future labor issues caused by the new laws. Furthermore, there can be no assurance that the labor laws will not change further or that their interpretation and implementation will vary, which may have a negative effect upon our costs and results of operations.

We must comply with the Foreign Corrupt Practices Act.

We are required to comply with the United States Foreign Corrupt Practices Act, which prohibits U.S. companies from engaging in bribery or other prohibited payments to foreign officials for the purpose of obtaining or retaining business. Foreign companies, including some of our competitors, are not subject to these prohibitions. Corruption, extortion, bribery, pay-offs, theft and other fraudulent practices occur from time to time in China. If our competitors engage in these practices, they may receive preferential treatment or other advantage in securing business or from government officials who might give them priority in obtaining new licenses, which would put us at a disadvantage. Such disadvantage can be expected to have a material adverse impact on our business, growth prospects and results of operations. Although we inform our personnel that such practices are illegal, we do not yet have an official policy in place and, even once such a policy is implemented, we cannot assure you that our employees or other agents will not engage in such conduct for which we might be held responsible. If our employees or other agents are found to have engaged in such practices, we could suffer severe penalties, which could be expected to have a material adverse effect on our reputation, share price and future operating prospects.

If we make equity compensation grants to persons who are PRC citizens, they may be required to register with SAFE. We may also face regulatory uncertainties that could restrict our ability to adopt equity compensation plans for our directors and employees and other parties under PRC laws.

On April 6, 2007, SAFE issued the “Operating Procedures for Administration of Domestic Individuals Participating in the Employee Stock Ownership Plan or Stock Option Plan of An Overseas Listed Company, also know as “Circular 78.” It is not clear whether Circular 78 covers all forms of equity compensation plans or only those which provide for the granting of stock options. For any plans which are so covered and are adopted by a non-PRC listed company, such as our company, after April 6, 2007, Circular 78 requires all participants who are PRC citizens to register with and obtain approvals from SAFE prior to their participation in the plan. In addition, Circular 78 also requires PRC citizens to register with SAFE and make the necessary applications and filings if they participated in an overseas listed company’s covered equity compensation plan prior to April 6, 2007. We believe that the registration and approval requirements contemplated in Circular 78 will be burdensome and time consuming.

In the future, we may adopt an equity incentive plan and make numerous stock option grants under the plan to our officers, directors and employees, some of whom are PRC citizens and may be required to register with SAFE. If it is determined that any of our equity compensation plans are subject to Circular 78, failure to comply with such provisions may subject us and participants of our equity incentive plan who are PRC citizens to fines and legal sanctions and prevent us from being able to grant equity compensation to our PRC employees. In that case, our ability to compensate our employees and directors through equity compensation would be hindered and our business operations may be adversely affected.

Due to various restrictions under PRC laws on the distribution of dividends by our PRC operating companies, we may not be able to pay dividends to our shareholders.

The Wholly-Foreign Owned Enterprise Law (1986), as amended and the Wholly-Foreign Owned Enterprise Law Implementing Rules (1990), as amended and the Company Law of the PRC (2006) contain the principal regulations governing dividend distributions by wholly foreign owned enterprises. Under these regulations, wholly foreign owned enterprises (“WFOE”) may pay dividends only out of their accumulated profits, if any, determined in accordance with PRC accounting standards and regulations. Additionally, a WFOE is required to set aside a certain amount of their accumulated profits each year, if any, to fund certain reserve funds. These reserves are not distributable as cash dividends except in the event of liquidation and cannot be used for working capital purposes.

Furthermore, if our consolidated subsidiaries in China incur debt on their own in the future, the instruments governing the debt may restrict its ability to pay dividends or make other payments. If we or our consolidated subsidiaries are unable to receive all of the revenues from our operations due to these contractual or dividend arrangements, we may be unable to pay dividends on our common stock. In addition, under current PRC law, we must retain a reserve equal to 10 percent of net income after taxes each year, with the total amount of the reserve not to exceed 50 percent of registered capital. Accordingly, this reserve will not be available to be distributed as dividends to our shareholders. We presently do not intend to pay dividends in the foreseeable future. Our management intends to follow a policy of retaining all of our earnings to finance the development and execution of our strategy and the expansion of our business.

As all of our operations and personnel are in the PRC, we may have difficulty establishing adequate western style management, legal and financial controls.

The PRC historically has been deficient in western style management and financial reporting concepts and practices, as well as in modern banking, and other control systems. We may have difficulty in hiring and retaining a sufficient number of qualified employees to work in the PRC. As a result of these factors, and especially given that we expect to be a publicly listed company in U.S. and subject to regulation as such, we may experience difficulty in establishing management, legal and financial controls, collecting financial data and preparing financial statements, books of account and corporate records and instituting business practices that meet western standards. We may have difficulty establishing adequate management, legal and financial controls in the PRC. Therefore, we may, in turn, experience difficulties in implementing and maintaining adequate internal controls as required under Section 404 of the Sarbanes-Oxley Act and other applicable laws, rules and regulations. This may result in significant deficiencies or material weaknesses in our internal controls which could impact the reliability of our financial statements and prevent us from complying with SEC rules and regulations and the requirements of the Sarbanes-Oxley Act. Any such deficiencies, weaknesses or lack of compliance could have a materially adverse effect on our business and the public announcement of such deficiencies could adversely impact our stock price.

An outbreak of a pandemic avian influenza, SARS or other contagious disease may have an adverse effect on the Chinese economy which may adversely affect our results of operations.

During the past four years, large parts of Asia experienced unprecedented outbreaks of avian influenza. Currently, no fully effective avian flu vaccines have been developed and there is evidence that the H5N1 virus is evolving. An effective vaccine may not be discovered in time to protect China against an avian flu pandemic. Also, in the first half of 2003, certain countries in Asia experienced an outbreak of severe acute respiratory syndrome, or SARS, a highly contagious form of atypical pneumonia, which seriously interrupted the economic activities in the affected regions.

An outbreak or perceived outbreak of avian flu, SARS, swine flu or other contagious disease may seriously interrupt our operations, which may have a materially adverse effect on our financial results.

Our bank accounts are not insured or protected against loss.

We maintain our cash with various banks and trust companies located in China. Our cash accounts are not insured or otherwise protected. Should any bank or trust company holding our cash deposits become insolvent, or if we are otherwise unable to withdraw funds, we would lose the cash on deposit with that particular bank or trust company.

Under the PRC EIT Law, we may be classified as a “resident enterprise” of the PRC. Such classification could result in PRC tax consequences to us and our non-PRC resident enterprise shareholders.

On March 16, 2007, the National People’s Congress approved and promulgated a new tax law, the PRC Enterprise Income Tax Law, or “EIT Law,” which took effect on January 1, 2008. Under the EIT Law, enterprises are classified as resident enterprises and non-resident enterprises. An enterprise established outside of China with “de facto management bodies” within China is considered a “resident enterprise,” meaning that it can be treated in a manner similar to a Chinese enterprise for enterprise income tax purposes. The implementing rules of the EIT Law define “de facto management bodies” as a managing body that in practice exercises “substantial and overall management and control over the production and operations, personnel, accounting, and properties” of the enterprise; however, it remains unclear whether the PRC tax authorities would deem our managing body as being located within China. Due to the short history of the EIT Law and lack of applicable legal precedents, the PRC tax authorities determine the PRC tax resident treatment of a foreign (non-PRC) company on a case-by-case basis.

If the PRC tax authorities determine we are a “resident enterprise” for PRC enterprise income tax purposes, a number of PRC tax consequences could follow. First, we may be subject to the enterprise income tax at a rate of 25 percent on our worldwide taxable income, as well as PRC enterprise income tax reporting obligations. Second, under the EIT Law and its implementing rules, dividends paid between “qualified resident enterprises” are exempt from enterprise income tax. As a result, if we are treated as a “qualified resident enterprise,” all dividends that we receive from Liaoning Shengsheng (assuming such dividends are considered sourced within the PRC) should be exempt from PRC tax. If we are treated as a “non-resident enterprise” under the EIT Law, then dividends that we receive from Liaoning Shengsheng (assuming such dividends are considered sourced within the PRC) may be subject to a 10 percent PRC withholding tax. Any such tax on dividends could materially reduce the amount of dividends, if any, we could pay to our shareholders.

Finally, the new “resident enterprise” classification could result in a situation in which a 10 percent PRC tax is imposed on dividends we pay to our enterprise, but not individual, investors that are not tax residents of the PRC (“non-resident investors”) and gains derived by them from transferring our common stock, if such income is considered PRC-sourced income by the relevant PRC tax authorities. In such event, we may be required to withhold a 10 percent PRC tax on any dividends paid to our non-resident investors. Our non-resident investors also may be responsible for paying PRC tax at a rate of 10 percent on any gain realized from the sale or transfer of our common stock in certain circumstances. We would not, however, have an obligation to withhold PRC tax with respect to such gain under the PRC tax laws.

Moreover, the State Administration of Taxation (“SAT”) released Circular Guoshuihan No. 698 (“Circular 698”) on December 10, 2009 that reinforces the taxation of certain equity transfers by non-resident investors through overseas holding vehicles. Circular 698 addresses indirect equity transfers as well as other issues. Circular 698 is retroactively effective from January 1, 2008. According to Circular 698, where a non-resident investor who indirectly holds an equity interest in a PRC resident enterprise through a non-PRC offshore holding company indirectly transfers an equity interest in a PRC resident enterprise by selling an equity interest in the offshore holding company, and the latter is located in a country or jurisdiction where the actual tax burden is less than 12.5 percent or where the offshore income of its residents is not taxable, the non-resident investor is required to provide the PRC tax authority in charge of that PRC resident enterprise with certain relevant information within 30 days of the transfer. The tax authorities in charge will evaluate the offshore transaction for tax purposes. In the event that the tax authorities determine that such transfer is abusing forms of business organization and a reasonable commercial purpose for the offshore holding company other than the avoidance of PRC income tax liability is lacking, the PRC tax authorities will have the power to re-assess the nature of the equity transfer under the doctrine of substance over form. A reasonable commercial purpose may be established when the overall international (including U.S.) offshore structure is set up to comply with the requirements of supervising authorities of international (including U.S.) capital markets. If the SAT’s challenge of a transfer is successful, it may deny the existence of the offshore holding company that is used for tax planning purposes and subject the seller to PRC tax on the capital gain from such transfer. Since Circular 698 has a short history, there is uncertainty as to its application. We (or a non-resident investor) may become at risk of being taxed under Circular 698 and may be required to expend valuable resources to comply with Circular 698 or to establish that we (or such non-resident investor) should not be taxed under Circular 698, which could have a material adverse effect on our financial condition and results of operations (or such non-resident investor’s investment in us).

If any PRC tax applies to a non-resident investor, the non-resident investor may be entitled to a reduced rate of PRC tax under an applicable income tax treaty and/or a deduction for such PRC tax against such investor’s domestic taxable income or a foreign tax credit in respect of such PRC tax against such investor’s domestic income tax liability (subject to applicable conditions and limitations). Investors are urged to consult their own tax advisors regarding the applicability of any such taxes, the effects of any applicable income tax treaties, and any available deductions or foreign tax credits. For a further discussion of these issues, see the section of this prospectus captioned “Material PRC Income Tax Considerations,” below.

Risks Associated With Our Common Stock

Shares of our common stock lack a significant trading market.

We will seek to list our common stock on the NYSE AMEX under the symbol CFG. There can be no assurance that an active trading market in our common stock will develop, or if such a market develops, that it will be sustained. The price at which investors purchase shares of our common stock may not be indicative of the price that will prevail in the trading market. Investors may be unable to sell their shares of common stock at or above their purchase price, which may result in substantial losses.

The market price for our stock may be volatile.

The market price for our stock may be volatile and subject to wide fluctuations in response to factors including the following:

liquidity of the market for the shares;

actual or anticipated fluctuations in quarterly operating results;

Sales of substantial amounts of our common stock, or the perception such sales might occur;

changes in financial estimates by securities research analysts;

conditions in PRC and international timber and wood processing markets;

changes in the economic performance or market valuations of other companies in the industry;

announcements by us or our competitors of new products, acquisitions, strategic partnerships, joint ventures or capital commitments;

addition or departure of key personnel;

fluctuations of exchange rates between RMB and the U.S. dollar;

intellectual property litigation;

our dividend policy; and

general economic or political conditions in China.

In addition, the securities market has from time to time experienced significant price and volume fluctuations that are not related to the operating performance of particular companies. These market fluctuations may also materially and adversely affect the market price of our stock.

The future sale of a substantial amount of outstanding stock in the public marketplace could reduce the price of our common stock.

We cannot predict the effect, if any, that market sales of shares of our common stock or the availability of shares of common stock for sale will have on the market price prevailing from time to time. Sales of shares of our common stock in the public market covered under an effective registration statement, or the perception that those sales may occur, could cause the trading price of our common stock to decrease or to be lower than it might be in the absence of those sales or perceptions.

We may issue additional shares of our capital stock or debt securities to raise capital or complete acquisitions, which would reduce the equity interest of our stockholders .

Our certificate of incorporation authorizes the issuance of up to 50,000,000 shares of common stock, $.001 par value per share, and 2,000,000 shares of preferred stock, $.001 par value per share. There are currently 13,854,281 shares of our common stock, and 500,000 shares of our preferred stock, outstanding. An additional 5,797,751 shares of common stock are reserved for issuance upon the exercise of outstanding warrants, conversion of the Series A Convertible Preferred Stock and conversion of outstanding promissory notes. As a result, there are approximately 30,558,951 authorized and unissued shares of our common stock and 1,500,000 shares of our preferred stock which have not been reserved and are available for future issuance. Although we have no commitments as of the date of this offering to issue our securities other than as set forth herein, we may issue a substantial number of additional shares of our securities to complete a business combination or to raise capital. We registered many shares under the registration statement of which this prospectus is a part for the benefit of certain selling stockholders, many of which are shares of common stock underlying notes, preferred stock and warrants. Accordingly, such shares are not yet issued and outstanding, but the registration of such shares may make it more likely such securities will be converted or exercised (as applicable) and such additional shares of common stock issued to such investors. The issuance of additional shares of our securities may cause economic and percentage dilution to our stockholders and may adversely affect prevailing market prices for our common stock.

As of August 10, 2010, those investors who purchased convertible promissory notes and warrants in our February 2010 private placement exercised their right to purchase up to an additional $2,500,000 of notes on terms identical to those in the February 2010 offering. See “Description of Our Securities – February 2010 Private Placement” included herein for a complete description of the February 2010 Private Placement.

Further, we anticipate that we will require approximately $100 million to fund our 3-5 year growth strategy. We currently plan to raise a majority of such funds from the capital markets. If we raise these funds by issuing additional securities, the newly issued securities can be expected to result in substantial dilution of our stockholders.

Our management and directors own a significant amount of our common stock or options to purchase a significant amount of our common stock, giving them influence or control in corporate transactions and other matters, and their interests could differ from those of other stockholders.

As of the date of this prospectus, our management and directors as a group have the right to control 86.61% of our outstanding common stock. As a result, they are in a position to significantly influence the outcome of matters requiring a stockholder vote, including the election of directors, the adoption of any amendment to our articles of incorporation or bylaws, and the approval of significant corporate transactions. Their control may delay or prevent a change of control on terms favorable to our other stockholders and may adversely affect your voting and other stockholder rights.

Risks Related to an Investment in Our Securities

No cash dividends on our common stock are expected to be paid in the foreseeable future.

While we do pay dividends on our Series A Preferred Stock at a rate of 11% per annum, we do not anticipate paying cash dividends on our common stock in the foreseeable future and we may not have sufficient funds legally available to pay dividends in the event we choose to do so. Even if the funds are legally available for distribution, we may nevertheless decide not to pay any dividends. Furthermore, the terms of our Series A Preferred Stock prohibit the payment of dividends on our common stock while any Series A Preferred Stock is outstanding. We intend to retain all earnings for our operations. As a result, investors in our common stock should not rely on an investment in our securities if they require the investment to produce dividend income. Capital appreciation, if any, of our shares may be investors’ sole source of gain for the foreseeable future. Moreover, investors may not be able to resell their shares of the Company at or above the price they paid for them.

Volatility in our common share price may subject us to securities litigation.

The market for our common stock may be characterized by significant price volatility, and we expect that our share price will continue to be more volatile than a seasoned issuer for the indefinite future. In the past, plaintiffs have often initiated securities class action litigation against a company following periods of volatility in the market price of its securities. We may, in the future, be the target of similar litigation. Securities litigation could result in substantial costs and liabilities and could divert management's attention and resources.

Our common stock may be thinly traded and you may be unable to sell at or near ask prices or at all if you need to sell your shares to raise money or otherwise desire to liquidate your shares.

We intend to apply to have our common stock listed on the NYSE AMEX. Our common stock may be “thinly-traded”, meaning that the number of persons interested in purchasing our common stock at or near bid prices at any given time may be relatively small or non-existent. This situation may be attributable to a number of factors, including the fact that we are a small company which is relatively unknown to stock analysts, stock brokers, institutional investors and others in the investment community that generate or influence sales volume, and that even if we came to the attention of such persons, they tend to be risk-averse and might be reluctant to follow an unproven company such as ours or purchase or recommend the purchase of our shares until such time as we became more seasoned. As a consequence, there may be periods of several days or more when trading activity in our shares is minimal or non-existent, as compared to a seasoned issuer which has a large and steady volume of trading activity that will generally support continuous sales without an adverse effect on share price. We cannot give you any assurance that a broad or active public trading market for our common stock will develop or be sustained.

The elimination of liability of our directors, officers and employees under Delaware law and the existence of indemnification rights to our directors, officers and employees may result in substantial expenditures by our company and may discourage lawsuits against our directors, officers and employees.

Our certificate of incorporation contains provisions that eliminate the liability of our directors to our company and stockholders to the extent allowed under Delaware law, and we are prepared to give such indemnification to our directors and officers to the extent provided by Delaware law. The foregoing indemnification obligations could result in our company incurring substantial expenditures to cover the cost of settlement or damage awards against directors and officers, which we may be unable to recoup. These provisions and resultant costs may also discourage our company from bringing a lawsuit against directors and officers for breaches of their fiduciary duties, and may similarly discourage the filing of derivative litigation by our stockholders against our directors and officers even though such actions, if successful, might otherwise benefit our company and stockholders.

Shares eligible for future sale may adversely affect the market.

From time to time, certain of our stockholders may be eligible to sell all or some of their shares of common stock by means of ordinary brokerage transactions in the open market pursuant to Rule 144 of the Securities Act, subject to certain limitations. In general, pursuant to amended Rule 144, non-affiliate stockholders may sell freely after six months subject only to the current public information requirement (which disappears after one year). Affiliates may sell after six months subject to the Rule 144 volume, manner of sale (for equity securities), current public information and notice requirements. Any substantial sale of our common stock pursuant to Rule 144 or pursuant to any resale prospectus may have a material adverse effect on the market price of our common stock. In addition we are registering for resale 8,068,698 shares of common stock from our private placements on the Registration Statement relating to this prospectus. Such shares will be freely tradable with no restrictions after registration.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

AND OTHER INFORMATION CONTAINED IN THIS PROSPECTUS

This prospectus contains forward-looking statements. Forward-looking statements give our current expectations or forecasts of future events. You can identify these statements by the fact that they do not relate strictly to historical or current facts. Forward-looking statements involve risks and uncertainties. Forward-looking statements include statements regarding, among other things, (a) our projected sales, profitability and cash flows, (b) our growth strategies, (c) anticipated trends in our industries, (d) our future financing plans and (e) our anticipated needs for working capital. They are generally identifiable by use of the words “may,” “will,” “should,” “anticipate,” “estimate,” “plan,” “potential,” “projects,” “continuing,” “ongoing,” “expects,” “management believes,” “we believe,” “we intend” or the negative of these words or other variations on these words or comparable terminology. In particular, these include statements relating to future actions, future performance, sales efforts, expenses, the outcome of contingencies such as legal proceedings, and financial results.

Any or all of our forward-looking statements in this prospectus may turn out to be inaccurate. They can be affected by inaccurate assumptions we might make or by known or unknown risks or uncertainties. Consequently, no forward-looking statement can be guaranteed. Actual future results may vary materially as a result of various factors, including, without limitation, the risks outlined under “Risk Factors” and matters described in this prospectus generally. In light of these risks and uncertainties, there can be no assurance that the forward-looking statements contained in this filing will in fact occur and you should not place undue reliance on these forward-looking statements.

USE OF PROCEEDS

We estimate that the net proceeds from the sale of the 4,000,000 shares of common stock in the offering at an offering price of $[ ] per share will be approximately $[ ] million after deducting the underwriting discounts and commissions and estimated offering expenses. Our net proceeds will be approximately $[ ] million if the underwriter exercises its over-allotment option to purchase additional shares of common stock from us in full.

We intend to use the net proceeds from the offering for the following purposes subject to our application for and obtaining of applicable registrations and approvals under PRC laws and regulations:

approximately $3.18 million to pay the remaining unpaid purchase price to the Shengsheng Shareholders who shall immediately transfer such amount to Liaoning Shengsheng (with the amount of cash as reflected in the balance sheet as of the end of the corresponding fiscal period increasing by $3.84 million as does total shareholder’s equity) for working capital purposes, which may include acquisitions in the ordinary course of business; and

approximately $5.03 million to expand and construct our Karamai MDF production facilities/capabilities; and

approximately $3-$5 million to pay the balance for the acquisition of Beijisong, with the final price to be determined by an appraisal of Beijisong to be conducted later in 2010 (as set forth herein). This estimate is based in part on our estimation that (i) Beijisong owns net assets worth not more than $6.6 million, (ii) we are only purchasing 80% of Beijisong, (iii) we have already paid $877,693 for such acquisition and (iv) we may also purchase additional raw materials owned by Beijisong; and

approximately $2.64 million to pay for the acquisition of Yuying (as set forth herein); and

approximately $1.5 million to be used as working capital for Beijisong and Yuying after their respective acquisitions; and

approximately $2.0 million for transaction expenses related to this offering; and

approximately $0.5 million for an escrow account to fund the initial expenses of being a public company; and

the remaining balance to expand our poplar seedling business and for working capital and general corporate purposes.

The amount and timing of our actual expenditures will depend on numerous factors, including the status of our acquisition and development efforts, sales and marketing activities, and the amount of cash generated or used by our operations. We may find it necessary or advisable to use portions of the proceeds for other purposes, and we will have broad discretion in the application of the net proceeds. Additionally, we may choose to expand our current business through acquisition of complimentary businesses using cash or shares, as set forth herein. Except as set forth herein, we have not entered into any negotiations, agreements or commitments with respect to any such acquisitions at this time.

DIVIDEND POLICY

Although we will continue paying required dividends of 11% per annum with respect to our outstanding Series A Preferred Stock, we have not paid, and do not currently intend to pay, cash dividends on our common stock in the foreseeable future. Liaoning Shengsheng, the Company’s subsidiary, declared a one time dividend in the amount of $6,139,166 in 2008 (prior to our acquisition of Liaoning Shengsheng), and paid such dividends to the original Liaoning Shengsheng shareholders (the “Shengsheng Shareholders”) in 2009. On March 21, 2010, Liaoning Shengsheng declared a one time dividend to the Shengsheng Shareholders in the amount of RMB55,300,000 ($8,091,017). This dividend was based on Liaoning Shengsheng ’s profit for its 2009 fiscal year, which was not finally determined until completion of the audit of its 2009 financial statements. RMB 34,557,800 ($5,056,198) of such dividend was paid in May, 2010 to certain non-management shareholders of Liaoning Shengsheng. On June 28, 2010 the Shengsheng Shareholders agreed to return $3,046,471 (RMB 20,742,200) to the Company in order to assist the Company’s future developments. The Company has no intention of using the proceeds of this offering for paying the balance of such dividend payment.

Our policy is to retain all earnings, if any, to provide funds for operation and expansion of our business. We are a holding company incorporated in the State of Delaware and do not have any assets or conduct any business operations other than our investments in our subsidiaries. As a result of our holding company structure, we rely entirely on dividend payments from our PRC subsidiaries. PRC accounting standards and regulations currently permit payment of dividends only out of accumulated profits, a portion of which is required to be set aside for certain reserve funds. Our inability to receive all of the revenues from our PRC subsidiaries' operations may provide an additional obstacle to our ability to pay dividends if we so decide in the future. The declaration of dividends, if any, will be subject to the discretion of our board of directors, which may consider such factors as our results of operations, financial condition, capital needs and acquisition strategy, among others.

Generally there is no prior SAFE approval required for remitting dividends of a foreign invested enterprise. However, according to Notice on Relevant Issues concerning Improving Foreign Direct Investment Foreign Exchange Administration by SAFE, effective as of April 1, 2003, before the acquisition price of an acquisition of a PRC company by a foreign investor has been paid off, any dividend remittance abroad by such PRC company may only be in proportion to the actual payments made by such foreign investor. Since we have only paid $1.28 million of $5.12 million consideration due to the Liaoning shareholders, Liaoning Shengsheng can only remit 25% of its dividends or profits to us until we have paid all the acquisition consideration. This restriction is not affected by the timing of the exercise of the call option granted from Sherry Li to the original Liaoning Shengsheng shareholders pursuant to the Amended and Restated Call Option Agreement dated May 12, 2010.

CAPITALIZATION

On May 11, 2010, the Company effected a 1:1.5 reverse split of the Company’s issued and outstanding common stock (the “Reverse Split”). The following table summarizes our capitalization as of June 30, 2010, after taking into account the Reverse Split, on an actual basis and as adjusted basis to reflect our receipt of estimated net proceeds from the sale of 4,000,000 shares of common stock (excluding the 600,000 shares of common stock which the underwriter has the option to purchase to cover over-allotments, if any) in this offering at an offering price of $[ ] per share, and after deducting estimated underwriting discounts and commissions and estimated offering expenses of approximately $[ ] per share.

You should read this table in conjunction with the sections of this prospectus entitled “Use of Proceeds,” “Summary Consolidated Financial Information,” “Selected Consolidated Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes included elsewhere in this prospectus.

	June 30, 2010 (1)
	Actual		As Adjusted

Stockholders’ equity:
Common stock, $0.001 par value, 52,000,000 shares authorized, 13,854,281 shares outstanding at June 30, 2010(1) actual and as adjusted	$	14,271	$
Preferred stock, $0.001 par value, 2,000,000 shares authorized, 500,000 issued and outstanding at June 30, 2010		500
Additional paid-in capital		6,404,575
Statutory reserves		—
Accumulated other comprehensive income		2,697,642
Retained earnings (accumulated deficit)		26,435,729
Total stockholders’ equity (deficiency)		35,552,717
Total capitalization	$	37,382,794	$

(1) The table above excludes, as of June 30, 2010:

shares of our common stock issuable upon the conversion of Series A Convertible Preferred Stock at a one to one conversion ratio pursuant to the Securities Purchase Agreement between us and Professional Offshore Opportunity Fund, Ltd. in May 2008; and

shares of common stock issuable upon the conversion of those certain Promissory Notes and warrants issued pursuant to the Note Purchase Agreement between us and certain investors in February 2010.

MARKET PRICE OF COMMON EQUITY AND

RELATED STOCKHOLDER MATTERS

Market Information

There is currently no public market for our common stock. We intend to apply to have our common stock listed on the NYSE AMEX under the symbol CFG.

Holders

As of September 2, 2010, there were 13 holders of record of our common stock.

Equity Compensation Plan Information

As of June 30, 2010 and September 2, 2010, we did not have any equity compensation plan in effect.

DETERMINATION OF OFFERING PRICE

The representative has advised us that the underwriters propose to offer the common stock directly to the public at the public offering price that appears on the cover page of this prospectus. Prior to this offering, there was no public market for any of our securities. The public offering price of our common stock was determined by negotiation between us and the underwriters. The principal factors considered in determining the public offering price of the common stock included:

the information in this prospectus and otherwise available to the underwriters;

the history and the prospects for the industry in which we compete;

the ability of our management;

the prospects for our future earnings;

the present state of our development and our current financial condition;

the general condition of the economy and the securities markets in the United States at the time of this offering;

the recent market prices of, and the demand for, publicly-traded securities of generally comparable companies; and

other factors as were deemed relevant.

We cannot be sure the public offering price will correspond to the price at which our common stock will trade in the public market following this offering or that an active trading market for our common stock will develop or continue after this offering.

DILUTION

If you invest in our securities, your investment will be diluted immediately to the extent of the difference between the public offering price per share of common stock you pay in this offering, and the pro forma net tangible book value per share of common stock immediately after this offering.

Pro forma net tangible book value represents the amount of our total tangible assets reduced by our total liabilities after giving effect to the sale of four million shares of common stock in this offering. Tangible assets equal our total assets less goodwill and intangible assets. Pro forma net tangible book value per share represents our pro forma net tangible book value divided by the number of shares of common stock outstanding after giving effect to the conversion of 500,000 shares of Series A Convertible Preferred Stock. As of June 30, 2010, our pro forma net tangible book value was $[ ] million and our pro forma net tangible book value per share was $[ ].

After giving effect to the sale of 4,000,000 shares of common stock in the offering at a public offering price of $[ ] per share, and after deducting the underwriting discount and commission and estimated offering expenses, our adjusted pro forma net tangible book value as of June 30, 2010 would have been $[ ] million, or $[ ] per share. This represents an immediate increase in pro forma net tangible book value of $[ ] per share to existing stockholders and immediate dilution of $[ ] per share to new investors purchasing shares in this offering.

The following table illustrates this per share dilution:

	As of June 30, 2010			As Adjusted
Public offering price per share				$	5.00
Pro forma net tangible book value per share as of June 30, 2010	$	[	]
Increase in pro forma net tangible book value per share attributable to new investors		[	]
Adjusted pro forma net tangible book value per share after the offering					[	]
Dilution in net tangible book value per share to new investors				$	[	]

The information above is as of June 30, 2010 and excludes the following:

444,119 shares of common stock (as adjusted pursuant to both its terms and the Reverse Split) issuable upon the conversion of Series A Convertible Preferred Stock owned by a single investor, as such investor’s ownership of our common stock would have exceeded the cap of 4.9% if such shares of Series A Convertible Preferred Stock were also converted to common stock. According to the terms of our Preferred Stock, holders of our Series A Convertible Preferred Stock are restricted from converting to common stock if the number of shares of common stock to be issued pursuant to such conversion would cause the number of shares of common stock owned by such holder and its affiliates at such time to equal or exceed 4.9% of our then issued and outstanding common stock;

2,950,001 shares of common stock issuable upon the exercise of warrants outstanding at June 30, 2010 with a weighted average exercise price of $[ ] per share; and

Our adjusted pro forma net tangible book value after the offering, and the dilution to new investors in the offering, will change from the amounts shown above if the underwriters’ over-allotment option is exercised.

A $1.00 increase or decrease in the assumed public offering price per share would increase or decrease our adjusted pro forma net tangible book value per share after this offering by approximately [$ ], and dilution per share to new investors by approximately $[ ], after deducting the underwriting discount and estimated offering expenses payable by us.

EXCHANGE RATE INFORMATION

Our business is primarily conducted in China and all of our revenues are denominated in RMB. Capital accounts of our consolidated financial statements are translated into United States dollars from RMB at their historical exchange rates when the capital transactions occurred. Assets and liabilities are translated at the exchange rates as of the balance sheet date. Income and expenditures are translated at the average exchange rate of the period. RMB is not freely convertible into foreign currency and all foreign exchange transactions must take place through authorized institutions. No representation is made that the RMB amounts could have been, or could be, converted into United States dollars at the rates used in translation.

The following table sets forth information concerning exchange rates between the RMB and the United States dollar for the periods indicated.

Year Ended December 31 ,	Year End (1)		Yearly Average (2)

2007		7.2946		7.5806
2008		6.8225		6.9193
2009		6.8282		6.8314
2010 (through August 31, 2010)				6.8150

(1)

The exchange rates reflect the noon buying rates as reported by the Federal Reserve Bank of New York.

(2)

Annual averages are calculated from month-end rates. Monthly averages are calculated using the average of the daily rates during the relevant period.

SELECTED CONSOLIDATED FINANCIAL AND OPERATING DATA

The selected consolidated statement of income data for the fiscal years ended December 31, 2009 and 2008 and the consolidated balance sheet data as of December 31, 2009 and 2008 have been derived from our audited consolidated financial statements of included elsewhere in this prospectus. The results of operations for past accounting periods are not necessarily indicative of the results to be expected for any future periods.

	Year ended		Year ended		Six months ended			Six months ended
	December 31,		December 31,		June 30,			June 30,
	2009		2008		2010			2009

Sales revenues	$	23,615,957	$	22,146,254	$	16,243,275		$	12,916,318

Cost of goods sold	$	6,351,073	$	10,428,042	$	3,475,168		$	5,197,326

Gross profit	$	17,264,884	$	11,718,212	$	12,768,107		$	7,718,992

Operating expenses
Selling expense	$	3,561,550	$	4,206,849	$	1,722,143		$	2,562,200
General and administrative expenses	$	912,870	$	830,813	$	807,720		$	376,715
Total operating expenses	$	4,474,020	$	5,037,662	$	2,529,863		$	2,938,915

Net operating income	$	12,790,464	$	6,680,550	$	10,238,244		$	4,780,077

Other income (expense)
Interest income	$	5,211	$	8,221	$	4,090		$	3,649
Gain on change of fair value of derivative liabilities						80,918			-
Interest expense						(209,915	)		-
Other expense						(773	)		(231	)
Total other income (expense)	$	5,211	$	8,221	$	(125,680	)	$	3,418

Net income before taxes	$	12,796,075	$	6,688,771	$	10,112,564		$	4,783,495

Taxes	$	-	$	-	$	-		$	-

Net income	$	12,795,675	$	6,688,771	$	10,112,564		$	4,783,495

Foreign Currency Translation Adjustment	$	34,412	$	1,138,567	$	101,920		$	(33,422	)

Comprehensive Income	$	12,830,087	$	7,827,338	$	10,214,484		$	4,750,073

Balance Sheet Data (at end of Period)	December 31				June 30,
	2009		2008		2010
Cash	$	843,358	$	612,971	$	3,569,434
Total Current Assets	$	28,258,086	$	21,552,444	$	31,879,709
Total Assets	$	30,981,287	$	24,529,932	$	37,382,794
Total Liabilities	$	1,556,016	$	1,796,182	$	1,830,077
Total Stockholder's Equity	$	29,424,671	$	22,733,750	$	35,552,717
Total Liabilities & Shareholder's Equity	$	30,981,287	$	24,529,932	$	37,382,794

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following discussion and analysis of financial condition and results of operations relates to the operations and financial condition reported in the consolidated financial statements of the Company for the two years ended December 31, 2009 and 2008, and the six months ended June 30, 2010 and 2009, and should be read in conjunction with such financial statements and related notes included in this prospectus. Those statements in the following discussion that are not historical in nature should be considered to be forward looking statements that are inherently uncertain. Actual results and the timing of the events may differ materially from those contained in these forward looking statements due to a number of factors, including those discussed in the “Cautionary Note on Forward Looking Statements” set forth elsewhere in this prospectus.

Overview

We were incorporated under the laws of the State of Delaware on February 26, 2008. The core activities of our business include the sale of transgenic poplar seedlings and trees, and the planting, harvesting, processing, forestation, and cloning of such seedlings and trees. We are based in Anshan City of Liaoning Province, PRC.

Through joint research with specialized universities, we have developed transgenic poplar seedlings that are fast-growing, highly pest and drought-resistant and high in fiber density. As a result, our seedlings are ultimately purchased by government departments and other organizations responsible for tree planting.

Operating Results

The following selected comparative financial information for the six months ended June 30, 2010 and 2009, and the years ended December 31, 2009 and 2008 have been derived from and should be read in conjunction with our financial statements for the six months ended June 30, 2010 and 2009, and the fiscal years ended December 31, 2009 and 2008 included as exhibits to this prospectus. Because we are categorized as in a farm and forest industry, we are entitled to participate in a government subsidy program for our sapling business. Under the program, we collect value added tax (VAT) from customers, in an amount equal to 3% of sales during the year ended December 31, 2009 and 6% of sales during the year ended December 31, 2008. This amount is not required to be remitted to the government. VAT, which is included in revenue, was $682,735 and $1,251,786 for the years ended December 31, 2009 and 2008 respectively.

Comparison of Six Months and Three Months Ended June 30, 2010 and 2009

	Six Months ended June 30,						Three months ended June 30,
	2010			2009			2010			2009
Sales revenues	$	16,243,275		$	12,916,318		$	16,237,700		$	12,909,326
Cost of goods sold		3,475,168			5,197,326			3,473,034			5,195,333
Gross profit		12,768,107			7,718,992			12,764,666			7,713,993
Operating expenses
Selling expense		1,722,143			2,562,200			1,719,290			2,559,702
General and administrative expenses		807,720			376,715			379,204			211,859
Total operating expenses		2,529,863			2,938,915			2,098,494			2,771,561
Operating income		10,238,244			4,780,077			10,666,172			4,942,432
Other income (expense)
Interest income		4,090			3,649			3,444			2,868
Gain on change of fair value of derivative liabilities		80,918			-			60,672			-
Interest expense		(209,915	)		-			(152,316	)		-
Other expense		(773	)		(231	)		(773	)		(231	)
Total other income (expenses)		(125,680	)		3,418			(88,973	)		2,637
Net income		10,112,564			4,783,495			10,577,199			4,945,069
Foreign Currency Translation Adjustment		101,920			(33,422	)		141,498			(71,703	)
Comprehensive Income	$	10,214,484		$	4,750,073		$	10,718,697			4,873,366

We experience strong seasonality in the sales of poplar saplings, our main product. The majority of sales are executed in April, May, October and November each year. During the first quarter, our sales revenue was derived from sales of vegetables and flowers. The revenue from sales of vegetables and flowers historically does not account for more than 1% of our total revenue each year. The price of vegetables and flowers we sell and the related expenses have been relatively stable over the past several years. The sale of vegetables and flowers has no big impact on our operating results.

Sales Revenue

Total net revenues increased $3,328,374 or 26% and $3,326,957 or 26% during the three and six months ended June 30, 2010, respectively, compared to the same periods of 2009. This is primarily due to the sales from Sapling No. 2, the product we started to sell in 2010.

Cost of Goods Sold

Cost of goods sold decreased 1,722,299 or 33% and $1,722,158 or 33% during the three and six months ended June 30, 2010, respectively, compared to the same periods of 2009. This is primarily due to the fact that we used the saplings bred and cultivated in house with lower costs in 2010 compared to the saplings outsourced from third parties in 2009.

Gross Profit

Gross profit increased $5,050,673 or 65% and $5,049,115 or 65% during the three and six months ended June 30, 2010, respectively, compared to the same periods of 2009. This was primarily due to the aforementioned increase in sales and decrease in cost of goods sold.

The gross profit margin (gross profit as a percent of total revenues) increased 18.9 percentage points to 78.6% in the three months ended 2010 from 59.8% in the three months ended 2009 and increased 18.9 percentage points to78.6% in the six months ended June 30, 2010 from 59.8% in the six months ended June 30, 2009. This was primarily due to the new product introduced in 2010 and self-bred and cultivated saplings used in 2010.

Selling Expenses

Selling expenses decreased by $840,412 or 33% and $840,057 or 33% during the three and six months ended June 30, 2010, respectively, compared to the same periods of 2009. Sales expenses in 2010 decreased compared to the same period in 2009. It was mainly due to the fact that we sold more saplings in 2009 and the size of saplings sold in 2010 are typically larger than those sold in 2009, resulting in lower unit variable cost for each sapling.

General and Administration Expenses

General and administration expenses increased by $167,345 or 79% and $431,005 or 114%, during the three and six months ended June 30, 2010, respectively, compared to the same periods of 2009. It was mainly due to the increase in professional, entertainment and maintenances fees in 2010.

Gain on the change of fair value of warrants liabilities

We used the Black-Scholes model to estimate the fair value of warrants then outstanding as of June 30, 2010 and March 31, 2010. There were 1,108,334 shares of warrants A and 1,108,333 shares of warrants B outstanding as of June 30, 2010 and March 31, 2010, which were valued at $535,414 and $444,522, respectively for the six months ended June 30, 2010 and 2009, and $565,674 and $474,933 respectively for the three months ended March 31, 2010 and 2009, resulting a gain on change of fair value of warrant liability of $60,672 and $80,918 for the three and six months ended June 30, 2010, respectively.

Interest Expense

On February 12, 2010, we issued five-year convertible promissory notes with a face amount of $2,000,000, a 10% annual interest rate and a maturity date of February 11, 2015. The notes bear interest at a rate of 10% per annum accrued monthly in kind for the first 12 months and shall be payable in cash on the 10th day of each month, after the initial 12 months at the election of the noteholder. As of March 31, 2010 and June 30, 2010, we recorded accrued interest of $23,528 and $38,440 on these notes for the three months ended March 31, 2010 and the six months ended June 30, 2010, respectively.

The conversion feature of the convertible notes provides for a rate of conversion that is below market value. This feature is characterized as a beneficial conversion feature (“BCF”). A BCF is recorded by us as a debt discount pursuant to ASC Topic 470-20. We recorded an amortization expense $65,244 and $22,221 of BCF related to the convertible notes for the six and three months ended June 30, 2010.

Net Income

For the three months ended June 30, 2010, net income was $10,577,199 compared to $4,945,069 for the corresponding period of 2009, an increase of $5,632,130 or 114%. For the six months ended June 30, 2010, net income was $10,112,564 compared to $4,783,495 for the corresponding period of 2009, an increase of $5,329,069 or 111%. The increases in net income for the three and six months ended June 30, 2010 were mainly due to the aforementioned higher revenues and lower cost of goods sold and selling and general and administrative expenses.

Taxes

We incurred no income taxes during the three and six months ended June 30, 2010, as our income from the sale of tree saplings is tax exempted in the PRC.

Foreign Currency Translation Adjustment

The accompanying financial statements are presented in U.S. Dollars. Our functional currency is the Renminbi ("RMB") of the PRC. The financial statements are translated into U.S. Dollars from RMB at period-end exchange rates for assets and liabilities, and weighted average exchange rates for revenues and expenses. Capital accounts are translated at their historical exchange rates when the capital transactions occurred. We recognized $101,920 foreign currency translation gain and $33,422 foreign currency loss for the six months ended June 30, 2010 and 2009, respectively. For the three months ended June 30, 2010, we recognized $141,498 foreign currency translation gain, compared to a loss of $71,703 for the three months ended June 30, 2009.

Comprehensive income

For the three months ended June 30, 2010, comprehensive income was $10,718,697, compared to $4,873,366 for the corresponding period of 2009, an increase of $5,845,331 or 120%. For the six months ended June 30, 2010, comprehensive income was $10,214,484 compared to $4,750,073 for the corresponding period of 2009, an increase of $5,464,411 or 115%. The increases in comprehensive incomes for the quarter and six months ended June 30, 2010 were mainly due to change in foreign currency adjustments.

Comparison of Fiscal Years Ended December 31, 2009 and 2008

	Year ended December 31, 2009		Year ended December 31, 2008

Sales revenues	$	23,615,957	$	22,146,254

Cost of goods sold	$	6,351,073	$	10,428,042

Gross profit	$	17,264,884	$	11,718,212

Operating expenses
Selling expense	$	3,561,550	$	4,206,849
General and administrative expenses	$	912,870	$	830,813
Total operating expenses	$	4,474,020	$	5,037,662

Net operating income	$	12,790,464	$	6,680,550

Other income
Interest income	$	5,211	$	8,221
Total other income	$	5,211	$	8,221

Net income before taxes	$	12,795,675	$	6,688,771

Taxes	$	-	$	-

Net income	$	12,795,675	$	6,688,771

Foreign Currency Translation Adjustment	$	34,412	$	1,138,567

Comprehensive Income	$	12,830,087	$	7,827,338

Sales Revenue

Sales for the year ended December 31, 2009 and 2008 were $23,615,957 and $22,146,254 respectively, an increase of $1,469,703 or 6.64%. The increase was primarily due to the fact that approximately 9 million more saplings were sold than in the prior year.

Cost of Goods Sold

Cost of goods sold in 2009 and 2008 was $6,351,073 and $10,428,042 respectively. The cost of goods sold in year 2009 showed a decrease of approximately $4,076,969, or 39.1%. Our sales include both saplings grown internally and semi-mature saplings (e.g. year old saplings) purchased from other suppliers. The cost of internally grown saplings is lower than semi-mature saplings purchased for growing and resale. In 2009, our sales included a majority of internally grown saplings, lowering the cost of sales.

Gross Profit

Gross profit increased from $11,718,212 in 2008 to $17,264,884 in 2009, an increase of $5,546,672, or 47.33%. This increase was primarily due to the decrease in cost of goods sold.

Selling Expenses

Selling expenses were $4,206,849 in 2008 and $3,561,550 in 2009. This decrease of $645,299, or 15.34%, is primarily due to a decrease in labor costs because younger saplings were sold in year 2009 compared to year 2008.

General and Administrative Expenses

General and administrative expenses were $830,813 in 2008 and $912,870 in 2009. This increase of $82,057, or 9.88%, reflects a proportionate increase in administrative expenses, such as utilities, as business activity increased.

Government Subsidies

Because the Company is categorized as in a farm and forest industry, it is entitled to participate in a government subsidy program for its sapling business. Under the program, the Company collects value added tax (VAT) from customers in an amount equal to 3% of sales during the year ended December 31, 2009 and 6% of sales during the year ended December 31, 2008. This amount is not required to be remitted to the government. VAT, which is included in revenue, was $682,735 and $1,251,786 for the years ended December 31, 2009 and 2008 respectively. The subsidy rate is applicable on qualified revenues, which for us includes the sale of the saplings, but not landscaping projects.

Net Income Before Taxes

Net income was $12,795,675 in 2009 and $6,688,771 in 2008. This increase of $6,106,904, or 91.3%, in net income before taxes was mainly attributed to the increase in gross profit.

Taxes

Taxes were zero in 2009 and in 2008. According to the PRC income tax regulations, our income from the sale of tree saplings is tax exempt in the PRC.

Net Income

Net income was $12,795,675 in 2009 and $6,688,771 in 2008. This increase of $6,106,904, or 91.3%, was primarily due to the increase in gross profit.

Foreign Currency Translation Adjustment

The accompanying financial statements are presented in U.S. Dollars. The Company's functional currency is the Renminbi ("RMB") of the PRC. The financial statements are translated into U.S. Dollars from RMB at year-end exchange rates for assets and liabilities, and weighted average exchange rates for revenues and expenses. Capital accounts are translated at their historical exchange rates when the capital transactions occurred. During the fiscal period ended December 31, 2009, the RMB steadily appreciated against the U.S. dollar, and we recognized a foreign currency translation gain of $34,412.

Comprehensive Income

Comprehensive income was $12,830,087 in 2009 and $7,827,338 in 2008. The primary reason for this increase of $ 5,002,749, or 63.9%, is due to the combined effect of higher revenues, slightly lower operating expenses, and, most importantly, a significant decrease in cost of sales that led to a higher gross profit.

Liquidity and Capital Resources

The Company experiences strong seasonality in the sales of poplar saplings, its main product. The majority of sales are executed in April, May, October and November of each year. 11.26%, 41.87%, 47.24% and 8.69% of the sales were made in April, May, October and November, respectively, in 2009. Mainly because of the seasonality in its current business, the Company has relatively higher than average accounts receivable on its year-end balance sheets. All outstanding accounts receivables are expected to be received from customers within a year after the delivery date of the products specified in the relevant sales contracts. The Company has experienced no bad debts in its history and expects all of its customers to make their required payments. All sales made within the first half of fiscal year 2009 were collected within a year of the date of product delivery.

The Company’s current and long-term liquidity is very high, as demonstrated by the following chart, derived from the Company’s historical consolidated financial statements.

	2007		2008		2009		6/30/2010
Current Assets	$	14,151,362	$	21,552,444	$	28,258,086	$	31,879,709
Current Liabilities	$	2,650,068	$	1,689,257	$	1,449,691	$	589,928
Ratio		5.34		12.76		19.49		54.04

The Company’s current and long-term liquidity is very high as its current poplar sapling business requires relatively low investment in fixed assets. Short-term liquidity continues to improve as the Company’s current ratio has increased year-over-year since 2007, from 5.34 in 2007 to 12.76 in 2008 and 19.49 in 2009. The MDF business the Company intends to enter requires a relatively high investment in fixed assets, such as manufacturing facilities, land and machinery. Accordingly, the impact of this investment could be significant depending on the state of the Company’s finances at such time. The Company expects to develop good relationships with its MDF customers and suppliers, and expects timely payments from its customers.

On April 28, 2009, the Company entered into an acquisition agreement with Liaoning Shengsheng. Pursuant to the terms of such agreement, the Company acquired Liaoning Shengsheng in consideration for $5.12 million. The Company paid $1.28 million to the Liaoning Shengsheng shareholders at the closing. The Company’s long-term payable is $3.84 million for this transaction and is expected to be satisfied using the proceeds of this offering.

On May 13, 2009, Liaoning Shengsheng and Tuqiang Forestry Bureau of Daxinganling (the “Tuqiang Forestry Bureau”) entered into an acquisition agreement pursuant to which Liaoning Shengsheng has the right to acquire up to 80% of the outstanding equity of Beijisong for total consideration equal to 80% of the appraised value of Beijisong. Liaoning Shengsheng has made payments of $877,693 for the Beijisong acquisition. No further payments are due until an appraisal of Beijisong has been completed and a final purchase price has been determined. We anticipate such appraisal will be concluded in 2010, although no assurances thereof can be given. A portion of the proceeds of this offering are intended to be used for such remaining payment following completion of the appraisal of Beijisong. We cannot determine the full extent of our short-term or long-term payables as the appraisal of Beijisong has not yet been completed. The timing and result of such appraisal can be expected to impact the timing and amount of our current and future payables.

We anticipate that we will require approximately $100 million to fund our 3-5 year growth strategy. We expect to source a majority of these funds from the capital markets. One of our strategic growth areas is to enter into the business of manufacturing MDF by making strategic acquisitions in the northeast areas of China.

We plan to expand our existing plantation base in Xihuangdi Village, Dongsi Fangtai Town, and acquire new plantation bases to support our product growth strategy. This growth strategy requires approximately $16 million. Approximately $14 million will be used to fund a new research and development center and a new facility for wild plantation breeding and cultivation in the Daxinganling area.

The following table summarizes our liquidity and capital resources for the periods presented:

	June 30, 2010		December 31, 2009
Cash	$	3,569,434	$	843,358
Working capital	$	31,289,780	$	26,808,395
Stockholders' equity	$	35,552,717	$	29,424,671

The following table shows the movements of our cash for the periods presented.

	Six Months Ended June 30,
	2010			2009
Net cash provided by (used in) operating activities		8,962,175			(216,361	)
Net cash used in investing activities		(107,897	)		-
Net cash used in financing activities		(6,132,850	)		(1,864	)
Effect of exchange rate changes on cash		4,648			120,184
Net increase (decrease) in cash		2,726,076			(98,041	)

Operating Activities

Net cash provided by operating activities for the six months ended June 30, 2010 was $8,962,175. This is primarily due to a net income of $10,112,564, adjusted by non-cash related expenses, including depreciation and amortization of $101,095, a gain on the change of fair value of derivative liabilities of $80,918 and amortization of discount convertible notes of $145,462 and amortization of deferred financing costs of $13,500, offset by a net increase in working capital of $1,329,528. The net increase in working capital items was mainly due to an increase in accounts receivable, other receivable, long term deposit and advances to suppliers. The net increase in working capital items was partially offset by the decrease in the decrease in inventory, income tax receivable and advance from customers.

The Company paid $ 2,633,604 to Karamai Gas Company for large-scale forestation projects (30,000 mu) during six months ended June 30, 2010.

Net cash used in operating activities for the six months ended June 30, 2009 was $216,361. This is primarily due to a net income of $4,783,495, adjusted by non-cash related expenses, including depreciation and amortization of $99,056, offset by a net increase in working capital of $5,098,912. The net increase in working capital was mainly due to decrease in accounts receivable, inventories and income tax receivable. The decrease in accounts payable and accrued expenses also contributed to the net increase in working capital items.

Investing Activities

Net cash used in investing activities for the six months ended June 30, 2010 was $107,897. This is primarily due to $107,897 of capital expenditures for plant and office equipment.

Financing Activities

Net cash used in financing activities for the six months ended June 30, 2010 was $6,132,850. This is primarily due to net proceeds of $1,865,000 from the issuance of convertible notes and gross proceeds of $2,000,000 offset by the financial costs of $135,000, short-term loan of $93,167 from a shareholder of the Company who advanced certain expenses on behalf of the Company and $8,091,017 dividend paid. The $93,167 payable due to such shareholder is an oral agreement and has no stated interest. We do not intend to secure further funds from this or any other shareholder or other related party.

On March 21, 2010, Liaoning Shengsheng, the Company’s subsidiary, declared a dividend to the original Liaoning Shengsheng Shareholders in the amount of $8,091,017 (RMB 55,300,000). During the six months ended June 30, 2010, the Company paid an $8,091,017 dividend to its shareholders. On June 28, 2010 the shareholders agreed to return $3,046,471 (RMB 20,742,200) to the Company in order to assist the Company’s future developments.

Net cash used in financing activities for the six months ended June 30, 2009 was $1,864, representing funds borrowed from one of our stockholders.

For the Year Ended December 31, 2009 and 2008

	Years Ended December 31,
	2009			2008

Net cash provided by operating activities	$	6,419,755		$	648,988
Net cash (used in) investing activities	$	(2,923	)	$	(106,146	)
Net cash (used in) financing activities	$	(6,187,557	)	$	( 749,506	)

Operating Activities

Our net operating cash flow for 2009 was $6,419,755 and $648,988 for 2008. This was primarily attributable to a significant increase in net income, $12,795,675 compared to $6,688,771 in 2008. The rise in net income was mainly due to the increase in gross profit as our cost of sales decreased.

Investing Activities

Cash used in investing activities in 2009 was $2,923 compared to $106,146 in 2008. The primary reason for this decrease was because there were no significant purchases of plant or equipment in 2009. No additional land purchases, leases or construction was made.

Financing Activities

Cash used in financing activities in 2009 was $6,187,557, compared to $749,506 in 2008. The primary reason for the increase was an increase in dividends paid. No additional funds were provided from bank financing.

Liaoning Shengsheng, the Company’s subsidiary, declared a one time dividend in the amount of $6,139,166 in 2008 (prior to our acquisition of Liaoning Shengsheng), and paid such dividends to the original Liaoning Shengsheng shareholders in 2009.

Capital Expenditures

Capital expenditures were approximately $2,923 in 2009 and $106,146 in 2008, reflecting a decrease of $103,223, or 97.2%. Rent paid for real estate was a major component of our capital expenditures in 2008, accounting for approximately 92% of total capital expenditures. The main reason for the decrease is that such rent was prepaid in 2008 for both 2008 and 2009. Accordingly, no rent payments were made in 2009.

Contractual Obligations

We have one contractual obligation for the purchase of equipment. We engaged an MDF equipment manufacturer in April 2009 to design, build and install an MDF production line for us in Karamai. The total cost is approximately $9,004,392 and 80% of the total has been paid. Contract terms allow the Company to pay the remaining balance as follows: 15% upon completion of installation and 5% to be retained by the Company as maintenance and support fees. Currently we are surveying suitable land space for the production line and equipment.

Market Risks

We are exposed to various types of market risks, including changes in foreign exchange rates, commodity prices and inflation in the normal course of business.

Interest rate risk

We are subject to risks resulting from fluctuations in interest rates on our bank balances. A substantial portion of our cash is held in China in interest bearing bank deposits and denominated in RMB. To the extent we may need to raise debt financing in the future, upward fluctuations in interest rates will increase the cost of new debt. We do not currently use any derivative instruments to manage our interest rate risk.

Commodity price risk

We are not exposed to any commodity price risk. We do not speculate on commodity prices. We did not have any commodity price derivatives or hedging arrangements outstanding at March 31, 2010 and did not employ any commodity price derivatives during the three months ended March 31, 2010.

Foreign exchange risk

We carry out all of our transactions in Renminbi. Therefore, we have limited exposure to foreign exchange fluctuations. A substantial portion of our cash is held in China in interest bearing bank deposits and denominated in RMB. The Renminbi is not a freely convertible currency. The PRC government may take actions that could cause future exchange rates to vary significantly from current or historical exchange rates. Fluctuations in exchange rates may adversely affect the value of any dividends we declare.

Inflation risk

In recent years, China has not experienced significant inflation or deflation and thus inflation and deflation have not had a significant effect on our business during the past three years. According to the National Bureau of Statistics of China, inflation as measured by the consumer price index in China was -0.7%, 5.9% 4.8% and 1.5% in 2009, 2008,2007 and 2006, respectively.

Seasonality

The majority of our sales occur in the months of April, May, October and November. Accordingly, the Company has extreme seasonal fluctuations in its revenue, operating income and cash flows.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures or capital resources that is material to our investors.

Critical Accounting Policies and Estimates

Management’s discussion and analysis of its financial condition and results of operations are based upon our consolidated financial statements, which have been prepared in accordance with U.S. GAAP. Our financial statements reflect the selection and application of accounting policies, which require management to make significant estimates and judgments. We believe the following paragraphs reflect the more critical accounting policies that currently affect our financial condition and results of operations.

Accounts receivable

The Company collected accounts receivables incurred in 2008 more quickly than those incurred in 2009, resulting in less accounts receivable outstanding as of December 31, 2008 as compared to December 31, 2009. This is primary reason why accounts receivable increased faster than sales in 2009 than 2008. We did not accrue allowance on trade receivables because we have previously not incurred loss on trade receivables. We are confident we can collect all accounts receivable outstanding. We collected $ 5,623,403 on our December 31, 2009 balance of trade receivable. We have $5,272,499 of accounts receivable not yet collected. They were trade receivables related to sales in the last three months of 2009. We expect to collect all account receivable in a year and all the remaining balance in November and December 2010.

The following table sets out the collections of our accounts receivable as of December 31, 2009

A/R Collections in each month	03/2010		04/2010		05/2010		06/2010		Subtotal
Collections in 2010	$	405,813	$	1,110,459	$	3,164,876		942,255	$	5,623,403
Uncollection in 2010										5,272,499
Total A/R as of 12/31/2009									$	10,895,902

Impairment

We account for impairment of long-lived assets including property, plant and equipment, and amortizable intangible assets in accordance with SFAS No.144, Accounting for the Impairment or Disposal of Long-Lived Assets, which requires an impairment loss to be recognized when the carrying amount of a long-lived asset or asset group exceeds its fair value and is not recoverable (when carrying amount exceeds the gross, undiscounted cash flows from use and disposition). The impairment loss is measured as the excess of the carrying amount over the assets’ (or asset group’s) fair value.

Revenue recognition

Our revenues consist of sales of genetically modified saplings. Sales are recognized in accordance with SEC Staff Accounting Bulletin (“SAB”) No. 104 included in the codification as ASC 605, Revenue Recognition, when the following four revenue criteria are met: persuasive evidence of an arrangement exists, delivery has occurred, the selling price is fixed or determinable and collectability is reasonably assured. No return allowance is made as products are normally not returnable upon acceptance by the customers.

The price at which we sell fast-growing poplar seedlings is based on numerous factors, including: market price changes of fast-growing poplar seedlings; regional supply of fast-growing poplar seedlings; seasonal availability of seedlings and demand for fast-growing poplar seedlings. Generally, it takes 20 days for a single transaction to be consummated. This time frame includes negotiation of terms, execution of contract, preparation, delivery, transportation, planting of products and receipt of payment. For larger transactions, it can take up to one year for the last payment to be made.

Our revenue recognition policies are in compliance with Staff accounting bulletin (SAB) 104, included in the Codification as ASC 605, Revenue Recognition. Sales revenue is recognized at the date of shipment or delivery to customers when a formal arrangement exists, the price is fixed or determinable, no other significant obligations of the Company exist and collectability is reasonably assured. Payments received before all of the relevant criteria for revenue recognition are satisfied are recorded as unearned revenue. No return allowance is made as products are normally not returnable upon acceptance by the customers.

Foreign currency translation

The reporting currency of the Company is United States Dollars. All assets and liabilities accounts have been translated into United States Dollars using the current exchange rate at the balance sheet date. Capital stock is recorded at historical rates. Revenue and expenses are translated using the average exchange rate in the year. The resulting gain and loss has been reported as other comprehensive income (loss) within the shareholder’s equity.

Use of estimates

The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Because of the use of estimates inherent in the financial reporting process, actual results could differ from those estimates. Significant estimates include estimates of accruals and inventory valuation.

The fair value of the Warrants was determined using the Black-Scholes option pricing method with the following assumptions (not accounting for the Reverse Split and any adjustment in the exercise price such Warrants as a result thereof):

	Six Months Ended			Year Ended December 31,
	2010			2009			2008
Estimated dividends		11	%		11	%		11	%
Expected volatility		54	%		54	%		54	%
Risk-free interest rate		2.05	%		3	%		3	%
Expected term	4.6years			3.3 years			4.3 years

Stock based compensation

We adopted SFAS No. 123R effective January 1, 2006, and are using the modified prospective method, in which compensation cost is recognized beginning with the effective date based on the requirements of SFAS No. 123R for all share-based payments granted after the effective date that remain unvested on the effective date. We account for stock option and warrant grants issued and vesting to non-employees in accordance with EITF No. 96-18: “Accounting for Equity Instruments that are Issued to Other Than Employees for Acquiring, or in Conjunction with Selling, Goods or Services” and EITF No. 00-18 “Accounting Recognition for Certain Transactions involving Equity Instruments Granted to Other Than Employees” whereas the value of the stock compensation is based upon the measurement date as determined at either a) the date at which a performance commitment is reached, or b) at the date at which the necessary performance to earn the equity instruments is complete.

Recently issued accounting pronouncements

In June 2009, the FASB issued authoritative guidance on accounting standards codification and the hierarchy of generally accepted accounting principles effective for interim and annual reporting periods ending after September 15, 2009. The FASB accounting standards codification (“ASC, “Codification”) has become the source of authoritative accounting principles recognized by the FASB to be applied by nongovernmental entities in the preparation of financial statements in accordance with GAAP. All existing accounting standard documents are superseded by the Codification and any accounting literature not included in the Codification will not be authoritative. However, rules and interpretive releases of the SEC issued under the authority of federal securities laws will continue to be sources of authoritative GAAP for SEC registrants. The Codification does not change or alter existing GAAP and, therefore, it does not have an impact on our financial position, results of operations and cash flows.

We also adopted authoritative guidance issued by the FASB on business combinations. The guidance retains the fundamental requirements that the acquisition method of accounting (previously referred to as the purchase method of accounting) be used for all business combinations, but requires a number of changes, including changes in the way assets and liabilities are recognized and measured as a result of business combinations. It also requires the capitalization of in-process research and development at fair value and requires the expensing of acquisition-related costs as incurred. We will apply this guidance to business combinations completed after July 1, 2009. Adoption of the new guidance did not have a material impact on our financial statements.

In June 2009, the FASB made an update to consolidation of variable interest entities. Among other things, the update replaces the calculation for determining which entities, if any, have a controlling financial interest in a VIE from a quantitative based risks and rewards calculation, to a qualitative approach that focuses on identifying which entities have the power to direct the activities that most significantly impact the VIE’s economic performance and the obligation to absorb losses of the VIE or the right to receive benefits from the VIE. The update also requires ongoing assessments as to whether an entity is the primary beneficiary of a VIE (previously, reconsideration was only required upon the occurrence of specific events), modifies the presentation of consolidated VIE assets and liabilities, and requires additional disclosures about a company’s involvement in VIEs. This update will be effective for fiscal years beginning after November 15, 2009. The Company does not currently believe the adoption of this update will have any effect on its consolidated financial position and results of operations.

In October 2009, the FASB issued authoritative guidance on revenue recognition that will become effective for us beginning July 1, 2010, with earlier adoption permitted. Under the new guidance on arrangements that include software elements, tangible products that have software components that are essential to the functionality of the tangible product will no longer be within the scope of the software revenue recognition guidance, and software-enabled products will now be subject to other relevant revenue recognition guidance. Additionally, the FASB issued authoritative guidance on revenue arrangements with multiple deliverables that are outside the scope of the software revenue recognition guidance. Under the new guidance, when vendor specific objective evidence or third party evidence for deliverables in an arrangement cannot be determined, a best estimate of the selling price is required to separate deliverables and allocate arrangement consideration using the relative selling price method. The new guidance includes new disclosure requirements on how the application of the relative selling price method affects the timing and amount of revenue recognition. We believe the adoption of this new guidance will not have a material impact on our financial statements.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

INDUSTRY OVERVIEW

In China, the State Forestry Administration of the PRC, or the SFA, is the state bureau in charge of the national forestry industry. Its principal functions include the formulation of policies and regulations for the national forestry industry, forest management and forestry resources protection and the supervision of their implementation. Under the PRC Forest Law, the PRC strictly implements a quota system for the logging of forest wood. The forestry bureaus at the provincial level are responsible for compiling annual logging quotas. The annual quota is reviewed by the local government at the same level and is submitted to the PRC State Council for approval. Domestic log supply in China is ultimately determined by the planted area and standing volume of resources inside China. Increases in planted area and standing volume are ultimately going to affect allowable quotas.

According to the FAO’s Global Forest Resources Assessment 2005 and the website of the State Forestry Administration Bureau of the PRC, China ranks fifth in the world with approximately 195 million hectares of forest. However, China’s forest area per capita is approximately 0.145 hectare, only about 22.2% of the global average. China’s forest area, in terms of percentage of land area, is 18.21%, which is lower than the world average of 30.3%. The forest growing stock in China is, by area, 67 m 3 per hectares, which is only about 60.9% of the global average. As a result, China has become the second largest timber-importer in the world.

At present, China’s comprehensive utilization rate of timber (the percentage of harvested forest actually used to make saleable products) is only 60%, while it is 80% to 90% in developed countries. Increasing the comprehensive utilization rate of timber, especially by utilizing MDF, not only increases the comprehensive utilization rate of timber and saves forest resources, but it also provides various high value-added wood products, with large-size, multiple specifications and wide application.

FORESTRY POLICIES IN THE PRC

The following is a brief overview of certain recent forestry policies in the PRC:

According to the Guiding Catalogue for Industry Restructuring promulgated by NDRC which took effect on December 2, 2005, reforestation falls within the category of industries encouraged by the PRC government. The PRC government also has formally encouraged foreign investment in the business of reforestation.

According to the Outline of Policy on Forest Industry promulgated by seven state bureaus of the PRC including the SFA on August 10, 2007, (1) development of essential technology, equipment and products which could speed the improvement of the forest industrial structure are encouraged; (2) forest resource development and international cooperation are encouraged; (3) non-public ownership within the forest industry is encouraged; (4) preferential tax policies on forestry were implemented; and (5) government support policies on forestry insurance were established.

According to the Opinion on Comprehensively Promoting the Reform of the System of Collectively-owned Forestry Rights (the “Opinion”) issued by the Central Committee of the Communist Party of China and the State Council on June 8, 2008, the PRC government will promote the reform of the system of collectively-owned forestry rights. The reform does not change the ownership of the forest land and the collectively-owned forest land will continue to be owned by the collectives, while the ownership of forest trees and the use right of forest land with a period of 70 years should be granted with clearly established ownership and rights. The Opinion also provides that those who are entitled to the forestry rights have the right to dispose of these rights in accordance with PRC laws, including by way of subcontracting, lease, transfer, mortgage and using them for contributing to the capital of a company, provided that the use of the forestry land remains unchanged. Furthermore, the PRC will simplify the legal formalities for management of logging activities and the approval procedures, and will support the establishment of leading forestry enterprises and promote large-scale forestry production and standardization of forestry management. On December 26, 2008, the SFA promulgated the Notice about the Pilot Implementation of Forestry Deforestation Management Reform, according to which, the SFA will gradually reform the forestry deforestation system, simplify the approval procedures, establish a convenient and efficient deforestation approval system, and ultimately change the current standards-based control system to a sustainable operation management system.

In addition to reducing the Forest Maintenance Fee (a fee required to be paid when a logging permit is applied for in the PRC) from 20% of relevant sales value to less than 10%, the PRC government will expand both domestic and international markets, accelerate technological innovation, strengthen brand construction, assist in the expansion of leading enterprises, support the small and medium enterprises and promote forestry reform.

Forest management

All forest land in the PRC is either owned by the state or rural collective economic organizations. Ownership of forestry land is not transferable in the PRC. However, forest land use rights, forest trees use rights and forest trees ownership rights are transferable as long as the transfer is conducted in accordance with PRC law (including the requirement that a forest land cannot be converted into a non-forest land).

Forests are divided into the following five categories:

(1) Forests for special uses: forests and trees mainly aimed at national defense, environmental protection and scientific experiments.

(2) Protection forests: forests, trees and bushes mainly aimed at protection, inclusive of water source storage forests, forests for water and soil conservation, wind protection and sand bind forests, forests for farmland and grassland protection, river bank protective belts and road protection belts;

(3) Timber stands: forests and trees mainly aimed at timber production, inclusive of bamboo groves mainly aimed at bamboo production;

(4) Economic forests: trees mainly aimed at the production of fruits; edible oils, soft drinks and ingredients; industrial raw materials; and medicinal materials; and

(5) Firewood forests: trees mainly aimed at the production of fuels.

Only the timber stands, economic forests and firewood forests and the forest land use right thereof and the forest land use right of other forests, trees and other woodlands stipulated by the State Council, are transferable under the PRC laws. Moreover, according to the PRC laws, they can be priced and converted into shares or used as capital contribution for equity joint ventures or cooperation conditions for cooperative joint ventures. However, forest lands may not be converted into non-forest lands.

According to the PRC Forestry Law enacted by SCNPC on September 20, 1984 and amended on April 29, 1998, and the Implementation Regulations of PRC Forestry Law effective as of January 29, 2000, the State adopted a registration system of forest, forest wood and forest land. All forest, forest wood or forest land is to be registered by local governments at or above the county level and records maintained and certificates issued confirming the ownership or right to use.

Logging in forests is strictly regulated in the PRC under its forestry laws and regulations. Forestry bureaus at the national, provincial, municipal, county and township levels are responsible for checking and organizing the forestry resources, formulating forestry operation plans, and compiling annual logging quotas in their area based on these forestry resources and forestry operation plans.

Logging quotas

Under the PRC Forestry Law, the PRC government strictly implements a quota system for logging of forest wood, to uphold the overriding principle that the amount of consumption of timber must be less than that grown.

Each year, the forestry bureaus at the lower levels of government (mainly the county level), based on their regular check on conditions (including the maturity of trees and the forestry resources) and the forestry operation plans of all forestry lands within their respective area, prepare proposed annual logging quotas. The annual quota is reviewed by the local governments at the same level and submitted to the forest bureau at the provincial level. The forestry bureaus at the provincial level are then responsible for compiling annual logging quotas by adjusting the proposed logging quotas submitted by the lower level forestry bureaus and submitting them to the PRC State Council for final approval.

According to the Implementation Regulations, the annual quota for certain key forest zones will be approved by the PRC State Council and the quota will be set every five years. The Implementation Regulations of the PRC Forestry Law (which was enacted on September 20, 1984 and amended on 29 April 1998) further stipulate that the logging of a foreign-invested timber forest up to a certain scale is subject to the approval of the forestry bureaus at the provincial level within the annual forest logging quota approved by the PRC State Council and is to be listed separately in respect of the logging quota.

Annual logging quotas are subject to review and strictly implemented by the different levels of forestry bureaus. In order to ensure logging quotas are strictly implemented: (1) before logging, forestry operators are required to obtain the pre-approval and logging permits from the relevant forest bureaus; (2) during logging, the local forest bureaus selectively conduct on-site investigation and supervise the logging activities of the forest operators; (3) after logging, the transportation of the timber out of the forestry zone requires a separate transportation permit from the forestry bureau; and (4) in respect of transportation, timber inspection posts are set up along the roads heading out from the forestry zones to inspect the timber transport and stop the transport of timber without permit.

Logging permits

The PRC Forestry Law provides that logging of trees requires logging permits. When a state-owned forestry enterprise or institution applies for a logging permit, it is required to develop a logging area survey, design document and logging and renewal verification proof of the previous year. For non-state-owned forestry operators, they must apply for a logging permit with a document that contains contents such as logging objectives, location, tree species, tree situation, area, stock, approach and reforestation measures.

Upon receipt of an application of logging permit from a forest operator, the respective forestry bureau at the county level will examine the application and assess whether the accumulated area/volume of timber to be harvested will exceed the logging quota for the year initially allocated to the specific piece of forestry land based on its own annual assessment reports on the relevant forestry land, or the aggregate logging quota for the year allocated to the whole county.

Logging permits will not be issued to the applicant:

if the applicant has not replanted forest wood logged in the previous year; or

if there were any large scale forest fires, significant unlawful logging or large scale destruction caused by pests in the previous year and the applicant has not adopted appropriate preventive measures or improved measures to prevent such occurrences.

The logging permits usually contain details of logging, including the location, the species of trees, its origin, ownership, logging method, intensity of logging, area for logging, the amount of timber and the term of validity of the permit. Forestry operators must carry out the harvesting activities pursuant to such details specified on the logging permits. After logging, the forestry bureaus which issued the logging permits examine and inspect whether the logging activities comply with the terms of the logging permits. If it is found that the relevant forestry operator has not conducted logging activities or the re-plantation in accordance with the requirements of the logging permits, the forestry bureau will not approve further applications for logging permits.

Violations

Illegal logging, or logging in excess of timber production plans or logging permits, is punishable by fines and the confiscation of illegally logged timber and the proceeds from sales thereof. Illegal loggers may be asked to replant trees. If any logging unit or individual logger fails to fulfill reforestation tasks pursuant to the prescribed provisions, the department issuing the logging permit has the power to stop issuing such permits. In the case of serious violations, the relevant forestry bureaus may impose fines and administrative sanctions.

Processing of timber in forest zones

Timber processing in forest areas must be approved by the forestry bureau at the county or higher level. The current PRC Forestry Law and its implementation regulations do not stipulate detailed requirements for timber processing in forest zones. Generally, anyone who is engaged in timber processing can apply for approval by submitting the application form and relevant documents. However, there is a limit, depending on the volume of the local forestry resources, for the total number of approved timber processors within a forest. Any unapproved timber processing in a forest zone will be subject to penalties including the confiscation of illegal proceeds generated therefrom and a fine of not more than 2 times the proceeds.

Transportation of timber

Other than the logging quotas and logging permits, timber transportation permit is another measure implemented by the PRC government to further monitor the logging activities in the PRC.

According to the PRC Forestry Law and its implementation regulations, transportation of timber (unless the timber is uniformly allocated and transferred by the state) out of forestry zones to destination points requires a transportation permit to be issued by the forestry bureau at the county level or above. No entity or individual carrier may transport any timber without a timber transportation permit. To apply for a timber transportation permit, the applicant must submit the relevant forest logging permit, the quarantine certificate and other documents as may be required by the forestry bureau at the provincial level. The competent forestry bureau shall, within 3 days after it has received an application, issue to the applicant a timber transportation permit which specifies the total volume of timber permitted to be transported.

The local forestry bureau sets up timber inspection stations in forest zones for the inspection of timber transportation. For any timber transportation without any permit, the timber inspection station must stop it, and may temporarily detain the timber not covered by a transportation permit and immediately report it to the competent forestry bureau at the county or higher level. When anyone transports any timber without any permit or using a forged or altered timber transportation permit or in excess of the approved timber amount stated in the timber transportation permit, the law provides that (i) the timber may be confiscated; (ii) a fine of up to 50% of the price of the timber may be imposed on the owner; (iii) the transportation fee paid to the carrier may be confiscated; and (iv) a fine up to one to three times of the transportation fee may be imposed on the carrier.

Environmental impact assessment

According to the PRC Environmental law, the PRC Environmental Impact Assessment Law and other relevant regulations, if an entity performs clear logging, an environmental impact report must be prepared to provide a comprehensive assessment of the resulting environmental impact; if an entity plants in the environmental non-sensitive area, an environmental impact registration form must be filled in and submitted to the relevant environmental bureau.

Environmentally sensitive areas include the following:

the areas stipulated under the national and local laws that need special protection, such as water source protection areas, scenic spots, nature reserves, forest parks, key national heritage, historical and cultural preservation areas, soil erosion protection areas and basic farmland protection areas;

the ecologically sensitive and vulnerable areas, such as key soil erosion areas that need special governance and supervision, natural wetlands and habitats of rare or special ecological environment and naturally regenerated forests, tropical rain forests, mangroves, coral reefs, spawning grounds, fisheries and other important ecosystems; and

the areas of social concern, such as cultural and educational areas, resorts, hospitals and other protection areas with regional and historical, scientific, national or cultural significance.

An environmental impact report generally is required to cover the following:

1. a brief introduction to the construct project;

2. the existing environment of the construction project;

3. an analysis, prediction and assessment of the environmental effects from the construction project;

4. the protective measures for the environment of the construction project, and the technical and economic demonstrations of such measures;

5. an analysis of the environmental effects from the economic losses and benefits of the construction project;

6. a proposal for monitoring the environment of the construction project; and

7. a conclusion on the evaluation of environmental effects.

According to the contents and format promulgated by SFA, the environmental impact report form must contain the following contents:

1. the project name, location, types of industry and total investment amount;

2. the main targets of the environmental protection which may be the resident area, the school, hospital, cultural relic, landscape area, water resources or other sensitive points;

3. the analysis of the impact and suggestions or measures to protect the environment; and

4. the conclusion on the evaluation of environmental effects.

An environmental impact report is for a construction project which may have more significant environmental impact and therefore is required to contain a more comprehensive assessment of the environmental impact. The environmental impact report is to be submitted by an enterprise which is engaged in construction activity, (1) if a feasibility study of the relevant construction project is required by PRC laws and regulation, at the time it conducts such feasibility study; and (2) if such feasibility study is not required by PRC laws and regulations, before it commences the construction or obtains the business license (if required).

Pusheng has conducted environmental impact assessments for its MDF project (as described below) and same was approved by the Environmental Protection Bureau of the Karamai municipality. Additional government approvals are still required in order to continue with its MDF project.

Reforestation

In order to protect forests, the PRC Forestry Law and the Implementation Regulations of PRC Forestry Law provide that entities and individuals that have harvested the forest must, according to the area, number of trees, tree species and period of time specified in the logging permits, plant a number of trees equal to the ones logged. After the planting of saplings is completed, the forestry bureaus which issue logging permits examine the area and quality of reforestation and issue an Acceptance Certificate of Reforestation.

Should forest logging entities or individuals fail to finish the reforestation task in compliance with the relevant requirements, the authorities which have issued the logging permit may stop issuing further logging permits to them until they have completed their reforestation tasks. Under any of the following circumstances, the local forestry bureau may order the forest logging entities or individuals to complete the reforestation task within a prescribed period, and if they fail to do so, a fine of not more than 2 times the expenses required for completing the uncompleted reforestation task, may be imposed: (1) the forest logging entities or individuals fail to complete the reforestation in two consecutive years; (2) the reforestation area completed within the current year is less than 50% of the area of reforestation required; (3) except for the arid or semi-arid areas as specially provided for by the state, the reforestation survival rate of the year is less than 85%; or (4) the forest logging entities or individuals fail to complete the reforestation task as scheduled in accordance with applicable requirements. The poplar saplings grown by the Company regenerate after harvesting if they are cut at the base, rather then removed at the root level. The Company plans to meet the reforestation requirements by doing the last harvest as cut trees so no additional costs are expected to be incurred for reforestation.

Taxation

According to the PRC EIT Law and its implementing rules, both domestic and foreign-invested enterprises are now subject to a uniform enterprise income tax rate of 25%. Income generated from the cultivation of forest trees and the gathering of forest products, however, is exempt from the enterprise income tax pursuant to relevant PRC EIT Law, which became effective in 2008. Therefore w e paid this income tax for 2008 and will be reimbursed by the Chinese government in 2010.

In addition, under the EIT Law, an enterprise incorporated outside of the PRC may be deemed to be a “non-resident enterprise” or “resident enterprise” according to their definitions thereunder. If that enterprise is deemed to be a “non-resident enterprise” without an establishment or place of business in the PRC, a withholding tax at the rate of 10% may be applicable to any dividends it receives from a resident enterprise, unless it is entitled to reduction or exemption of such tax, for example, pursuant to relevant tax treaties. On the other hand, if that enterprise has “de facto management bodies” located within the PRC territory, it may be considered a “resident enterprise” under the EIT Law, and: (i) its worldwide taxable income will normally be subject to the enterprise income tax at the rate of 25%; and (ii) any dividends it pays to its non-PRC resident shareholders and any gains realized by such shareholders from the sale or other transfer of the shares of that enterprise may be regarded as China-sourced income, and as a result, be subject to a PRC income tax at a rate up to 10%.

MDF

MDF and particleboard are wood products produced from sub-quality and small fuel wood, a process encouraged as part of the government’s national timber industry policy. Pursuant to the MDF sector investment outlook forecast for 2010 to 2015 published by the Chinese government, it is estimated that in 2010, the demand for MDF in China will be 27 million m 3 but the production will only be 24 million m 3 . In 2015, the annual demand for MDF in China is expected to be 35 million m 3 . Since 2000, China has been importing more than 1 million m 3 of MDF each year.

MDF in China is widely used in the following industries:

65% of total MDF is used in furniture industry;

15% is used in building;

8% is used in floor board

5% is used in packaging; and

7% is used in household appliances, vehicles, ships and musical instruments.

We believe access to raw timber is critical to the success of any MDF manufacturer. Some MDF producers have been forced to stop production, and some have had to declare bankruptcy due to a shortage of raw materials. The Company has been creating the raw materials planting base for the last 5 years through plantings of its genetically modified saplings. Even with so many competitors in the current domestic market, there is only one MDF manufacturing plant in Xinjiang Province which has its own raw materials planting base. Once our planting base matures to the point where we can harvest and utilize the timber, and once our MDF manufacturing facilities are operational, we believe we will have a competitive advantage in Xinjiang Province as we expect our raw material costs to be 10% to 15% lower than our competitors who do not have their own supply of raw materials.

Demand of Real Estate Market and Building Decoration Industry

The annual timber consumption of China’s building industry is 65 million m2, which is 21.3% of the total national timber consumption. Currently, MDF is used in for approximately 25% of the Chinese building industry’s timber needs.

Pursuant to the Current Status and Development and Trends of China Wood Floor published by the Chinese State Forestry Administration in 2006, the predicted annual demand of MDF for decoration material is more than RMB 30 billion Yuan (approximately $44.13 billion using the conversion rate in effect on June 21, 2010 of 1:6.7976). Floor board is the No.1 interior decoration material in China, with annual floor board production of over 200 million m 2 and sales of more than RMB 30 billion Yuan ($4.41 billion as of June 21, 2010). Approximately 60% (120 million m2 ) of the floor board is long-wearing intensified floor, which is mainly made from MDF. In 2010, the production of long-wearing intensified floor is expected to be 200 million m2 .

We believe that in order to be successful in the MDF industry in China, companies must, among other things, increase production capacity and improve product quality. With the overall development of the Chinese economy, increases in national per capita income level and urban and rural residents’ increasing improved housing conditions, we believe there will continue to be increasing demand for MDF.

We believe the key for rapid development of the MDF processing industry is the accessing of raw materials. However, as a result of the Chinese government’s strict controls on logging, the development of the MDF processing industry may be slowed for those companies who do not own and control the raw materials and who are not well capitalized. For those that are, they have the ability to more successfully develop and profit from large scale MDF production capabilities.

We believe establishing an annual production capacity of 15,000 m3 MDF requires a more than RMB 20 million Yuan (approximately $2.96 million as of June 21, 2010) investment in equipment and other ancillary facilities, and an additional RMB 50 million Yuan (approximately $17.87 million as of June 21, 2010) for the improvement of conditions in these facilities. Although we seek to construct such a facility in the future, we have not made any material efforts in this regard to date.

New and larger production lines must be built to support the expected increase in demand. Further, existing MDF facilities are located primarily other than in Western China where we are focusing our efforts. We believe this gives us a unique opportunity to establish a modern facility designed to meet MDF production needs.

With the rapid economic and social development and increase in people’s living standards, China's demand for wood products continues to grow. We believe raw materials supply, production scale, product quality and management will be the key elements in establishing our competitiveness.

Competition in the MDF industry in China is mainly reflected in the purchase of raw materials, particularly by the large-scale production lines. We expect this pattern to continue in the future, as the demand for raw materials by the wood processing industry continues to outpace supply. In short, we believe the continuous and stable supply of raw materials will be key to survival of any company involved in MDF production.

Another key competitive factor in China's MDF industry is the quality of the products. In 2005, the Comprehensive Medium Density Fiberboard Quality Integrated pass rate in China was 73%. This is a large difference compared with foreign advanced technology. In particular, many of China's MDF exports cannot meet the quality certification standards in European countries. The increase in environmental standards around the world has presented challenges to existing Chinese MDF manufacturers as they must expend resources getting their facilities and products up to international quality certification standards. We feel we will have a distinct advantage over existing competitors in this regard as our facilities are intended to be built in order to comply with ever-stricter international standards.

BUSINESS

Overview

China For-Gen Corp. is a Delaware corporation formed on February 26, 2008 for the purpose of acquiring all of the equity interests of Liaoning Shengsheng Biotechnological Co., Ltd. (“Liaoning Shengsheng”), a limited liability company incorporated in the People’s Republic of China (the “PRC”) on November 24, 2000. Since its inception, Liaoning Shengsheng has been an agricultural and forestry company engaged in the breeding, cloning and sale of plant seedlings and specialized transgenic plant seedlings, and the research and development of seedling breeding technologies. The Company also owns a poplar tree plantation of 8,300 mu in the Xingjiang Province in western China.

The majority of our operations are located in western China. The primary technologies used in our business are tissue culture technology and transgenic seedling technology. This is a popular type of cell breeding technology utilized in agriculture which takes advantage of cell division of a plant’s branches and leaves. By the appropriate control of temperature and humidity, we can increase the dividing speed of plant cells, thereby cultivating a large amount of plant seedlings in the shortest possible time. Our core products are transgenic poplar seedlings, which require less water and are disease free and insect and pest resistant. The poplar seedlings are characterized by fast growth, maturing in 3-5 years, instead of the normal maturation time of 13-15 years for regular poplar seedlings. Through our intended business model expansion, we also seek to become a leading supplier of wood products (including MDF and particleboard) and plant seedlings in China. An overwhelming majority of our revenues are derived from transgenic poplar seedlings.

From September 25, 2001 through September, 2003 and through October 2002 to June 2004, Liaoning Shengsheng conducted research projects together with Dalian Technology University (“DTU”), pursuant to various Technology Development Contracts, regarding transgenic poplar research, including cellulose syntheses transgenic research. As a result of such cooperation, the Company was able to develop Shengsheng No.1 and No.2 transgenic poplar seedlings. The resulting technology is co-owned by both parties. Liaoning Shengsheng and DTU are entitled to 70% and 30% of the profit, respectively, resulting from the use of the patent received on such technology by either party. However, as no patent was ever applied for, the Company has not paid, and is not obligated to make any payment to, DTU for any profit received. DTU is not currently commercializing this technology and, to our knowledge, has no plans to do so. The Company now markets and sells Shengsheng No. 1 and No. 2 transgenic seedlings as a result of such development efforts. Pursuant to a confirmation letter issued by DTU dated May 28, 2010, DTU has waived its right to apply for any intellectual property protection of such research results, as well as its rights in any products resulting from this cooperative project.

Liaoning Shengsheng also entered into a Technology Development Contract with Shenyang Agriculture University Biotechnology Co., Ltd. (“SAU”) regarding cloning and insect and pest resistant transgenic poplar research project, providing that SAU would provide complete information (including research data and materials) relating to the transgenic seedling technology and Liaoning Shengsheng would reimburse SAU’s research in consideration. The agreement provides that Liaoning Shengsheng would own all technologies and intellectual properties produced from the project and would have the exclusive right to commercialize and transfer such intellectual properties. On March 31, 2010, the Plant Tissue Culture Laboratory of Shenyang Agriculture University, an affiliate of SAU, issued a confirmation letter stating that Liaoning Shengsheng has the sole right to commercialize the technical achievements and is entitled to all of the economic benefit generated thereafter.

Transgenic poplar seedlings collectively researched and developed by Shengsheng with DTU and SAU won the National Gold Invention Award in 2003, an award given by the Technology Exposition Committee of the Ministry of Science and Technology. Plants developed by the Company are used for forestation in western China. Major clients include departments in the Chinese government (at the provincial and local levels) and other social organizations responsible for tree planting in China

Recent Developments

On May 10, 2009, Liaoning Shengsheng and Tuqiang Forestry Bureau of Daxinganling (the “Tuqiang Forestry Bureau”) entered into an acquisition agreement (the “Beijisong Agreement”) pursuant to which Liaoning Shengsheng has the right to acquire 67.74% of the outstanding equity of Daxinganling Tuqiang Beijisong Wooden Boards Industry Co., Ltd. (“Beijisong”), a manufacturer of MDF, in exchange for 21 million RMB, or approximately $3.09 million. On May 13, 2009, the Company and Tuqiang Forestry Bureau executed an amendment to the Beijisong Agreement pursuant to which Liaoning Shengsheng has the right to acquire up to 80% of the outstanding equity of Beijisong for a total consideration equal to 80% of the appraised valuation of Beijisong. Liaoning Shengsheng has made payments of $877,693 for the Beijisong acquisition. No further payments are due at this time and a portion of the proceeds of this offering are intended to be used for such remaining payment when the appraisal of Beijisong has been completed. We anticipate such appraisal will be concluded in 2010, although no assurances thereof can be given.

Products

The Company’s primary products are fast growing poplar saplings. These trees are grown in the far northwest regions of China, in Xinjiang province near the city of Karamai. Our current major product is its Shengsheng Fast-Growing Poplar Seedlings. We have different types of cloned seedlings (bottle seedlings), seedlings, one-year old seedlings, one-year old cutting seedlings, two-year old seedlings and three-year old seedlings. Our transgenic fast-growing poplar seedlings have important features such as drought tolerant, disease resistant and a dense fiber plant (limited water requirements). The Company grows two distinct types of poplar saplings: Shengsheng No. 1 and Shengsheng No. 2. Each product is separated into 5 different subcategories (1-5 years old trees) according to their age. The characteristics of the two types of trees are as follows:

Shengsheng No. 1: the distinct features of these saplings are that they are highly pest and drought resistant, with a growth period of 5 years, which is very short for saplings of this kind. According to the National Weather Service Bureau, the annual rainfall of the western region is less than 10% of that in eastern China, and as a result many types of trees cannot survive in the region, with poplar being a major exception. The survival rate of Shengsheng No.1 is very high, at over 96%, in the western regions of China.

Shengsheng No. 2: the distinct feature is large plant fiber density. Under normal circumstances, poplar fiber is very loose, and therefore is generally used only in low quality paper making and as firewood. However, the genetically modified fast-growing poplar trees have high fiber density. As a result, the paper making utilization rate is higher, and the wood can also be used in other commercial applications. The growth period is also only 5 years for this variety, and the survival rate is also high, at over 96% in the western regions of China.

In 2002, we co-developed anti-insect-and-disease poplar seedlings and dense plant fiber seedlings in conjunction with SAU and DTU, respectively. We began pilot planting of these new seedlings in 2003 in Xinjiang Province. We clone and cultivate the seedlings in a greenhouse environment for transplantation into the ground. Each seedling can be cut into about 10 pieces, and each piece can be cultivated as a new seedling.

Resources and Raw Material Supply

We do not need to purchase large amounts of raw materials. The seedlings, being the critical material, are cloned in a greenhouse and can be mass cultivated at our headquarters in Dongsifangtai, Haicheng City, or at a project site according to demands. Other major production costs include irrigation (twice a year), labor costs such as planting, cutting, digging, watering and leveling off the site, and lease expenses.

According to the PRC Agriculture Network published by the State Agriculture Department in 2001, the primary resources needed for our business are land and water. Land is used mainly for nursery purposes. For every mu, 6,000-8,000 saplings can be planted. A “mu” is a measurement of area used in the PRC and is equal to 1/15 of a hectare. For greenhouses, 20,000-28,000 plants (seedlings) can be planted for every mu. Other raw materials include fertilizer, chemicals, nutrient solutions and general agricultural production materials. These are all ordinary agricultural production materials that are generally available and there are numerous suppliers we can turn to in the event of disruption in business with our current suppliers for any reason. Land can be rented privately or the Company can choose to rent land offered by the government.

Research and Product Development

We currently have limited resources to conduct the development of new products. We have only 2 employees engaged in research and development, and we are dependent on our relationships with third party research and development institutes such as DTU and SAU to perform research and development for us. There were no research and d

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China For-Gen Corp. - FORM S-1/A - September 3, 2010