- Annual Report (10-K)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-K

[X] Annual Report pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

For the period ended: December 31, 2008 .

[ ] Transition Report pursuant to 13 or 15(d) of the Securities

Exchange Ac of 1934

For the transition period from to

Commission File Number: 333-137437

SHANDONG ZHOUYUAN SEED AND NURSERY CO., LTD .

(Exact name of Small Business Issuer as specified in its charter)

Delaware 58-2258912

-------------------------------- ----------------------------------

(State or other jurisdiction of (IRS Employer Identification No.)

incorporation or organization)

1688 ChengGangZhongLu, Laizhou, Shandong Province, China N/A

(Address of principal executive offices) (Postal or Zip Code)

Issuer's telephone number, including area code: : (86) 535-2257888

Copies to:

Andrew Chien

SEC Filing Agency

665 Ellsworth Avenue

New Haven, CT 06511

(203) 844-0809

Securities registered pursuant to Section 12(b) of the Exchange Act: None

Securities registered pursuant to Section 12(g) of the Exchange Act:

Common Stock, par value $.001 per share

Check whether the Issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [x] No[ ]

Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B is not contained in this form, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. Yes [x] No [ ]

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

Large accelerated filer [ ] Accelerated filer [ ]

Non-accelerated filer [ ](Do not all reporting company [x]

check if smaller reporting company)

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

Yes [ ] No[x]

The issuer's revenues for the its most recent fiscal year: $ 3,108,918

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant on June 30, 2008 was approximately $3,341,167. The per share stock price for computational purposes was $0.05, based on the closing sale price per share for the registrant's common stock as reported on the OTC Bulletin Board on such date. This value is not intended to be a representation as to the value or worth of the registrant's common stock. The number of non-affiliates of the registrant has been calculated by subtracting the number of shares held by persons affiliated with the registrant from the number of outstanding shares.

The number of shares outstanding of the issuer's Common Stock, $.001 par value, held by non-affiliates as of May 5, 2008 was $ 1,336,467.

As of May 5, 2008 the number of shares outstanding of the Registrant’s common stock was 84,001,200 shares, $.001 par value.

Transitional Small Business Disclosure Format: Yes o No x

Documents Incorporated By Reference: See Part VI Item 15.

TABLE OF CONTENTS

TO ANNUAL REPORT ON FORM 10-K

FOR YEAR ENDED DECEMBER 31, 2008

Pages

PART I

Item 1. Description of Business -------------------------------- 4

Item 1A. Risk Factors ------------------------------------------- 9

Item 1B. Unresolved Staff Comments ------------------------------ 12

Item 2. Description of Property -------------------------------- 12

Item 3. Legal Proceedings ------------------------------------ 12

Item 4. Submission of Matters to a Vote of Security Holders ----- 13

PART II

Item 5. Market for Registrant’s Common Equity and

related Stockholder Matters --------------------------- 13

Item 6. Selected Financial Data --------------------------------- 13

Item 7. Management’s Discussion and Analysis or Plan

of Operation ---------------------------- 14

Item 7A. Quantitative and Qualitative Disclosures About

Market Risk ----------------------------------15

Item 8. Financial Statements ---------------------------- 15

Item 9. Changes in and Disagreements with Accountants on

Accounting and Financial Disclosures ------------------- 43

Item 9A. Controls and Procedures ----------------------------- 43

PART III

Item 10. Directors, Executive Officers of the Registrant -------- 44

Item 11. Executive Compensation -------------------------------- 46

Item 12. Security Ownership of Certain Beneficial

Ownership Management ---------------------------------- 47

Item 13. Certain Relationships and Related Transactions -------- 47

Item 14. Principal Accountant Fees and Services ----------------- 48

Part IV

Item 15. Exhibits ---------------------------------------------- 48

Signatures ------------------------------------------------------ 49

FORWARD-LOOKING STATEMENTS

T his document contains forward-looking statements. The forward-looking statements are based on our current goals, plans, expectations, assumptions, estimates and predictions regarding the Company.

When used in this document, the words "plan", "believes," "continues," "expects," "anticipates," "estimates," "intends", "should," "would," "could," or "may," and similar expressions are intended to identify forward looking statements.

Such forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, events or growths to be materially different from any future results, events or growths expressed or implied in this document. The cautionary statements should not be construed as exhaustive or as any admission regarding the adequacy of disclosures made by the Company. Forward looking statements are beyond the ability of the Company to control and in many cases the Company cannot predict what factors would cause results to differ materially from those indicated by the forward looking statements.

The statements made in this document should be read as being applicable to all forward-looking statements wherever they appear in this document, and any documents incorporated by reference herein

We do not undertake any obligation to update any forward-looking statements contained in this document to reflect new events or circumstances, unless and to the extent required by applicable law.

PART I

Item 1: Description of Business:

Shandong Zhouyuan Seed and Nursery Co., Ltd. (“Zhouyuan”) is a holding company, through its consolidated subsidiary, Shandong Zhouyuan Seed and Nursery Co., Ltd., a company formed under the laws of the People’s Republic of China, to engage in the business of developing, distributing and selling agricultural seeds in China . The Company’s executive offices are located at 1688 ChengGangZhongLu, Laizhou, Shandong Province, Peoples Republic of China. The Company's website address is

http://www.zhouyuanseed.com/ch/index.asp

Company Organization and History

The Company was originally incorporated in the State of North Carolina on July 20, 1996 under the name “Great Land Development Co.” In 2000 Great Land Development Co. changed its name to “Xenicent, Inc.” In 2004 Xenicent, Inc. changed its name to “Pingchuan Pharmaceutical, Inc.” In 2007 Pingchuan changed its name to “Shandong Zhouyuan Seed and Nursery Company, Ltd.” As Great Land Development Co. the Company was in the business of real estate consulting and purchasing and reselling vacant tracts of land, primarily in the North Carolina area. In 2002, the Company acquired a majority interest in Giantek Technology Corporation ("Giantek"), a Taiwanese corporation that manufactured and distributed Light Emitting Diode (LED) display systems. In 2003, the Company terminated its relationship with Giantek and agreed to transfer all of the Company’s interest in Giantek back to its former controlling shareholders. Thereafter the Company existed as a “shell company,” but not a “blank check” company, under regulations promulgated by the SEC and had no business operations and only nominal assets until 2004 when the Company entered into a plan of exchange with Heilongjiang Pingchuan Medical Equipment Inc, a corporation organized and validly existing under the laws of the People’s Republic of China. The plan of exchange was consummated on August 11, 2004 and the Company changed its name to “Pingchuan Pharmaceutical, Inc.” Pingchuan was engaged in the business of providing integrated operational management services for a related medical company, Harbin Pingchuan Medical Equipment Inc, a corporation validly organized and existing under the laws of the People’s Republic of China (“Gu Fen”). In February 2007, the Company consummated the merger of Infolink Pacific Limited into a wholly-owned subsidiary of the Company (the “Merger”) and changed its state of incorporation from North Carolina to Delaware. See “The Merger” below. In connection with the Merger, the Company changed its name from “Pingchuan Pharmaceutical, Inc.” to “Shandong Zhouyuan Seed and Nursery Company, Ltd.” Unless the context otherwise requires, the term “Company” as used herein collectively refers to Shandong Zhouyuan and its wholly-owned subsidiaries and consolidated entities, including Infolink Pacific Limited and Shandong Zhouyuan Seed and Nursery Co., Ltd., a PRC company.

Subsidiaries and Joint Ventures

The diagram below illustrates the current corporate structure of the Company and its subsidiaries (“we,” “our,” “us,” or the “Company”):

[ANNUALREPORT083002.GIF]

InfoLink Pacific Limited

Infolink was incorporated on September 28, 2006 in British Virgin Islands (“BVI”) under the BVI Business Companies Act, 2004 by Li Han Xun and You Li, for the purpose of seeking and consummating a merger or acquisition with a business entity organized as a private corporation, partnership, or sole proprietorship as defined by Statement of Financial Accounting Standards (SFAS) No. 7.

In October 2006 Li Han Xun and You Li, the record shareholders of the PRC Subsidiary, entered into Trust and Indemnity Agreements with Infolink pursuant to which Mr. Li and Ms. You assigned to Infolink all of the benefits of ownership of 60% of the total equity interests in the PRC Subsidiary. In addition, Mr. Li and Ms. You agreed to vote on shareholder matters as directed by Infolink. Finally, the Declaration of Trust signed by Mr. Li and Ms. You contains their undertaking to assign the shares of the PRC Subsidiary to Infolink at any time upon Infolink’s request.

Shandong Zhouyuan Seed and Nursery Co., Ltd.

Shandong Zhouyuan Seed and Nursery Co., Ltd., a People’s Republic of China company was organized on October 26, 2001 under the laws of the People’s Republic of China (the “PRC Subsidiary” or “Zhouyuan”) by Li Han Xun and You Li, who are the record shareholders of the PRC Subsidiary. The PRC Subsidiary was created from the merger of two formerly state owned companies, Laizhou Yongzhou Seed Ltd and Laizhou Agriculture Science Research and Development Ltd., which were reformed and merged into one company named Laizhou Huiyuan Seed Ltd. ("Huiyuan") on October 26, 2001. On December 24, 2002, Huiyuan changed its name to Shandong Zhouyuan Seed and Nursery Co., Ltd. Since its formation in 2001, the PRC Subsidiary has worked closely with government agencies, particularly the state Science and Technology Commission, to develop improved hybrid seed strains. The PRC Subsidiary now ranks as one of the top three seed producers in the LaiZhou District, which is known as the “Seed Valley of China.”

The Merger

On January 18, 2007, the Company entered into a Share Exchange Agreement with Infolink Pacific Limited pursuant to which the Company issued 55,000,000 shares of its common stock to Li Han Xun and You Li in exchange for all of the issued and outstanding capital stock of Infolink and Infolink became a wholly-owned subsidiary of the Company.

Subsequently the Parent Corporation terminated the pharmaceutical consulting business that had been carried by its subsidiary, Heilongjiang Pingchuan Medical Equipment Inc. On April 2, 2007, the Parent Corporation changed its name to “Shandong Zhouyuan Seed and Nursery Co., Ltd.”

The merger of the Company with Infolink was accounted for as a reverse merger and the transaction was treated for accounting purposes as a recapitalization of the accounting acquirer (Infolink) and a reorganization of the accounting acquiree (the Company). Accordingly, the historical financial statements presented prior to the merger are the historical financial statements of Infolink, which includes the PRC Subsidiary.

In addition, under U.S. accounting rules, as a result of the obligations of the parties under the Trust and Indemnity Agreements described above, Infolink is deemed to be a 60% beneficiary of the PRC Subsidiary and the financial results of the PRC Subsidiary may be consolidated with the financial results of the Company under Financial Interpretation 46 (Revised) "Consolidation of Variable Interest Entities" issued by the Financial Accounting Standards Board ("FASB").

On April 2, 2007, the Company changed its name to Shandong Zhouyuan Seed and Nursery Co., Ltd.

Products

Zhouyuan currently has approval from several provincial governments to market a wide variety of seeds. Its primary product is corn seed, including both corn intended for forage and corn with a high starch content for use in industrial food production. In addition, Zhouyuan currently markets varieties of wheat seeds and cabbage seeds.

Among Zhouyuan’s most popular seeds are:

Corn - Huiyaun 20. This product was examined, and approved for sale by Anhui Province, Henan Province and Chongqing Municipality. The revenue of this product increased sharply in 2008.

Corn - New Yeden 4. This product was approved for sale by Henan Province, and performed very well, and sale increased greatly in 2008.

Corn - White Prince. This seed will produce white, fresh taste corn. This product has high yield, and wide adaptability. This product approved for sale in Shandong Province, Guangxi Province and Hunan Province. In 2008, the seeds were short of supply. Zhouyuan is able to sell these seeds for almost three times the market price of standard corn seeds.

Wheat - Zhouyuan 9369. This seed will produce the excellent winter wheat with strong gluten and high yield. In 2008, this product approved for sale in Shandong Province, short of supply.

The professional seed production team with highly experienced experts, organizes the seed production of Zhouyan. It established the seed production base in rural area. In 2008, the seed production area expanded to 2000 acres of land. Zhouyuan, with the growers of the seed production bases, has been a solid long-term relation of cooperation. Zhouyuan determines its production requirements based on its market condition, and contracts the growers to produce enough seeds to meet the market demand on a seasonal basis. Zhouyuan provides the original species (or seed parent) to seed growers. Zhouyuan inspects, purchases, processes, and packages the seeds from the growers, and then makes the distribution of wholesale. Patents, specifically six patents on its corn hybrids, one on its wheat hybrid and one on its cabbage hybrid protect Zhouyuan's proprietary rights to its seeds. Zhouyuan also owns seven registered trademarks.

The Seed Industry

The People’s Republic of China contains less than 7% of the world’s cultivatable land, but 22% of the world’s population. For this reason, the government of China has placed a special focus on developing the advanced agricultural technology needed to successfully feed its population. The seed industry has been a prime beneficiary of this focus, receiving grants, tax relief and technological assistance.

Until 2000 China restricted the market of any individual seed company to the district in which it was located. The Seed Law of the People’s Republic of China, issued in 2000, eliminated that restriction. Today, there are approximately 3,700 firms marketing seeds nationwide in China. However, because the ability to have a national presence is new, the firms marketing seeds in China tend to be small, and none has significant market share. The eight largest seed companies are believed to control only about 25% of the national market.

A number of multinational companies have made inroads into the Chinese seed market, among them Monsanto, Pioneer and Sygenta. To date, however, their influence has been limited by the difficulty of marketing to the highly decentralized agricultural community in China. In addition, the multinationals primarily offer genetically-engineered seeds, which have not gained widespread acceptance in China.

Marketing

Farming in China remains a highly decentralized industry. Marketing to farmers is conducted at a local level and customer loyalty is built on personal relationships. For that reason, Zhouyuan has developed a decentralized distribution network, constituted by county-based sales representatives who report to independent retail companies located in each of the 19 Provinces and Autonomous Regions in which Zhouyuan carries on marketing operations. Zhouyuan’s internal marketing personnel are responsible for monitoring the performance of the regional sales companies and providing any assistance they require.

Employees

Zhouyuan has 68 employees, all of whom are employed on a full-time basis. Its employees include 1 research scientist, 13 senior agronomists, 27 agronomists and 18 technicians.

Government Regulation

Limitations on Foreign Ownership in the Seed Industry

Due to restriction in the People’s Republic of China on foreign investments in Chinese businesses in the seed industry, Infolink does not have direct equity ownership in Zhouyuan. Zhouyuan is owned by two PRC citizens, who hold 60% of the equity interests in Zhouyuan in trust for the benefit of the Company.

Regulation of Foreign Currency Exchange

The principal regulation governing foreign currency exchange in China is the Rules on Foreign Exchange Control (1996), as amended. Under the Rules, Renminbi is freely convertible for trade and service-related foreign exchange transactions, but not for direct investment, loan or investment outside China unless the prior approval of the State Administration for Foreign Exchange of the PRC or other relevant authorities is obtained.

Pursuant to the Rules on Foreign Exchange Control, foreign investment enterprises in China may purchase foreign currency without the approval of the State Administration for Foreign Exchange of the PRC for trade and service-related foreign exchange transactions by providing commercial documents evidencing these transactions. They may also retain foreign exchange (subject to a cap approved by the State Administration for Foreign Exchange of the PRC) to satisfy foreign exchange liabilities or to pay dividends. However, the relevant PRC government authorities may limit or eliminate the ability of foreign investment enterprises to purchase and retain foreign currencies in the future. In addition, foreign exchange transactions for direct investment, loan and investment outside China are still subject to limitations and require approvals from the State Administration for Foreign Exchange of the PRC.

Item 1A. Risk Factors

An investment in our common stock involves a high degree of risk. You should carefully consider the following risk factors and information provided in this annual report and other filings. If any of the following risks actually occur, our business, financial condition, or results of operations could be materially and adversely affected.

Risks Relating To Our Business

We have limited operating history and our operating results are unpredictable.

We have only several years' operation, and only commenced our business at the end of 2002. We had experienced a loss in past including fiscal year of 2007. There are many factors to affect our operation results such as weather and to develop and offer innovative products, to expand and retain the customer base, and to raise capital, to maintain effective control of our costs and expenses, and to control other business relative risks as detailed in the followings. If we are unsuccessful in addressing any of these risks and uncertainties, our business may be materially and adversely affected.

We will incur increased costs as a result of being a public company .

Conducting our business as a public company has caused us to incur significant accounting and other expenses that we did not have as a private company. In addition, the Sarbanes-Oxley Act, as well as certain rules implemented by the SEC, requires changes in corporate governance practices of public companies. These new rules and regulations will increase our legal, accounting and financial compliance costs and will require additional staff time.

We are subject to the risk of natural disasters .

Our revenue stream depends on our ability to deliver seeds at the beginning of their growing season. Our supply of seeds and their timely availability can be negated by drought, flood, storm, blight, or the other woes of farming. Any such event or a combination thereof could render us unable to meet the demands of our distribution network. This could have a long-term negative effect on our ability to grow our business, in addition to the near-term loss of income.

We have limited business insurance coverage.

In China, insurance companies offer limited business insurance products. Zhouyuan do es not have business liability insurance to protect Zhouyuan 's operation. Zhouyuan may not have sufficient capital to cover material damage or loss of Zhouyuan 's facilities due to fire, severe weather, flood, earthquake or social violence or other causes. Such damage or loss would have a material adverse effect on our business and financial condition, and the price of our common stock.

We may be unable to protect our proprietary and technology rights.

The Company's success will depend in part on its ability to protect its proprietary rights and technologies. Zhouyuan relies on a combination of patents, trademark laws, trade secrets, confidentiality provisions and other contractual provisions to protect its proprietary rights. However, these measures afford only limited protection. Zhouyuan’s failure to adequately protect its proprietary rights may adversely affect our competitive prospects. Despite our efforts to protect our proprietary rights, unauthorized parties may attempt to copy aspects of Zhouyuan’s products or to obtain and use trade secrets or other information that it regards as proprietary.

RISKS OF DOING BUSINESS IN CHINA

Zhouyuan operates from facilities that are located in China. Accordingly, its operations must conform to governmental regulations and rules of the PRC.

Government regulation may hinder our ability to function efficiently .

The national, provincial and local governments in the People’s Republic of China are highly bureaucratized. The day-to-day operations of our business require frequent interaction with representatives of the Chinese government institutions in order to obtain and maintain the licenses needed to market hybrid seeds in China. The effort to obtain the registrations, licenses and permits necessary to carry out our business activities can be daunting. Significant delays can result from the need to obtain governmental approval of our activities. These delays can have an adverse effect on the profitability of our operations. In addition, compliance with regulatory requirements applicable to manufacturing operations and production may increase the cost of our operations, which would adversely affect our profitability.

Downturn in the global economy may slow domestic growth in China, which in turn may affect our business.

Due to the global downturn in the financial markets, China may not be able to maintain its recent growth rates mainly due to the lack of demand of exports to countries that are in recessions. Although we do not presently export any of our products, our earnings may become unstable if China’s domestic growth slows significantly and the demand for grains and other food decli nes.

Adverse changes in economic and political policies of the Chinese government could have a material adverse effect on the overall economic growth of China, which could adversely affect our business.

China’s economy differs from the economies of most developed countries in many respects, including with respect to the amount of government involvement, level of development, growth rate, control of foreign exchange and allocation of resources. The Chinese government has implemented various measures to encourage economic development and guide the allocation of resources. Some of these measures benefit the overall Chinese economy, but may also have a negative effect on us. For example, our financial condition and results of operations may be adversely affected by government control over capital investments or changes in tax regulations that are applicable to us.

The PRC legal system has inherent uncertainties that could limit the legal protections available to Zhouyuan and the Company.

The PRC legal system is based on written statutes. Prior court decisions may be cited for reference but have limited precedential value. Although, in past twenty years, some laws and regulations are issued for the protections provided to foreign invested enterprises in China, these laws, and regulations are relatively recent and evolving rapidly, and their interpretation and enforcement involve uncertainties. These uncertainties could limit the legal protections available to foreign investors.

You may personally see difficulties in effecting service of legal process, enforcing foreign judgments or getting original actions in China based on United States or other foreign laws against us.

We only have contractual arrangements of operation in China. All of our senior officers are residents of China. Our PRC counsel has advised us that China does not have current treaties with the United States or many other countries providing for the reciprocal recognition and enforcement of judgment of courts. As an impact, it may not be possible to affect service of process within the United States or elsewhere outside China upon our senior executive officers, including with feature to particular issues arising under U.S. federal securities laws or applicable state securities laws.

Any litigation in China may be protracted and result in substantial costs and diversion of resources and management attention.

Risks Related to Our Securities

We must comply with penny stock regulations, which could effect the liquidity and price of our stock.

Our common stock was traded in the OTCBB as a “penny stock”, which generally is the equity security with a price of less than $5.00. The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in "penny stocks." These rules may have the effect of reducing the level of trading activity in the secondary market for our stock. The investors may find it more difficult to sell the shares.

We do not anticipate paying any cash dividends in the foreseeable future.

We do not plan to pay any cash dividends in the foreseeable future. Any return on your investment would derive from an increase in the price of our stock, which may or may not occur.

Item 1B. Unresolved Staff Comments

On December 15, 2008, we received SEC staff comments regarding the internal control and other issues disclosed in our Form 10-KSB for fiscal year ended on December 31, 2007. We believed that we properly addressed these concerns in this report. We will actively cooperate with SEC staff to make sure our reports compliance with all rules and regulations

Item 2. Description of Property:

The executive offices of Zhouyuan are located at 1688 ChengGangZhongLu in Laizhou in the Province of Shandong. Zhouyuan owns the building in which its offices are located, although it currently leases the first and second floor. This arrangement assures Zhouyuan of adequate space if its growth necessitates expansion of its offices.

The production facilities are located in a factory owned by Zhouyuan at 1688 Chenggang Zhong Road in Laizhou. We will need additional capital equipment as we grow, however. But we believe the factory space will support our expansion for the foreseeable future.

Item 3. Legal Proceedings:

On August 1, 2006 Greentree Financial Group, Inc. ("Greentree"), a former consultant to a subsidiary of the former entity of the Company, filed a breach of contract complaint in the Superior Court in Mecklenberg County, North Carolina for non payment of contractual obligations for 2004 and 2005. The claim is for $49,000 in cash and $40,000 worth of stock as compensatory damages or $80,000 in liquidated damages. The former entity of the Company failed to appear to the Court, and the Court rendered a judgment, which orders the Company to pay the plaintiff a sum of $201,500, with interest thereon at the rate of 8.000% per annum from the date of Entry of the Judgment until paid; and for the costs of this action, in full, to be taxed by the Clerk. The former entity of the Company was in settlement discussions with GreenTree financial Group. And they had a resolution in 2008. Some shareholders of the Company paid Greentree 4 millions of shares of common stock to get the settlement.

Item 4. Submission of Matters to a Vote of Security Holders:

In the fiscal year ended December 31, 2008, no any matter was submitted to the Company's shareholders for a vote.

PART II

Item 5. Market for Registrant’s Common Equity and related Stockholder Matters.

a. Market Information.

Our common stock, par value $0.001, is listed on the Over-The-Counter Bulletin Board ("OTCBB") under the symbol "SZSN". The following table sets forth, for the periods indicated, the reported high and low trading prices for our common stock as reported on the OTCBB.

Common Stock Price ($)

Quarter Ended High Low

December 31, 2008 0.024 0.009

September 30, 2008 0.05 0.011

December 31, 2008 0.07 0.04

March 31, 2008 0.09 0.045

December 31, 2007 0.20 0.04

September 30, 2007 0.49 0.06

December 31, 2007 0.30 0.2

March 31, 2007 0.108 0.04

b. Shareholders.

Our shareholders list contains the names of 1,912 registered stockholders of record of the Company’s Common Stock.

c. Dividends.

We have not declared any dividends yet.

Item 6. Selected Financial Data

Financial Highlights

_____________________________________________________________________

Fiscal Year Ended December 31, 2008 2007

Revenue $ 3,108,918 702,602

Income (Loss) from Operation 998,678 51,660

Net Income (Loss) 508,162 (661,460)

Cash & Cash Equivalents 514,139 1,020

Liabilities 0 11,345

Shareholder Equities 1,296,237 163,818

_________________________________________________________________________

Item 7. Management’s Discussion and Analysis or Plan of Operation:

The revenue of 2008 increased to $3,108,918 from $702,602 of the same period in 2007, with an increase of $2,406,316. The 342% revenue increases are due to that our product gradually accepted by the market. Our one corn seed - Huiyaun 20, approved for sale by Anhui Province, Henan Province and Chongqing Municipality, and another corn seed- New Yeden 4, approved for sale by Henan Province, and third corn seed - White Prince, approved for sale in Shandong Province, Guangxi Province and Hunan Province, and the winter wheat seed - Zhouyuan 9369, approved for sale in Shandong Province. Both corn seed - White Prince, and the winter wheat seed - Zhouyuan 9369 were in short supply in 2008.

In 2008, we sold seeds of 3.85 million kilograms compared with 1.12 million kilograms in 2007. Among the sold seeds, the patented seeds occupied the 80.66% compared only 26.7% in 2007.

The net income of 2008 was $508,162 compared a loss of $(661,460) in the same period of 2007, the profits are due to high revenue growth and high profits margin of some of our products, for example, corn seeds - White Prince can be able to sell at almost three times the market price of standard corn seeds.

Our total cost of sale for the fiscal year 2008 was $2,110,239, compared to $650,942 for the same period in 2007, an increase of $1,459,297 or 224%. This increase in cost of sale was mainly attributable to revenue growth, and to an increase in volume of seeds we purchased from our growers in anticipation for a higher demand for our seeds. From seed grower in 2008, we purchased seeds of 3.77 million kilograms compared with 1.01 million kilograms in 2007.

Our total operating expenses increased to $1,057,862 for the fiscal year 2008 as compared to $713,120 for the same period in 2007, an increase of $344,742 or 48%. The major increases were due to professional fees of $115,139, R&D of $18,416 and Bad Debt of $149,098.

Liquidity and Capital Resources

On December 31, 2008, the company had cash and cash equivalent of $514,139 compared with $11,345 on Decembers 31, 2007. The increase of $ 502,794 was mainly due to the positive cash flow of $451,547 from operation due to revenue and profits increase.

The account payable in 2008 was $678,873, increased $156722 from 2007.

The account receivable was $484,627 on December 31, 2008 compared with $18,380 on Decembers 31, 2007. The increase of account receivable was due to over 400% of revenue growth and the tight cash flow of wholesale agents. The managers carefully watched the account receivable and made some measures, such as to change some of the wholesale agents, to reduce the account receivable.

In December 2008, we sold the old office building located at 238 Jianxindong Street, Laizhou, Shandong Province, PRC, and applied the proceeds to pay off all loans of the Agricultural Bank of China. The loans were in default before the payment.

Off-Balance Sheet Arrangements:

None.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Interest Rates:

Our exposure to market risk for changes in interest rates relates primarily to our short-term investments; thus, fluctuations in interest rates would not have a material impact on the fair value of these securities. At December 31, 2008, we had approximately $514,139 in cash and cash equivalents.

Exchange Rates:

From 2001 until June 2005, the exchange rate of the RMB yuan to the U.S. dollar ranged within a narrow band of $0.12080 to 0.12083 to 1 RMB yuan. Beginning in July 2005, the Chinese government has permitted the value of the yuan to float within a broader range against the dollar and as a result the yuan has slowly risen against the dollar, and traded approximately $0.146235 to 1 RMB yuan recently. The downtrend of US dollar increased the affordability of the potential Chinese clients for paying various services in USA, and reduced their benefits if they got the financing amount in the US dollars.

Inflation:

We believe that inflation has not had a material effect on our operations to date.

Item 8. Financial Statements

The information required by Item 8 and an index thereto commences on the next page.

_______________________________________________________________________________________

SHANDONG ZHOUYUAN SEED AND NURSERY CO., LTD.

F/K/A PINGCHUAN PHARMACEUTICALS, INC.

INDEX


	PAGE

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

CONSOLIDATED BALANCE SHEETS

CONSOLIDATED STATEMENTS OF OPERATIONS

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
AND COMPREHENSIVE INCOME

CONSOLIDATED STATEMENTS OF CASH FLOWS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

KEMPISTY & COMPANY

CERTIFIED PUBLIC ACCOUNTANTS, P.C.

15 MAIDEN LANE - SUITE 1003 - NEW YORK, NY 10038 - TEL (212) 406-7272 - FAX (212) 513-1930

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Board of Directors

Shangdong Zhouyuan Seed and Nursery Co., Ltd.

F/K/A Pingchuan Pharmaceuticals, Inc.

We have audited the accompanying consolidated balance sheets of Shandong Zhouyuan Seed and Nursery Co., Ltd. and subsidiaries as of December 31, 2008 and 2007, and the related consolidated statements of operations, changes in stockholders' equity and comprehensive income and cash flows for each of the years in the two year period ended December 31, 2008. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Shandong Zhouyuan Seed and Nursery Co., Ltd. as of December 31, 2008 and 2007, and the results of its operations and its cash flows for each of the years in the two year period ended December 31, 2008 in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company has negative cash flows from operations, a working capital deficiency of $412,373 and an accumulated deficit of $2,117,908 at December 31, 2008. Management’s plans concerning these matters are also described in Note 1. The accompanying consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Kempisty & Company

Certified Public Accountants PC

New York, New York

May 5, 2009

SHANDONG ZHOUYUAN SEED AND NURSERY CO., LTD.

F/K/A PINGCHUAN PHARMACEUTICALS, INC.

Consolidated Balance Sheets


		December 31,
		2008		2007
ASSETS
Current Assets:
Cash and cash equivalents	$	-	$	11,345
Restricted cash		514,139		-
Accounts receivable, net (Note 4)		484,627		18,380
Inventory (Note 5)		142,616		183,600
Other receivable		34,629		17,144
Advance to suppliers		32,607		113,063
Total current assets		1,208,618		343,532
Property, Plant, and Equipment, net (Note 7)		1,557,325		1,827,528
Other Assets
Land use right, net (Note 6)		235,039		452,067
Acquired seed patents, net (Note 8)		430,184		545,417
Receivable from sale of land use right (Note 9)		348,370		326,465
Total other assets		1,013,593		1,323,949
Total Assets	$	3,779,536	$	3,495,009

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Bank loans (Note 10)	$	-	$	1,449,255
Short-term loans		18,650		37,238
Accounts payable and accrued expenses		679,924		522,151
Pension and employee benefit payable		75,677		252,137
VAT payable		90,366		124,748
Income tax payable		490,700		-
Interest payable		-		315,579
Deferred revenue		32,907		49,729
Court judgement payable (Note 11)		-		208,217
Due to employees		52,092		34,526
Due to an officer		76,804		-
Customer security deposit		103,871		89,591
Total Current Liabilities		1,620,991		3,083,171

Minority interest		862,782		248,020

Stockholders' Equity:
Preferred stock, $0.001 par value, 5,000,000 shares authorized;
none issued and outstanding as of December 31, 2008 and 2007		-		-
Common stock, $0.001 par value, 150,000,000 shares authorized;
77,001,635 shares issued and outstanding as of December 31, 2008
70,001,635 shares issued and outstanding as of December 31, 2007		77,002		70,002
Common stock to be inssued		15,750
Additional paid-in capital		3,290,185		3,144,237
Accumulated deficit		(2,117,908)		(2,636,401)
Deferred compensation		(91,801)		(497,000)
Accumulated other comprehensive income		122,535		82,980
Stockholders' Equity		1,295,763		163,818
Total Liabilities and Stockholders' Equity	$	3,779,536	$	3,495,009

The accompanying notes are an integral part of these financial statements.

SHANDONG ZHOUYUAN SEED AND NURSERY CO., LTD.

F/K/A PINGCHUAN PHARMACEUTICALS, INC.

Consolidated Statements of Operations


		For the Year Ended
		December 31,
		2008		2007
Revenues
Sale of seeds	$	3,108,918	$	702,602
Total revenue		3,108,918		702,602
Cost of good sold
Cost of seeds sold		1,960,766		514,321
Amortization of seed patents		149,473		136,621
Total cost of sales		2,110,239		650,942
Gross Profit		998,679		51,660

Governmental subsidy for one plant variety protection		567,345		-

Operating Expenses
Selling expenses		34,343		41,790
Payroll		53,308		76,061
Pension and employee benefit		39,606		32,927
Depreciation expenses		110,263		105,156
Amortization of land use rights		11,130		10,173
Bad debt expenses		149,098		-
Consultant fees		420,000		343,000
Professional fees		115,139		-
R&D expenses		18,416		-
Office expenses		24,836		-
Vehicle expenses		21,971		19,392
Travel and entertainment		32,996		39,866
Other general and administrative		27,791		44,755
Total Operating Expenses		1,058,897		713,120

Income (Loss) from Operation		507,127		(661,460)

Other Income (Expenses)
Interest income		17,398		16,241
Interest expenses		(140,607)		(185,018)
Court judgment expense		-		(208,217)
Other income (expenses)		34,707		(19,899)
Total other income (expenses)		(88,502)		(396,893)
Income (Loss) before provision for income tax, extraordinary items and minority interest		418,625		(1,058,353)
Provision for Income Tax		490,700		-
Income (Loss) before extraordinary items and minority interest		(72,075)		(1,058,353)
Extraordinary Income (Note 13)		1,162,655		-
Income before Minority Interest		1,090,580		(1,058,353)
Minority Interest		(572,087)		214,658
Net Income (loss)	$	518,493	$	(843,695)

Basic and fully diluted earnings (loss) per share	$	0.01	$	(0.01)
Weighted average shares outstanding		70,876,635		69,251,635

The accompanying notes are an integral part of these financial statements.

[ANNUALREPORT083004.GIF]

The accompanying notes are an integral part of these financial statements

SHANDONG ZHOUYUAN SEED AND NURSERY CO., LTD.

F/K/A PINGCHUAN PHARMACEUTICALS, INC.

Consolidated Statements of Cash flows


		For the Year Ended
		December 31,
		2008		2007

Operating Activities
Net income (loss)	$	518,493	$	(843,695)
Adjustments to reconcile net income (loss) to
net cash providedby operating activities:
Minority interest		572,087		(214,658)
Depreciation		110,263		105,156
Amortization		160,603		146,794
Common stocks to be issued for compensation		72,948		840,000
Deferred consultant compensation		405,199		(497,000)
Extraordinary income		(1,162,655)		-
Increase in court judgment payable		(208,217)		208,217
Changes in operating assets and liabilities:
(Increase)/Decrease in restricted cash		(514,139)		-
(Increase)/Decrease in accounts receivable		(457,797)		(6,662)
(Increase)/Decrease in inventory		52,476		109,112
(Increase)/Decrease in other receivable		(16,081)		11,978
(Increase)/Decrease in advance to suppliers		86,676		(5,252)
Increase/(Decrease) in accounts payable and accrued expenses		120,833		29,486
Increase/(Decrease) in pension and employee benefit payable		(190,377)		107,169
Increase/(Decrease) in taxes payable		440,996		-
Increase/(Decrease) in interest payable		-		172,520
Increase/(Decrease) in deferred revenue		(19,846)		20,783
Increase/(Decrease) in customer security deposit		8,139		2,593
Net cash provided by operating activities		(20,399)		186,541

Investing Activities
Purchase of fixed assets		(2,370)		(86,089)
Net cash used by investing activities		(2,370)		(86,089)

Financing Activities
Payback of short-term loans		(20,759)		(95,868)
Loans from an officer		75,612		-
Loans from employees		15,013		-
Payback of loans from employees		-		(2,037)
Net cash provided (used) by financing activities		69,866		(97,905)

Increase in cash		47,097		2,547
Effects of exchange rates on cash		(58,442)		6,198
Cash at beginning of period		11,345		2,600
Cash at end of period	$	-	$	11,345

Supplemental Disclosures of Cash Flow Information:
Cash paid (received) during year for:
Interest	$	(76,929)	$	(28,157)
Income taxes	$	-	$	-

The accompanying notes are an integral part of these financial statements.

SHANDONG ZHOUYUAN SEED AND NURSERY CO., LTD.

F/K/A PINGCHUAN PHARMACEUTICALS, INC.

Notes to Consolidated Financial Statements

NOTE 1 – ORGANIZATION AND OPERATIONS

Shandong Zhouyuan Seed and Nursery Co., Ltd. f/k/a Pingchuan Pharmaceuticals, Inc. ("Shangdong Zhouyua" or “Pingchuan” or the "Company") was organized under the laws of the State of North Carolina on July 20, 1996. The Company currently engages in the business of development, production and distribution of hybrid crop seeds in the People's Republic of China ("PRC'), through its whole owned subsidiary, Infolink Pacific Limited ("Infolink").

The structure of the Company is illustrated as following:

[ANNUALREPORT083006.GIF]

On January 30, 2007, Pingchuan issued to Mr. Wang, Zhigang and Ms. You, Li 55,000,000 shares of its capital stock in exchange for all of the capital stock of Infolink.

Infolink was incorporated on September 28, 2006 in British Virgin Islands (“BVI”) under the BVI Business Companies Act, 2004, for the purpose of seeking and consummating a merger or acquisition with a business entity organized as a private corporation, partnership, or sole proprietorship as defined by Statement of Financial Accounting Standards (SFAS) No. 7.

On October 18, 2006, Mr. Li Han Xun and Ms. You Li (collectively the "Trustees"), both of whom are citizens of the People's Republic of China ("PRC") and owned a 60% equity ownership interest in Shandong Zhouyuan Seed and Nursery Co., Ltd. ( "Zhouyuan" ), executed Trust and Indemnity Agreements with Infolink, pursuant which the Trustees assigned to Infolink all of the beneficial interest in the Trustee's equity ownership interest in Zhouyuan. These arrangements have been undertaken solely to satisfy PRC regulations, which prohibits foreign companies from owning or operating the business of sale and development of crop seeds in PRC.

Through the agreements described in the preceding paragraph Infolink is deemed a 60% beneficiary resulting in Zhouyuan being deemed a subsidiary of Infolink under the requirements of Financial Interpretation 46 (Revised) "Consolidation of Variable Interest Entities" issued by the Financial Accounting Standards Board ("FASB"). Accordingly, Infolink consolidated Zhouyuan’s financial date prior to acquiring 60% beneficial interest in Zhouyuan and thereafter.

Zhouyuan was incorporated in Laizhou City, Shandong Province, PRC on October 26, 2001. Zhouyuan engages in the business of development, production and distribution of hybrid crop seeds in PRC.

Under the Company Law of PRC, two formerly state owned companies, Laizhou Yongzhou Seed Ltd and Laizhou Agriculture Science Research and Development Ltd., were reformed and merged into one company named Laizhou Huiyuan Seed Ltd ("Huiyuan") on October 26, 2001. On December 24, 2002, Huiyuan changed its name to Shandong Zhouyuan Seed and Nursery Co., Ltd.

Zhouyuan owns 80% of Laizhou Tianzhe Seed Research and Development Co., Ltd. ("Tianzhe"), which was incorporated in Laozhou City, Shandong Province, PRC on October 24, 2004 under the Company Law of PRC. Tianzhe engages in the research and development of crop seeds.

The merger of Pingchuan with Infolink results in a capital transaction accounted for as a reverse merger. The transaction was treated for accounting purposes as a recapitalization of the accounting acquirer (Infolink) and a reorganization of the accounting acquiree (Pingchuan). Accordingly, the historical financial statements presented prior to the merger are the historical financial statements of Infolink, which includes Infolink's variable interest entity, Zhouyuan.

On April 2, 2007, the Company changed its name to Shandong Zhouyuan Seed and Nursery Co., Ltd.

Pingchuan, Infolink, Zhouyuan, and Tianzhe are hereafter referred to as the Company.

Going Concern

As reflected in the accompanying consolidated financial statements, the Company has negative cash flows from operations, a working capital deficiency of $412,373 and an accumulated deficit of $2,117,908 at December 31, 2008. These factors raise substantial doubt about its ability to continue as a going concern. In view of the matters described above, recoverability of a major portion of the recorded asset amounts shown in the accompanying consolidated balance sheet is dependent upon continued operations of the Company, which in turn is dependent upon the Company's ability to raise additional capital, obtain financing and succeed in its future operations. The financial statements do not include any adjustments relating to the recoverability and classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

Management has taken the following steps to revise its operating and financial requirements, which it believes are sufficient to provide the Company with the ability to continue as a going concern. The Company is actively pursuing additional funding and a potential merger or acquisition candidate and strategic partners, which would enhance stockholders' investment. During 2008 the Company executed a debt cancellation agreement whereby in exchange for a building and land use rights the Company extinguished approximately $1,653,000 of bank debt and interest payable. Management believes that the above actions will allow the Company to continue operations through the next fiscal year.

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The accompanying consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States of America ("US GAAP"). This basis of accounting differs from that used in the statutory accounts of the Company, which are prepared in accordance with the "Accounting Principles of China " ("PRC GAAP"). Certain accounting principles, which are stipulated by US GAAP, are not applicable in the PRC GAAP. The difference between PRC GAAP accounts of the Company and its US GAAP financial statements is immaterial.

The Company maintains its books and accounting records in PRC currency "Renminbi" ("RMB"), which is determined as the functional currency. Assets and liabilities of the Company are translated at the prevailing exchange rate at each year end. Contributed capital accounts are translated using the historical rate of exchange when capital is injected. Income statement accounts are translated at the average rate of exchange during the year. Translation adjustments arising from the use of different exchange rates from period to period are include in the cumulative translation adjustment account in shareholders' equity. Gain and losses resulting from foreign currency transactions are included in operations.

Translation adjustments resulting from this process are included in accumulated other comprehensive income (loss) in the consolidated statement of shareholders’ equity and amounted to $122,543 and $82,980 as of December 31, 2008 and 2007, respectively. The balance sheet amounts with the exception of equity at December 31, 2008 were translated at 6.85 RMB to $1.00 USD as compared to 7.31 RMB at December 31, 2007. The equity accounts were stated at their historical rate. The average translation rates applied to income statement accounts for the years ended December 31, 2007 and 2006 were 6.96 RMB and 7.62 RMB, respectively.

Use of Estimates

The preparation of 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 and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results when ultimately realized could differ from those estimates.

Cash and cash Equivalents

Cash and cash equivalents include cash on hand, deposits in banks with maturities of three months or less, and all highly liquid investments which are unrestricted as to withdrawal or use, and which have original maturities of three months or less.

Statement of cash Flows

In accordance with SFAS No. 95, “Statement of Cash Flows,” cash flows from the Company’s operations is calculated based upon the functional currency. As a result, amounts related to assets and liabilities reported on the statement of cash flows may not necessarily agree with changes in the corresponding balances on the balance sheet.

Accounts Receivable

Accounts receivable are recorded at the invoiced amount and do not bear interest. The Company extends unsecured credit to its customers in the ordinary course of business but mitigates the associated risks by performing credit checks and actively pursuing past due accounts. An allowance for doubtful accounts is established and determined based on managements' assessment of known requirements, aging of receivables, payment history, the customer's current credit worthiness, and the economic environment. Recoveries of balances previously written off are also reflected in this allowance.

Concentrations of Credit Risk

Financial instruments that subject the Company to concentrations of credit risk consist primarily of cash and cash equivalents. The Company maintains its cash and cash equivalents with high-quality institutions. Deposits held with banks may exceed the amount of insurance provided on such deposits. Generally these deposits may be redeemed upon demand and therefore bear minimal risk.

Fair Value of financial Instruments

The carrying value of financial instruments including cash and cash equivalents, receivables, accounts payable and accrued expenses, approximates their fair value at December 31, 2008 due to the relatively short-term nature of these instruments.

Advance to Suppliers

The Company purchases seeds from the suppliers throughout the operating cycle. The majority of the seeds is purchased from the growers from the end of November through the following February. Pursuant to some purchase contracts, the Company may advance certain amount of purchase price to growers.

Inventories

Inventories are stated at the lower of cost or market value. Actual cost is used to value raw materials and supplies. Finished goods and work in process are valued at First-In-First-Out (FIFO) method.

Valuation of Long-Lived Assets

The Company periodically analyzes its long-lived assets for potential impairment, assessing the appropriateness of lives and recoverability of unamortized balances through measurement of undiscounted operating cash flows on a basis consistent with accounting principles generally accepted in the United States of America.

Property, Plant and Equipment

Property, plant and equipment are carried at cost. The cost of repairs and maintenance is expensed as incurred; major replacements and improvements are capitalized.

When assets are retired or disposed of, the cost and accumulated depreciation are removed from the accounts, and any resulting gains or losses are included in income in the year of disposition

Depreciation is calculated on a straight-line basis over the estimated useful life of the assets. The percentages or depreciable life applied are:

Property and plant 30 years

Machines and equipment 7 years

Office equipment 5 years

Motor vehicles 5 years

Land Use Right

All land belongs to the State in PRC. Enterprises and individuals can pay the State a fee to obtain a right to use a piece of land for commercial purpose or residential purpose for a period of 50 years or 70 years, respectively. The right of land usage can be sold, purchased, and exchange in the market.

The Company obtained the right to use a piece of land at which its headquarter building is located for a period of 50 years, from December 30, 1998 to December 30, 2045, and a piece of land at which its packing facilities and warehouse are located for a period of 50 years from September 10, 2003 to September 10, 2053. We amortize the cost of these and usage rights over a period of 50 years, using straight-line method with no residual value.

Acquired Seed Patents, net

Acquired intangible assets consist primarily of purchased technology rights and are stated at cost less accumulated amortization. Amortization is calculated on a straight-line basis over the estimated useful lives of these assets of an average of 10 years and recorded in cost of revenues.

Short-Term Loans

Short-term loans are temporally loans from third parties to finance the Company’s operation due to lack of cash resources. These loans are unsecured, non-interest bearing and have no fixed terms of repayment, therefore, deemed payable on demand. Cash flows from these activities are classified as cash flows from financing activates.

Due to Employees

Due to employees are temporally short-term loans from our employees to finance the Company’s operation due to lack of cash resources. These loans are unsecured, non-interest bearing and have no fixed terms of repayment, therefore, deemed payable on demand. Cash flows from these activities are classified as cash flows from financing activates.

Revenue Recognition

The Company derives its revenue primarily from the sale of various branded conventional seeds and branded seeds with biotechnology traits. Revenue is recognized when pervasive evidence of an arrangement exists, products have been delivered, the price is fixed or determinable, collectibility is reasonably assured and the right of return has expired. The estimated amounts of revenues billed in excess of revenues recognized are recorded as deferred revenues.

Research and Development Costs

Research and development costs relating to the development of new products and processes, including significant improvements and refinements to existing products, are expensed as incurred. The Research and development cost was immaterial for the Company for the years ended December 31, 2008 and 2007, respectively, and was included into general and administration expenses.

Advertising Costs

Advertising costs are expensed as incurred and included as part of selling and marketing expenses. Advertising expenses were $7,963 and $3,407 for the years ended December 31, 2008 and 2007, respectively.

Pension and Employee Benefits

Full time employees of the PRC entities participate in a government mandated multi-employer defined contribution plan pursuant to which certain pension benefits, medical care, unemployment insurance, employee housing fund and other welfare benefits are provided to employees. Chinese labor regulations require the Company to accrue for these benefits based on certain percentages of the employees' salaries. The total provisions for such employee benefits were $39,606 and $32,972 for the years ended December 31, 2008 and 2007, respectively.

Statutory Reserves

Pursuant to the laws applicable to the PRC, PRC entities are required to make appropriations to three non-distributable reserve funds, the statutory surplus reserve, statutory public welfare fund, and discretionary surplus reserve, based on after-tax net earnings as determined in accordance with the PRC GAAP. Appropriation to the statutory surplus reserve should be at least 10% of the after-tax net earnings until the reserve is equal to 50% of the Company's registered capital. Appropriation to the statutory public welfare fund is 10% of the after-tax net earnings. The statutory public welfare fund is established for the purpose of providing employee facilities and other collective benefits to the employees and is non-distributable other than in liquidation. No appropriations to the discretionary surplus reserve are made at the discretion of the Board of Directors. The statutory surplus reserve fund and statutory public welfare fund are included into retained earnings in the balance sheet presented. Since the Company has been accumulating deficiency, no such reserve funds have been made.

Income Taxes

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. Deferred tax assets and liabilities are measured using enacted tax rates in the US and the PRC expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.

Earnings (Loss) Per Share

The Company reports earnings per share in accordance with the provisions of SFAS No. 128, “Earnings Per Share.” SFAS No. 128 requires presentation of basic and diluted earnings per share in conjunction with the disclosure of the methodology used in computing such earnings per share. Basic earnings (loss) per share is computed by dividing income (loss) available to common shareholders by the weighted-average number of common shares outstanding during the period. Diluted earnings per share is computed similar to basic earnings per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares had been issued and if the additional common shares were dilutive. There are no potentially dilutive securities for the years ended December 31, 2008 and 2007, respectively.

Comprehensive Income

Statement of Financial Accounting Standards (SFAS) No. 130, “Reporting Comprehensive Income,” establishes standards for reporting and display of comprehensive income, its components and accumulated balances. Comprehensive income as defined includes all changes in equity during a period from non-owner sources. Accumulated comprehensive income, as presented in the accompanying statement of changes in shareholders' equity consists of changes in unrealized gains and losses on foreign currency translation. This comprehensive income is not included in the computation of income tax expense or benefit.

Segment Reporting

SFAS No. 131 “Disclosures about Segments of an Enterprise and Related Information” establishes standards for reporting information about operating segments on a basis consistent with the Company’s internal organization structure as well as information about geographical areas, business segments and major customers in financial statements. The Company currently plans on operating in one principal business segment. Therefore, segment disclosure is not presented.

Related Parties

For the purposes of these financial statements, parties are considered to be related to the Company if the Company has the ability, directly or indirectly, to control the party or exercise significant influence over the party in making financial and operating decisions, or vice versa, or where the Company and the party are subject to common control or common significant influence. Related parties may be individuals or other entities.

Reverse Stock Split

Effective on January 2, 2007, the Company filed with the Secretary of State of the State of North Carolina Articles of Amendment to its Articles of Incorporation. The amendment effected a reverse stock split of the Company's common stock in the ratio of 1:6. The number of common stocks issued and outstanding immediately after the reverse stock split was 12,001,635, including an addition of 2,234 shares for rounding up fractional shares. All share and per share information included in these consolidated financial statements have been adjusted to reflect this reverse stock split.

Recent Accounting Pronouncements

In June 2008, the Financial Accounting Standards Board (“FASB”) issued FSP No. EITF 03-6-1, Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating Securities (“FSP EITF 03-6-1”). FSP EITF 03-6-1 concludes that unvested share-based payment awards that contain rights to receive non-forfeitable dividends or dividend equivalents are participating securities, and thus, should be included in the two-class method of computing earnings per share (“EPS”). FSP EITF 03-6-1 is effective for fiscal years beginning after December 15, 2008, and interim periods within those years. Early application of EITF 03-6-1 is prohibited. It also requires that all prior-period EPS data be adjusted retrospectively. We have not yet determined the effect, if any, of the adoption of this statement on our financial condition or results of operations.

In April 2008, the FASB issued Staff Position FAS 142-3, Determination of the Useful Life of Intangible Assets (“FSP FAS 142-3”) which amends the factors an entity should consider in developing renewal or extension assumptions used to determine the useful life of a recognized intangible asset under FAS No. 142, Goodwill and Other Intangible Assets (“FAS No. 142”). FSP FAS 142-3 applies to intangible assets that are acquired individually or with a group of assets and intangible assets acquired in both business combinations and asset acquisitions. It removes a provision under FAS No. 142, requiring an entity to consider whether a contractual renewal or extension clause can be accomplished without substantial cost or material modifications of the existing terms and conditions associated with the asset. Instead, FSP FAS 142-3 requires that an entity consider its own experience in renewing similar arrangements. An entity would consider market participant assumptions regarding renewal if no such relevant experience exists. FSP FAS 142-3 is effective for year ends beginning after December 15, 2008 with early adoption prohibited. We have not yet determined the effect, if any, of the adoption of this statement on our financial condition or results of operations.

In March 2008, the FASB issued Statement of Financial Accounting Standards No. 161, “Disclosures about Derivative Hedging Instruments and Hedging Activities – an amendment of FASB Statement No. 133” (“SFAS 161”). SFAS 161, which is effective January 1, 2009, requires enhanced qualitative and quantitative disclosures with respect to derivatives and hedging activities. The Management does not expect that the adoption of SFAS No. 161 would have a material effect on the Company’s financial position and results of operations.

In December 2007, the FASB issued Statements of Financial Accounting Standards No. 141 (revised 2007), “Business Combinations” (“SFAS 141R”) and No. 160, “Noncontrolling Interests in Consolidated Financial Statements – an amendment to ARB No. 51” (“SFAS 160”). Both SFAS 141R and SFAS 160 are to be adopted effective January 1, 2009. SFAS 141R requires the application of several new or modified accounting concepts that, due to their complexity, could introduce a degree of volatility in periods subsequent to a material business combination. SFAS 141R requires that all business combinations result in assets and liabilities acquired being recorded at their fair value, with limited exceptions. Other areas related to business combinations that will require changes from current GAAP include: contingent consideration, acquisition costs, contingencies, restructuring costs, in process research and development and income taxes, among others. SFAS 160 will primarily impact the presentation of minority or noncontrolling interests within the Balance Sheet and Statement of Operations as well as the accounting for transactions with noncontrolling interest holders. Management does not expect that the adoption of SFAS No. 141 (revised 2007) and SFAS No. 160 would have a material effect on the Company’s financial position and results of operations.

In February 2007, the FASB issued Statement of Financial Accounting Standards No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities – Including an amendment of FASB Statement No. 115” (“SFAS 159”). SFAS 159 provides an option to report certain financial assets and liabilities at fair value primarily to reduce the complexity and level of volatility in the accounting for financial instruments resulting from measuring related financial assets and liabilities differently under existing GAAP. SFAS 159 is effective January 1, 2008. The adpotion of SFAS 159 having a material impact on its financial statements.

In September 2006, the FASB issued SFAS No. 157 “Fair Value Measurements”. SFAS No. 157 defines fair values, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. This Statement shall be effective for financial statements issued for fiscal years beginning after November 25, 2007, and interim periods within those fiscal years. Earlier application is encouraged provided that the reporting entity has not yet issued financial statements for that fiscal year, including financial statements for an interim period with that fiscal year. The provisions of this statement should be applied, except in some circumstances where the statement shall be applied retrospectively. The adoption of SFAS No. 157 did not have a material effect on the Company’s financial position and results of operations.

In July 2006, the FASB issued FASB Interpretation (“FIN”) No. 48, “ Accounting for Uncertainty in Income Taxes,” which prescribes a comprehensive model for how a company should recognize, measure, present and disclose in its financial statements uncertain tax positions that the company has taken or expects to take on a tax return (including a decision whether to file or not to file a return in a particular jurisdiction). The accounting provisions of FIN No. 48 are effective for fiscal years beginning after December 15, 2006. The adoption of FIN No. 48 did not have a material effect on the Company's financial position or results of operations.

NOTE 3 – RESTRICTED CASH

On January 22, 2008, the Company entered into agreements with two employees to open bank accounts in their individual names, to be held and used for the benefit of the Company. During 2008 and currently, the Company has used these accounts as its operating bank accounts.

There were no requirements or contingencies with respect to this restricted cash balance beyond the amounts being held in accounts in the employee names.

NOTE 4 – ACCOUNTS RECEIVABLE

Accounts receivable consists of the following:


		December 31,
		2008		2007
Accounts receivable-trade	$	708,557	$	278,713
Allowance for doubtful accounts		(223,930)		(260,333)
Accounts receivable-trade, net	$	484,627	$	18,380

We use indirect method to write off accounts receivable. The bad debt expenses was $0 and $0 for the year ended December 31, 2008 and 2007, respectively.

NOTE 5 – INVENTORIES

Inventories consist of the following:


		December 31,
		2008		2007
Finished goods	$	99,538	$	121,923
Supply and packing materials		43,078		61,677
	$	142,616	$	183,600

NOTE 6 – LAND USE RIGHT

The following is a summary of land use right, less amortization:


		December 31,
		2008		2007
Land use right	$	262,613	$	494,255
Amortization		(27,574)		(42,188)
	$	235,039	$	452,067

Amortization expense charged to operations was $11,130 and $10,173 for the years ended December 31, 2008 and 2007, respectively.

NOTE 7 – PROPERTY AND EQUIPMENT

The following is a summary of property, plant and equipment-at cost, less accumulated depreciation:


		December 31,
		2008		2007
Property and plant	$	1,707,671	$	1,948,984
Machinery and equipment		202,797		189,391
Office equipment		20,665		17,801
Motor vehicles		104,812		98,222
Accumulated depreciation		(478,620)		(426,870)
Property and equipment, net	$	1,557,325	$	1,827,528

NOTE 8 – ACQUIRED SEED PATENTS

The following is a summary of acquired seed patents, less amortization:


		December 31,
		2008		2007
Acquired seed patents	$	1,518,295	$	1,422,826
Amortization		(1,088,111)		(877,409)
	$	430,184	$	545,417

Amortization expense charged to operations was $149,473 and $136,621 for the years ended December 31, 2008 and 2007, respectively.

NOTE 9 – RECEIVABLE FROM SALE OF LAND USE RIGHT

In 2004, the Company sold land use rights to a real estate development company for $1,228,858. The real estate development company owes the Company $309,025 as of December 31, 2004. The parties agreed that the real estate development company would pay interest annually at 7.488% on $126,817 (RMB 1,000,000) of the $309,025 and the rest of the balance bears no interest. The Company received interest payments of $2,031 and $3,942 for the years ended December 31, 2008 and 2007, respectively. $24,846 and $9,654 of interest was due to the Company as of December 31, 2008 and 2007, respectively.

The receivable from sale of land use right consists of the following:


		December 31,
		2008		2007
Balance bearing interest at 7.488%	$	145,896	$	136,722
Balance bearing on interest		202,474		189,743
	$	348,370	$	326,465

NOTE 10 – BANK LOANS

Bank loans consist of the following as of December 31, 2007:


		Loan		Annual
Financial Institutions		Amount	Duration	Interest Rate	Collateral

Agricultural Bank of China	$	560,561	04/21/04 - 04/21/05	6.903%	Headquarter Building and land usage right
Agricultural Bank of China		546,889	11/26/04 - 11/26/05	7.488%	Guaranteed by a real estate development company
Agricultural Bank of China		273,444	01/09/05 - 01/07/06	7.488%	Usage right of the land located in Chenggang Street
*Agricultural Bank of China		68,361	11/26/04 - 11/26/05	7.488%	Guaranteed by a real estate development company
	$	1,449,255

The Company defaulted on these bank loans, totally $1,449,255 , as of December 31, 2007. The Company also defaulted on bank loan interest payments of $315,579 as of December 31, 2007. However, these bank loans and the interest accrued were paid off in 2008 as more fully disclosed in Note 13.

* In 2004, the Company sold the usage right of a piece of land, which the Company used to secure its bank loans, to a real estate development company. The real estate company agreed to guarantee these bank loans.

Interest expense for these bank loans was $185,018 for the year ended December 31, 2007.

NOTE 11 – COURT JUDGEMENT PAYABLE

On August 1, 2006 Greentree Financial Group, Inc. ("Greentree"), a former consultant to a subsidiary of the Company, filed a breach of contract complaint in the Superior Court in Mecklenberg County, North Carolina for non payment of contractual obligations for 2004 and 2005. The claim is for $49,000 in cash and $40,000 worth of stock as compensatory damages or $80,000 in liquidated damages. The Company failed to appear to the Court, and the Court rendered a judgment, which orders the Company to pay the plaintiff a sum of $201,500, with interest thereon at the rate of 8.000% per annum from the date of Entry of the Judgment until paid; and for the costs of this action, in full, to be taxed by the Clerk. Although the Company planned to apparel the case, the Company recorded a litigation expense of $208,217 in 2007, and a current liability of $208,217 as of December 31, 2007, based on the court judgment.

On December 24, 2008, the Company and Greentree settled the lawsuit. The shareholders of the Company agreed to transfer 4,000,000 shares of the Company's common stock to Greentree, and Greentree agreed not to require any consultant fees payment from the Company. The settlement did not incur any costs to the Company.

NOTE 12 – COMMON STOCK

On January 18, 2007, The Company entered into a Share Exchange Agreement with Mr. Wang, Zhigang and Ms. You, Li, who are the shareholders of Infolink, pursuant which the Company will issue to Messrs. Wang and You 55,000,000 (330,000,000 pre-split) shares of its common stock in exchange for all of the capital stock of Infolink.

On April 5,2007, the Company engaged a consultant for a eighteen-month period ended October 4, 2008. The terms of the agreement are for the consultant to receive 800,000 shares of common stock valued at $0.28 per share, totaling $224,000, which will be amortized over the beneficial period. The consultant assists the Company in establish two distribution centers in the Center Region, PRC.

On April 5,2007, the Company engaged another consultant for a twenty-four-month period ended April 4, 2009. The terms of the agreement are for the consultant to receive 1,200,000 shares of common stock valued at $0.28 per share, totaling $336,000, which will be amortized over the beneficial period. The consultant assists the Company in website design, building, maintenance, and hosting.

On April 5,2007, the Company engaged another consultant for a twenty-four-month period ended April 4, 2009. The terms of the agreement are for the consultant to receive 1,000,000 shares of common stock valued at $0.28 per share, totaling $280,000, which will be amortized over the beneficial period. The consultant assists the Company in establish two distribution centers in the Southwest Region, PRC.

In November 2008, the Company issued 7,000,000 shares of common stock to an individual for $72,948 (RMB 500,000).

In December 2008, the Company hired two directors and one officer. The Company will issue 630,000 shares of common stock as compensation for their services on the first anniversary of their appointments to the positions. Based on the market price on the date of appointments, the cost of 630,000 shares of common stock was $15,750, which will be amortized over their service period.

NOTE 13 – EXTRAORDINARY INCOME

Extraordinary income consists of the following:


		For the Year Ended December 31,
		2008		2007
1 Extraordinary income from debt restriction	$	1,034,438	$	-
2 Extraordinary income from lawsuit settlement		128,217		-
Total extraordinary income		1,162,655		-
Provision for income tax		-		-
Extraordinary income, net of income tax	$	1,162,655	$	-

1 Extraordinary income from debt restriction

One December 26, 2008, Zhouyuan executed a debt restruction agreement with the Laizhou Branch of Agriculture Bank of China, pursuant to which, Zhouyuan agreed to transfer the ownership of its headquarters’ building located in Jianxindong Street and the land use right attached to the bank to satisfy all the bank loans and interest accrued that Zhouyuan owed.

The sum of bank loans and interest accrued were $ 1,652,629 (RMB 11,327,447), and the carrying value of the office building and the land use right attached was $ 519,756 (RMB 3,562,515) resulting a gain of $ 1,034,438 (RMB 7,198,560), after netting a sales tax of $ 98,435 (RMB 566,372).

2 Extraordinary income from lawsuit settlement

On December 24, 2008, the Company and Greentree settled the lawsuit. The shareholders of the Company agreed to transfer 4,000,000 shares of the Company's common stock owned by them to Greentree, and Greentree agreed not to require any consultant fees payment from the Company. Since this settlement did not incur any costs to the Company, the Company reversed the litigation expense of $208,217 in 2007 net of $80,000 for common stock contributed by its shareholders or $128,217. The $80,000 of stock (4,000,000 @ $.02 per share) was recorded as additional paid in capital.

NOTE 14 – MINORITY INTEREST


		For the Year Ended December 31, 2008
		Name of subsidiary
		and minority interest percentage
		Shandong
		Zhouyuan		Tianzhe		Parent
		40%		20%		Company		Total
Net income (loss)	$	1,554,399	$	(81,524)	$	(284,096)	$	1,188,779
Income (loss) from subsidiary (equity method)		(81,524)		-		883,725
Other comprehensive income (loss)-effects of
foreign currency conversion		64,819		(5,572)		38,893
Comprehensive income (loss)	$	1,537,694	$	(87,096)	$	638,522

						Total Minority
						Interest
Minority interest income (loss)	$	589,150	*$	-	*$	589,150		589,150
Other comprehensive income (loss)-effects of
foreign currency conversion		25,928		-		25,928
Minority interest income (loss)	$	615,078	$	-	$	615,078
Majority interest income (loss)							$	599,629

		For the Year Ended December 31, 2007
		Name of subsidiary
		and minority interest percentage
		Shandong
		Zhouyuan		Tianzhe		Parent
		40%		20%		Company		Total
Net income (loss)	$	(408,798)	$	(98,338)	$	(551,217)	$	(1,058,353)
Income (loss) from subsidiary (equity method)		(98,338)		-		(292,478)
Other comprehensive income (loss)-effects of
foreign currency conversion		50,592		(1,672)		30,354
Comprehensive income (loss)	$	(456,544)	$	(100,010)	$	(813,341)

						Total Minority
						Interest
Minority interest income (loss)	$	(207,757)	*$	(6,901)	*$	(214,658)		(214,658)
Other comprehensive income (loss)-effects of
foreign currency conversion		33,005		(334)		32,671
Minority interest income (loss)	$	(174,752)	$	(7,235)	$	(181,987)
Majority interest income (loss)							$	(843,695)

* Since the minority interest was zero, the majority absorbed all current period loss.

** Since the minority interest's share of current year loss brought the minority interest below zero, the majority absorbed the current period loss up to the extent that brought the minority interest to zero.

Balance of minority interest consists of the following:


		Name of subsidiary
		and minority interest percentage
		Shandong
		Zhouyuan		Tianzhe
		40%		20%		Total
Balance at December 31, 2006	$	422,773	$	7,235	$	430,008
Minority interest income (loss)		(174,753)		(7,235)		(181,988)
Balance at December 31, 2007		248,020		-		248,020
Minority interest income (loss)		615,077		-		615,077
Balance at December 31, 2008	$	863,097	$	-	$	863,097

NOTE 15 – SEGMENT REPORTING

Major Products

The major products consist of the following:


			For the Year Ended December 31,
				2008			2007
					Percentage			Percentage
	Kind of the	Name			of Total			of Total
	Seed	of the Seed		Amount	Revenue		Amount	Revenue

	Revenue

1	Corn seed	Xinyuedan No. 4	$	1,683,444	54.15%	$	55,401	7.89%
2	Corn seed	Huiyuan No. 20		773,564	24.88%		215,194	30.63%
3	Corn seed	Ludan 981		187,129	6.02%		76,516	10.89%
4	Corn seed	Nongda 108		137,811	4.43%		38,668	5.50%
5	Corn seed	Others		326,971	10.52%		316,823	45.09%
		Total		3,108,919	100.00%		702,602	100.00%

	Cost of sales

1	Corn seed	Xinyuedan No. 4	$	1,109,133	52.56%	$	48,455	7.44%
2	Corn seed	Huiyuan No. 20		452,726	21.45%		223,383	34.32%
3	Corn seed	Ludan 981		206,081	9.77%		69,466	10.67%
4	Corn seed	Nongda 108		114,294	5.42%		36,848	5.66%
5	Corn seed	Others		228,005	10.80%		272,790	41.91%
		Total		2,110,239	100.00%		650,942	100.00%

	Gross Profit

1	Corn seed	Xinyuedan No. 4	$	574,311	57.51%	$	6,946	13.45%
2	Corn seed	Huiyuan No. 20		320,838	32.13%		(8,189)	-15.85%
3	Corn seed	Ludan 981		(18,952)	-1.90%		7,050	13.65%
4	Corn seed	Nongda 108		23,517	2.35%		1,820	3.52%
5	Corn seed	Others		98,966	9.91%		44,033	85.24%
		Total	$	998,680	100.00%	$	51,660	100.00%

Major Customers

The Company has a diversified customer base. There were four major customers who made sales approximately 5% or more of the Company’s total sales as summarized in the following:


	For the Year Ended December 31,
		2008			2007
			Percentage			Percentage
			of Total			of Total
Major Customer		Revenue	Revenue		Revenue	Revenue

Henan Zhengzhou Zhongyi Technology Co., Ltd.	$	1,512,248	48.64%	$	-	-
Mr. Xu, xilin-Guozi Town, Changyi City		12,827	0.41%		91,986	13.09%
Mr. Xu, Xinqiang-Jiudian Town, Pingdu City		15,600	0.50%		84,191	11.98%
Mr. Han, Yongkuan-Cangzhou City, Hebei Province		-	-		72,616	10.34%
Total	$	1,540,675	49.55%	$	248,793	35.41%

Major Suppliers

The Company has a diversified Supplier base. There were four major customers who made sales approximately 5% or more of the Company’s total sales as summarized in the following:


	For the Year Ended December 31,
		2008			2007
			Percentage			Percentage
			of Total			of Total
Major Suppliers		Revenue	Revenue		Revenue	Revenue

Gansu Province Jinxibei Seed Co., Ltd.	$	1,093,037	57.33%	$	-	-
Mr. Chen, Hengjie-Pinglidian town, Laizhou City		153,601	8.06%		29,598	7.45%
Mr. Sun, Xiangcun-Mudan Town, Here City		130,805	6.86%		-	-
Mr. Ren, Zhaofu-Zuo Town, Laizhou City		125,984	6.61%		1,414	0.36%
Total	$	1,503,427	78.86%	$	31,012	7.81%

NOTE 16 – INCOME TAX

The Company’s operating subsidiaries, Zhouyuan and Tianzhe, are governed by the Income Tax Law of PRC concerning Foreign Investment Enterprises and Foreign Enterprises and various local income tax laws ("the Income Tax Laws").

Beginning January 1, 2008, the new Enterprise Income Tax (“EIT”) law has replaced the old laws for Domestic Enterprises (“DES”) and Foreign Invested Enterprises (“FIEs”).

The key changes are:

The new standard EIT rate of 25% replaces the 33% rate applicable to both DES and FIEs, except for High Tech companies that pay a reduced rate of 15%;

Companies established before March 16, 2007 continue to enjoy tax holiday treatment approved by local government for a grace period of either for the next 5 years or until the tax holiday term is completed, whichever is sooner.

In addition, the new EIT also grants tax holidays to entities operating in certain beneficial industries, such as the agriculture, fishing, and environmental protection. Entities in beneficial industries enjoy a three-year period tax exempt and a three-year period with 50% reduction in the income tax rates.

The Company’s operating subsidiaries, Zhongke and Lvxiang, are subject to effective income tax rate of 25% beginning from January 1, 2008.

The provision for income taxes consisted of the following:


		Year ended
		December 31,
		2008		2007

Provision for PRC national income tax	$	490,985	$	-

The following table reconciles the PRC statutory rates to the Company’s effective tax rate:


	Year ended
	December 31,
	2008	2007
U.S. statutory rate	34.0%	34.0%
Foreign income not recognized in USA	-34.0%	-34.0%
PRC income tax rate	25.0%	30.0%
Effect of tax holiday	-	-30.0%
Effective income tax rate	25.0%	-

At December 31, 2007, the Company had net losses of approximately $2,636,401 carried from prior years. Although the PRC Income Tax Law allows the enterprises to offset their future net income with operating losses carried forward, enterprise need approval from local tax authority before they can claim such tax benefit, and the outcome of the application is generally uncertain. Therefore, the Managements established a 100% valuation allowance for the losses carried forward and no deferred tax assets have been recorded.

NOTE 17 – COMMITMENTS AND CONTINGENCIES

The Company faces a number of risks and challenges not typically associated with companies in North America and Western Europe, since its assets exist solely in the PRC, and its revenues are derived from its operations therein. The PRC is a developing country with an early stage market economic system, overshadowed by the state. Its political and economic systems are very different from the more developed countries and are in a state of change. The PRC also faces many social, economic and political challenges that may produce major shocks and instabilities and even crises, in both its domestic arena and in its relationships with other countries, including the United States. Such shocks, instabilities and crises may in turn significantly and negatively affect the Company's performance.

NOTE 18 – SUBSEQUENT EVENT

In January 2009, Ms. Liu, Yiqun, CFO of the Company, lent $148,700 to the Company to finance its operation. The loan was unsecured and for the period January 1, 2009 through May 30, 2009, and the monthly interest is $1,022.

___________________________________________________________________________________________________________

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosures

None.

Item 9A. Controls and Procedures

Evaluation of Disclosure Controls :

We evaluated the effectiveness of our disclosure controls and procedures as defined in Rule 13a-15(e) or Rule 15a-15(e) under the Securities Exchange Act of 1934, as amended, and internal control over financial reporting. This evaluation was conducted with the participation of our chief executive officer and chief financial officer.

Disclosure controls are controls and other procedures that are designed

to ensure that information that we are required to disclose in the reports we file pursuant to the Securities Exchange Act of 1934 is recorded, processed, summarized and reported, within the time periods specified in the Commission's rules and forms.

Conclusions:

Based upon their evaluation of our controls, the chief executive officer and principal financial officer have concluded that, subject to the limitations noted above, the disclosure controls are effective providing reasonable assurance that material information relating to us is made known to management on a timely basis during the period when our reports are being prepared. There were no changes in our internal controls over financial reporting occurred during the fiscal year covered by this report that have materially affected, or are reasonably likely to materially affect our internal controls.

It should be noted that any system of controls is based in part upon certain assumptions designed to obtain reasonable (and not absolute) assurance as to its effectiveness, and there can be no assurance that any design will succeed in achieving its stated goals. Notwithstanding this caution, the CEO and CFO have reasonable assurance that the disclosure controls and procedures were effective as of December 31, 2008.

PART III

Item 10. Directors, Executive Officers, Promoters And Control Persons

The officers and directors of the Company are:

Name Age Term Served as Position with the Company

Member of Committee

Zhigang Wang 46 2002 CEO, Chairman

Jian Zhou 45 December 2008 Vice Chairman

Zhicheng Wang 43 2007 Director

ChiMing Chen 2007 Director

Chi Tai 42 2007 Director

Yiqun Liu 2008 CFO

Directors hold office until the annual meeting of the Company’s stockholders and the election and qualification of their successors. Officers hold office, subject to removal at any time by the Board, until the meeting of directors immediately following the annual meeting of stockholders and until their successors are appointed and qualified.

Zhigang Wang , Chairman, Founder, CEO and CFO, has been employed as its Chairman and General Manager since then. Mr. Wang was awarded a degree in Agriculture by The Shandong Agriculture University in 1997. In 1992 he was awarded a degree in Vegetable Protection by The Nanjing Agriculture University.

Jian Zhou , Vice Chairman, joined the company since December 2008; serves as Chairman of Sichuan Jiancheng Technology Industry Co., Ltd. and has held the position since 2004; and serves as Chairman of Sichuan Southwest Jiaotong University Long Hui Software Development Co., Ltd. and has served in that capacity since 2005; Director and 17% Common Stock owner of American Nano Silicon Technology, Inc (ANNO.OB); Director of China Shoe Holdings, Inc (CHSH.OB).

Zhicheng Wang , Director, has been employed by Zhouyuan since 2002, initially as Manager and then as General Manager of the marketing of the Company. In 1986 Mr. Wang was awarded a degree in Civil Engineering by The Shandong Agriculture Project College.

Chi Ming Chen . Since 2003 Mr. Chen has been employed by China World Trade Corporation (OTC Bulletin Board: CWTD), initially as General Manager and now as Chief Executive Officer. China World Trade Corporation is engaged in trade agency and investment consulting for Chinese businesses. From 2000 to 2001 Mr. Chen was employed as Chief Executive Officer of Asia Information Source Holding Company, which provided online business information. In 1991 Mr. Chen was awarded a Masters Degree in Law by the University of Lancaster. In 1987 he was awarded a Masters Degree in Physics by the Chinese University of Hong Kong.

Chi Tai , Independent Director, US Citizen, joined the company since 2007; he is Director of Silicon Valley of Chinese Chamber of Commerce since 2005, and the chief executive officer of www.chineseticketbox.com and has held the position since 1992. Mr. Tai is also the person in charge of Fremont Peralta Auto Center and has been since 1992.

Yiqun Liu, CFO. Prior to join the Company in November 2008 , she served as the Chief Financial Officer of Fuxiangju Hotel of Shandong Province of China from January 2008 to November 2008. From May 2006 to August 2007, Ms. Liu was the Director of Finance for the Beijing branch of Chengdu Sanhe Group. From September 2004 to April 2006 Ms. Liu served as an assistant to the general manager of Chengdu Sanhe Group. From January 2003 to July 2004, Ms. Liu held the position of in house accountant for Beijing Tianyu Logistics Company, Dongcheng District branch office.

Audit Committee

Name Age Term Served as Position with the Company

Member of Committee

Guang Lu 38 2008 Chairman of Audit Committee

Xiyu Man 38 2008 Member of Audit Committee

Guixing Gao 36 2008 Member of Audit Committee

Guang Lu, Chairman of Audit Committee. He is also the manager of the seed processing and inspection center of the Company.

Xiyu Man , Member of the Committee. He is a famous corn seed expert.

Guixing Gao, Member of the Committee. He is also the manager of wheat seed research center.

Compensation Committee:

Name Age Term Served as Position with the Company

Member of Committee

Yiqun Liu 2009 Chairman of the Committee

ShuRong Zhao 45 2009 Member of the Committee

GuoYi Jiang 35 2009 Member of the Committee

ChongLi Jiang 2009 Member of the Committee

Derong Hao 2009 Member of the Committee

ShuRong Zhao, Member of the Committee . She is also the chief accountant, and vice manager of the financial center of the Company .

GuoYi Jiang , Member of the Committee. He is the manager of the seed production.

Derong Hao , Member of the Committee. He is the vice manager of the administrative office of the Company.

ChongLi Jiang , Member of the Committee. She is the manager of the financial center of the Company.

There are no family relationships among the Officers, Directors or the Members of the Audit Committee.

Code of Ethics

The Company adopted the Code of Ethics pursuant to Item 406 of Regulation S-B, of which all our officers and employees are bound by. The Code of ethics is intended to promote honest and ethical conduct, full and accurate reporting, and compliance with the law. A copy of the Code of Ethics is included as Exhibit 14 to this registration statement. The full text of the Code of Ethics also posted in the Company's website:

http://www.zhouyuanseed.com/ch/index.asp.

A printed copy of the Code of Ethics may be obtained free of charge by writing to the Corporate Secretary at: Shandong Zhouyuan Seed and Nursery Co., Ltd, 1688 ChengGangZhongLu, Laizhou, Shandong Province, Peoples Republic of China.

Item 11. Executive Compensation

The following table sets forth all compensation awarded to, earned by, or paid by Zhouyuan to Wang Zhigang, its Chief Executive Officer, for services rendered in all capacities to the Company during the years ended December 31, 2008, and 2007. There were no executive officers whose total salary and bonus for the fiscal year ended December 31, 2006 exceeded $100,000.

Stock Option Other

Year Salary Bonus Awards Awards Compensation

Zhigang Wang 2008 $2,100

2007 $1,667

We do not have any compensation arrangements with our directors.

At this time, we do not anticipate awarding stock options to anyone.

All of our executive officers serve on an at-will basis.

Item 12 . Security Ownership of Certain Beneficial Ownership Management

We have set forth in the following table information, which is relative to our common stock beneficially owned on December 31, 2008 for:

(1) each shareholder we know to be the beneficial owner of 5% or more

of our outstanding common stock;

(2) each of our executive officers and directors; and

(3) all executive officers and directors as a group.

As of December 31, 2008, there were 77,001,635 shares of our Common Stock

issued and outstanding.

Name and Address of Amount of Percent of Class

Beneficial Owner Beneficial Owner Before Offering

Zhigang Wang 3,050,300

Jian Zhou 7,000,000

Zhicheng Wang 128,000

Total: 10,178,300 13.2%

Item 13. Certain Relationships and Related Transactions

On November 10, 2008, Vice Chairman of the Board of Directors, Jian Zhou purchased 7,000,000 shares of Common Stock for aggregate CHY 500,000 from the Company.

Mr. Zhou will receive 250,000 shares of the Company’s common stock and Mr. Tai will receive 200,000 shares of the Company’s common stock at the first anniversary of their appointments to the Company’s board of directors.

Ms. Liu will receive 180,000 shares of the Company’s common stock as compensation for her services as the Company’s Chief Financial Officer on the first anniversary of her appointment to the position.

Item 14. Principal Accountant Fees and Services.

Audit Fees:

The fees billed by Kempisty & Company for professional services rendered for reviewing quarterly, and auditing the Company’s annual financial statements for the fiscal year ended June 2008 were $ 58,494.

The fees billed by Kempisty & Company for professional services rendered for reviewing quarterly, auditing the Company’s annual financial statements for the fiscal year ended June 2007 were $ 37,000.

Audit related fees:

None

Tax Fees:

None

All Other Fees:

None

Pre-Approval Policies and Procedures:

All of the auditing and permissible non-auditing services were approved in advance by the Board of Directors in accordance with its procedure. An estimate for the service to be performed should be submitted to our Board of Directors by the accountants before they were engaged to perform particular services.

PART IV

Item 15. Exhibits.

Exhibit Filed ___ References In______

No Description_______________________ herewith_ Form Exhibit Filing Date

3.1 Articles of Inc. Amended 8K 3.1 01/05/2007

3.2 Bylaws SB2 3.2 12/21/2000

4.1 2007 Equity Incentive Plan S-8 06/08/2007

10.1 Agreement on Joint Development of Zhouyuan

Building Project with Jixi Xingcheng Real

Estate Development LTD. 8K 07/19/2007

14.1 Code of Ethics X

21.1 List of Subsidiaries 10KSB 04/15/2008

23.1 Consent of Independent Registered

Public Accounting Firm X

31 Section 302 Certification

of CEO & CFO X

32 Section 906 Certification

of CEO & CFO X

99.1.1 Audit Committee Charter X

99.1.2 Compensation Committee Charter X

Signature:

Pursuant to the requirements of the Securities Exchange Act of 1934, Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Shandong Zhouyuan Seed and Nursery Co., Ltd

Dated: May 5, 2009 By: /s/ Zhigang Wang

------------------------

Zhigang Wang, CEO

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Name Title Date

/s/Zhigang Wang CEO May 5, 2009

Zhigang Wang

/s/Yiqun Liu CFO May 5, 2009

Yiqun Liu

/s/Jian Zhou Vice Chairman May 5, 2009

Jian Zhou

/s/Zhicheng Wang Director May 5, 2009

Zhicheng Wang

/s/ChiMing Chen Director May 5, 2009

ChiMing Chen

/s/Chi Tai Director May 5, 2009

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