As filed with the Securities and Exchange Commission on September 16, 2011
 
Registration No. 333-               


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
Form F-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
 

DRAGON BRIGHT MINTAI BOTANICAL TECHNOLOGY (CAYMAN) LIMITED
(Exact name of registrant as specified in its charter)
 
 
Cayman Islands
 
800           
 
N/A
(State or jurisdiction of
incorporation or organization)
 
(Primary Standard Industrial Classification Code Number)
 
(I.R.S. Employer
Identification No.)

Room B, 19/F, Hillier Commercial Building
89-91 Wing Lok Street
Sheung Wan, Hong Kong
Telephone: +852 3568 1829
(Address and telephone number of registrant’s principal executive offices)
 
 
C T Corporation System
111 Eighth Avenue
New York, New York 10011
Telephone: (212) 894 – 8800
 
(Name, address and telephone number of agent for service)
 
 
Copies to:
David A. Sakowitz, Esq.
Simon Luk, Esq.
Winston & Strawn LLP
200 Park Avenue
New York, New York 10166
 
Tel: +1-212-294-6700
 
 
Approximate date of commencement of proposed sale to the public:   As soon as practicable after the effective date of this Registration Statement.

If any securities being registered on this form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933.  x

If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act of 1933, please check the following box and list the Securities Act of 1933 registration statement number of the earlier effective registration statement for the same offering.  o

If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act of 1933, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.   o

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act of 1933, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.   o

CALCULATION OF REGISTRATION FEE
 
Title of each
class of securities to be registered
Amount to be
registered(1)
Proposed
maximum
offering price
per share
Proposed
maximum
aggregate
offering price
Amount of
registration fee
Shares, par value $0.0001 per Share
131,000,000
$0.12 (2)
$15,720,000
$1,825.09
 
(1)
An indeterminate number of additional shares shall be issuable pursuant to Rule 416 under the Securities Act of 1933, as amended, to prevent dilution resulting from stock splits, stock dividends or similar transactions and in such an event the number of shares registered shall automatically be increased to cover the additional shares in accordance with Rule 416.
(2)
Estimated in accordance with Rule 457 solely for the purpose of computing the amount of the registration fee based on the most recent price at which we sold our shares. As of the date hereof, there is no established public market for the shares being registered.  The selling shareholders may sell our shares at prevailing market price or privately negotiated prices.
 
 
The Registrant hereby amends this registration statement on the date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with section 8(a) of the Securities Act of 1933, as amended, or until the registration statement shall become effective on the date as the Securities and Exchange Commission, acting pursuant to said section 8(a), may determine.
 


 

 

The information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. The preliminary prospectus is not an offer to sell nor does it seek an offer to buy these securities in any jurisdiction where the offer or sale is not permitted.
 
PRELIMINARY PROSPECTUS
SUBJECT TO COMPLETION, DATED        , 2011
 
 
DRAGON BRIGHT MINTAI BOTANICAL
TECHNOLOGY (CAYMAN) LIMITED
 
131,000,000 Shares
 
 
This prospectus registers for resale by our selling shareholders up to 131,000,000 of our shares.  The selling shareholders may be deemed to be underwriters.  Our shares are not now nor have they ever been listed or quoted on any stock exchange or quotation system.  We intend to have our shares quoted on the OTC Bulletin Board or another quotation system, such as OTCQX.  The selling shareholders may sell the shares at a fixed price of $0.12 per share, until our shares are quoted on the OTC Bulletin Board or another quotation system, such as OTCQX, and thereafter at prevailing market prices or privately negotiated prices.  If we are successful in having our shares quoted on the OTC Bulletin Board or another quotation system, such as OTCQX, the selling shareholders subsequently may offer to sell the shares being offered in this prospectus at fixed prices, at prevailing market prices at the time of sale, at varying prices or at negotiated prices.
 
We will not receive any proceeds from the resale of our shares by the selling shareholders.  We will pay for all costs associated with this registration statement and prospectus.  The selling shareholders will receive the proceeds from the sale of the shares being registered in this registration statement and prospectus.  The selling shareholders received our shares either through subscription from our private placements in May 2011 and August 2011 or through a share swap transaction in which the former shareholders of Dragon Bright Mintai Botanical Technology Company Limited, or Dragon Bright HK, a private company incorporated with limited liability under the laws of the Hong Kong Special Administrative Region of the People’s Republic of China, exchanged their shares of Dragon Bright HK for our shares at an exchange rate of 1-for-1.  As of the date hereof, there is no established public market for the shares being registered. If the selling shareholders sell all of their shares at $0.12 per share, they may be expected to receive approximately $15,720,000, estimated as follows:
 
 
Proceeds to Selling Shareholders
Per Share
$0.12
Total
$15,720,000
 
An investment in our shares involves a high degree of risk.  You should invest in our shares only if you can afford to lose your entire investment. You should carefully consider the various risk factors described under “Risk Factors” beginning on page 10 of this prospectus before investing in our shares.
 
Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or determined if this prospectus is truthful or complete.  Any representation to the contrary is a criminal offense.
 
Please read this prospectus carefully.  You should rely only on the information contained in this prospectus.  We have not authorized anyone to provide you with different information.

 
The date of this prospectus is _______________ __, 2011.
 
 

 

TABLE OF CONTENTS
 
 
   Page
     
     
Prospectus Summary
  4
Risk Factors
 
10
Special Notes Regarding Forward-looking Statements
  20
Use of Proceeds
  20
Dividend Policy
  20
Exchange Rate Information
  21
Capitalization   22
Dilution
 
22
Corporate Structure
  22
Selected Consolidated Financial Data   24
Management’s Discussion and Analysis of Financial Condition and Results of Operations
  25
Industry  
41
Business
  42
Regulations   54
Management   58
Principal and Selling Shareholders
 
61
Plan of Distribution
 
65
Related-Party Transactions
  67
Description of Share Capital
 
69
Shares Eligible for Future Sale
 
78
Taxation
  78
Enforceability of Civil Liabilities
  86
Legal Matters
 
87
Experts
 
87
Expenses Related to This Offering
  88
Where You Can Find More Information
 
88
Index to Consolidated Financial Statements
 
89

You should rely only on the information contained in this prospectus or in any related free writing prospectus. Neither we nor the selling shareholders have authorized anyone to provide you with information different from that contained in this prospectus. The selling shareholders are offering to sell, and seeking offers to buy, the shares only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is current only as of the date of this prospectus, regardless of the time of delivery of this prospectus or of any sale of the shares.

 
3

 
 
 
PROSPECTUS SUMMARY

You should read the following summary together with the entire prospectus, including the more detailed information in our consolidated financial statements and related notes appearing elsewhere in this prospectus.  You should carefully consider, among other things, the matters discussed in “Risk Factors,” and our consolidated financial statements and notes to those consolidated financial statements, beginning on page F-1, before making an investment decision.

Overview

We are in the initial stages of developing a business in the forest seedling industry. Our main business is the mass propagation and sale of bamboo-willow seedlings and our secondary business is the sale of bamboo-willows as wood pulp generated from our trial bamboo-willow tree plantation business.  We have developed a three-year plan of operations to develop our bamboo-willow seedling cultivation base and we expect to start generating revenue in the first quarter of 2012.  However, there is no guarantee that we will generate any revenues.

Bamboo-willow is a type of Salicaceae plant and is a hybrid of Chimonobambusa Marmorea, Chosenia Arbutifria and Salix Linearistipularis. Its natural characteristics include fast growth, high cultivation density and strong resistance to diseases.  It is also highly adaptable to a wide range of climatic and soil conditions. Bamboo-willow is expected to have an economic life of 13 years. Based on studies of the wood density, natural lightness, chemical constitution and fiber quality of bamboo-willow conducted by China National Pulp & Paper Research Institute, Beijing in 2009, it also can be used as a fast growing pulp material for papermaking.

We are also in the process of developing a business model focusing on the application and commercialization of an aeroponics cultivation technology for agricultural and botanical cultivation, known as the Taiwan Fast Plant Propagation Technology, or TFPPT.  TFPPT is an emerging technology for rapid, uniform and mass propagation and growth of high-quality seedlings and plantlets.  We believe the successful application of TFPPT can provide us with significant competitive advantages in our business of mass propagation of bamboo-willow seedlings.

Since November 2010, we have been planning for the development of our business.  We had planted 10,000 bamboo-willow super mother saplings for our seedling propagation operation by mid-March 2011. Propagation of bamboo-willow is done by stem cutting and transplanting the stems to soil. On average, we cut 18 seedlings every 20 days from each super mother sapling tree. Super mother sapling trees are 1.5 meter bamboo-willow trees.  They are the sources for our seedling propagation through a cutting method. Therefore, we expect 3,200,000 seedlings each year can be cut from our existing super mother saplings.  We have been building our initial base site in Xiamen since September 2010 and finished the infrastructure construction at the end of August 2011. We started our bamboo-willow seedlings propagation in November 2010 and intend to start our bamboo-willow tree plantation in September 2011. We expect to generate our initial revenue from the sale of bamboo-willow seedlings beginning in the first quarter of 2012.  However, there is no guarantee that we will generate any revenues.  Beginning the third quarter of 2012, we expect a secondary source of revenue to come from the sale of young bamboo-willow (two to three years old) for wood pulp in papermaking.  As of the date of this prospectus, we have not yet generated any operating revenue.  The loss attributable to our equity shareholders for the year ended December 31, 2010 was $144,644 and our accumulated losses as of December 31, 2010 were $153,010. We anticipate that our initial markets will be in the People’s Republic of China, or the PRC.

Our business of mass propagation of bamboo-willow is substantially dependent on our ability to protect and commercialize TFPPT.  TFPPT has three components: (i) a probiotics-based organic fertilizer formulated and processed using certain proprietary technology; (ii) an aeroponics cultivation system using a process of growing plants suspended in a closed and semi-closed misty environment by spraying the plants’ dangling roots, lower stems and leaves with an atomized, nutrient-rich water solution without the use of soil or an aggregate medium; and (iii) a stereoscopic cultivation method using a 3-dimensional system that suspends roots of plants in a closed trellis where they are sprayed with an atomized nutrient-rich solution at regular intervals, which enhances output per square meter of land per year.  In our business of cultivating bamboo-willows, it is only necessary to apply two of the TFPPT components, the probiotics-based organic fertilizer and the aeroponics cultivation system, at and throughout the 20-day nursery stage. As bamboo-willows collected by stem cutting from the super mother sapling trees do not have roots and must be stabilized with a small amount of planting soil (or distilled sand) for the probiotics-based fertilizer mist to be sprayed on the stems and leaves in an aeroponics system, the stereoscopic cultivation method is not used in our aeroponics cultivation technology for bamboo-willow seedlings.
 
 
 
4

 
 
 
 
Our Industry

We operate in the forest seedling industry and we plan to provide bamboo-willow seedlings to forest tree plantation companies, seedling growers, manufacturers of paper pulp products and dealer agents. We believe these industries in China are highly fragmented and competitive with a large number of participants including individual farmers and small private forestry companies. We do not expect to compete with any state-owned agriculture companies.

We are in the initial stages of developing our business. As of the date of this prospectus, we have identified bamboo-willow seedlings as the primary plant that we will grow for our business.  Since November 2010, we have started propagation of bamboo-willow seedlings.  We had planted 10,000 bamboo-willows as super mother bamboo-willow saplings by mid-March 2011. We expect that our super mother bamboo-willow saplings will produce up to 3,200,000 seedlings at the end of 2011.

Our business is dependent on the successful application of bamboo-willow as wood pulp and the successful application and commercialization of TFPPT in our business. We expect to compete primarily with private seedling and plantation growers and manufacturers of paper pulp products.

Our Competitive Strengths
 
We believe that the following strengths give us a competitive advantage:
 
 
our intellectual property rights to TFPPT;
     
 
our shorter cultivating cycle, which increases production yield within a given cultivation period;
     
 
minimized seasonality of seedling growth; and
     
 
our balanced management and external consultancy team with expertise from a variety of professional areas.
     
Our Strategy

Our overall strategy is to capitalize on our competitive strengths based on our ability to utilize TFPPT to grow and expand our forest seedling business and eventually to benefit from the anticipated increase in demand for wood pulp products in China.  We plan to implement the following elements of our strategy:
     
 
focus on the application and commercialization of TFPPT;
     
 
focus on research and development and expand the application of TFPPT; and
     
 
expand application and commercialization of TFPPT through technology transfer.
     
 
 
5

 
 
 
Risks and Challenges

Our business is subject to numerous risks, as more fully described in the section entitled “Risk Factors” immediately following this prospectus summary, including:
     
 
the markets in which we operate are highly competitive;
     
 
we have a limited operating history;
     
 
protection of our intellectual property rights in China may be difficult;
     
 
extreme weather conditions, natural disasters, forest disturbances, terrorist attacks and other emergencies or events may affect our business;
     
 
we depend on our management and key personnel; and
     
 
failure to maintain an effective system of internal controls over financial reporting may diminish investors’ confidence in us and adversely affect our share price.
 
Our Corporate History and Structure

We are a holding company established on February 17, 2011 as an exempted company incorporated with limited liability under the laws of the Cayman Islands. We expect to conduct substantially all of our business through Fujian Qianlon Agricultural Technology Co., Ltd., or Fujian Qianlon, a company organized under the laws of the PRC and a direct subsidiary of Hong Kong Dragon Holdings Limited, or HK Dragon Holdings.

Our wholly-owned subsidiary Dragon Bright Mintai Botanical Technology Company Limited (formerly known as Team Profit Asia Limited), or Dragon Bright HK, was incorporated in July 2007 as a limited liability company under the laws of Hong Kong. 

On March 11, 2011, we entered into a share swap agreement with Dragon Bright HK and all of its shareholders. Pursuant to the share swap agreement, the shareholders of Dragon Bright HK exchanged an aggregate of 521,450,000 shares of Dragon Bright HK, representing all of the issued and outstanding shares of Dragon Bright HK, for an aggregate of 521,450,000 of our newly issued shares, representing all of our issued and outstanding shares, at an exchange rate of 1-for-1. As a result of the share swap, Dragon Bright HK became our wholly-owned subsidiary and the former shareholders of Dragon Bright HK, including several of our directors and officers and their family members, became our shareholders. In May 2011, we issued an aggregate of 4,500,000 shares at $0.06 per share for aggregate proceeds of $270,000. In August 2011, we issued an aggregate of 5,050,000 shares at $0.10 per share for aggregate proceeds of $505,000.

HK Dragon Holdings is a limited liability company incorporated under the laws of Hong Kong on August 11, 2010. HK Dragon Holdings is a 57%-owned subsidiary of Dragon Bright HK and its other shareholders include Ms. Anita Lai Lai Ho, our chairwoman and chief executive officer, Stanley Ang, our director and chief administrative officer, Million Max Limited, whose sole shareholder, Antonio Chau, is the brother-in-law of Ms. Anita Lai Lai Ho, and Wealth Vantage International Limited, an unaffiliated investor.  On December 9, 2010, Fujian Qianlon was established by HK Dragon Holdings with a total investment of approximately $1,285,023. Fujian Qianlon is engaged in research and development of agricultural technologies, propagation of bamboo-willow tree seedlings and plantation of bamboo-willow trees.
 
  
 
6

 
 
 
  The following chart summarizes our corporate structure as of the date of this prospectus:
 
 
(1)
The rest of the shares of Hong Kong Dragon Holdings Limited are held by Ms. Anita Lai Lai Ho, our chairwoman and chief executive officer, Stanley Ang, our chief administrative officer and director, Million Max Limited, whose sole shareholder, Antonio Chau, is the brother-in-law of Ms. Anita Lai Lai Ho, and Wealth Vantage International Limited, an unaffiliated investor.
(2) 
The rest of the shares of China Hainan Agriculture Holdings Ltd. are held by 11 unaffiliated investors.
 
 
Our Corporate Information

Our principal executive offices are located at Room B, 19th Floor, Hillier Commercial Building, 89-91 Wing Lok Street, Hong Kong. The telephone number is +852 3568 1829. Our registered office is in the Cayman Islands located at the offices of Maples Corporate Services Limited at PO Box 309, Ugland House, Grand Cayman, KY1-1104, Cayman Islands, or at such other place within the Cayman Islands as our Directors may decide. Our agent for service of process in the United States is C T Corporation System, 111 Eighth Avenue, New York, New York 10011.  Investors should contact us with any inquiries through the address and telephone number of our principal executive offices.
 
 
 
7

 
 
 
The Offering
   
Total number of shares offered in this
offering by the selling shareholders 
131,000,000 shares.
   
Shares outstanding immediately
prior to this offering                                                      
531,000,000 shares.
   
Shares outstanding immediately after this
offering if the selling shareholders sell all of
their shares                                                      
531,000,000 shares.
   
Offering price per share                                                      
$0.12 per share until our shares are quoted on the OTC Bulletin Board or another quotation system, such as OTCQX, and thereafter at prevailing market prices or privately negotiated prices.
   
Use of proceeds                                                      
We will not receive any of the proceeds from the sale of the share being offered for sale by the selling shareholders. We will pay for all costs associated with this registration statement and prospectus.  The selling shareholders will receive the proceeds from the sale of the shares being registered in this registration statement and prospectus.
   
Risk factors                                                      
See “Risk Factors” and other information included in this prospectus for a discussion of factors you should carefully consider before deciding to invest in our shares.
   
Dividend policy                                                      
We do not anticipate paying any cash dividends in the foreseeable future.
   
Listing                                                      
Our shares are not now, nor have they ever been, listed or quoted on any stock exchange or quotation system.  We intend to have our shares quoted on the OTC Bulletin Board or another quotation system, such as OTCQX.  The selling shareholders may sell the shares at a fixed price of $0.12 until our shares are quoted on the OTC Bulletin Board or another quotation system, such as OTCQX, and thereafter at prevailing market prices at the time of sale or at negotiated prices.  The selling shareholders received our shares either through subscription from our private placements in May 2011 and August 2011 or through a share swap transaction in which they exchanged their shares of Dragon Bright HK for our shares at an exchange rate of 1-for-1. As of the date hereof, there is no established public market for the shares being registered. The offering price was determined with reference to the price of the last completed private placement of our shares at $0.10.
   
Unless otherwise indicated, all information in this prospectus is based on 531,000,000 shares outstanding on August 31, 2011.
 
 
 
8

 
 
 
 
Conventions That Apply to This Prospectus

Unless otherwise indicated, references in this prospectus to:
     
 
“China” and the “PRC” are to the People’s Republic of China, excluding for the purposes of this prospectus Hong Kong, Macau and Taiwan;
     
 
“HK$” and “Hong Kong dollars” are to the legal currency of the Hong Kong Special Administrative Region of China;
     
 
“Hong Kong” is to the Hong Kong Special Administrative Region of China;
     
 
“IFRS” are to “International Financial Reporting Standards”;
     
 
“revenue” is to net revenue;
     
 
“RMB” and “Renminbi” are to the legal currency of China;
     
 
“shares” are to our shares, par value $0.0001 per share;
     
 
“U.S. GAAP” are to the generally accepted accounting principles in the United States of America; and
     
 
“$” and “U.S. dollars” are to the legal currency of the United States of America.
 
Unless the context indicates otherwise, “we,” “us,” “our company,” “our” and “Dragon Bright Cayman” refer to Dragon Bright Mintai Botanical Technology (Cayman) Limited, a Cayman Islands company, its predecessor entities and subsidiaries. “Dragon Bright HK” refers to Dragon Bright Mintai Botanical Technology Company Limited, a Hong Kong company. “HK Dragon Holdings” refers to Hong Kong Dragon Holdings Limited, a Hong Kong company.  Fujian Qianlon Agricultural Technology Co., Ltd., or Fujian Qianlon, is a foreign enterprise wholly owned by HK Dragon Holdings.  See the section entitled “Corporate Structure.”

Unless otherwise indicated, our financial information presented in this prospectus has been prepared in accordance with IFRS.

Solely for your convenience, this prospectus contains translations of certain Renminbi amounts into U.S. dollar amounts at specified rates. Unless otherwise indicated in the section entitled “Exchange Rate Information,” conversions of Renminbi into U.S. dollars in this prospectus are based on the exchange rate set forth in the H.10 weekly statistical release of the Federal Reserve Bank of New York, or the exchange rate, on December 31, 2010. We make no representation that the Renminbi or U.S. dollar amounts and/or HK dollar to Renminbi amounts referred to in this prospectus could have been or could be converted into U.S. dollars, Renminbi or HK dollars, as the case may be, at any particular rate or at all. Any discrepancies in any table between totals and sums of the amounts listed are due to rounding. See “Risk Factors - Risks Related to Doing Business in China – Governmental control of currency conversion may limit our ability to utilize our revenue effectively and affect the value of your investment” and “- Fluctuations in the value of the Renminbi may have a material and adverse effect on your investment” for discussions of the effects of currency control and fluctuating exchange rates on the value of our shares.
 
 
 
9

 

RISK FACTORS

Investing in our shares involves significant risks and uncertainties. You should consider carefully all of the information in this prospectus, including the risks and uncertainties described below and our consolidated financial statements and related notes, before making an investment in our shares. Any of the following risks could have a material adverse effect on our business, financial condition and results of operations. In any such case, the market price of our shares could decline, and you may lose all or part of your investment.

Risks Related to Our Business

The markets in which we operate are highly competitive and we may not be able to maintain or expand our market share.

We plan to operate in the highly competitive forest seedling industry and we believe we will compete intensely with a large number of participants including individual farmers and small private forest companies.  We do not expect to compete with any state-owned agriculture companies.  We expect competition to persist and intensify in the future, and we may face intense competition from other companies that provide seedlings and paper pulp products in China.  We expect our competition to be primarily affected by our ability to apply, commercialize and customize our TFPPT, the length of our cultivation cycle, product quality, distribution capability and pricing. In addition, product innovation and technical advancement may render our existing and potential applications and products and our own research and development efforts obsolete or non-competitive. We cannot assure you that additional competitors will not enter our existing markets, or that we will be able to compete successfully against existing or new competition, or be able to maintain or expand our market share, which may adversely affect our financial condition, results of operations or growth prospects.

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

We commenced our forestry technology and marketing research operations in 2007 and identified TFPPT for commercialization in early 2009. Through our corporate restructuring as described in more detail in the section entitled “Corporate Structure”, we are currently in the early stage of developing our business model.  We have a limited operating history under our current business model upon which you can evaluate the viability and sustainability of our business, and we had not generated any revenue as of December 31, 2010.  We do not have a revolving loan agreement with any financial institution, nor can we provide any assurance that we will be able to enter into any such agreement in the future or be able to raise funds through a future issuance of debt or equity.  Furthermore, we are relatively inexperienced in the management of a business in the forest seedling industry. If we were unsuccessful in addressing any of these risks and uncertainties, our business, financial condition, results of operations and future growth could be adversely affected.

Our business is sensitive to fluctuations in market prices and demand for our products.

Demand for forest seedling products is highly cyclical in nature. Price and demand for forest seedlings have been, and in the future are expected to be, subject to cyclical fluctuations. The pricing in the forest seedling market is influenced by the prices of the ultimate products produced from forest seedlings in China.
 
Demand for our products is affected by changes in consumer trends and tastes. Furthermore, the markets for forest seedling products are sensitive to changes in industry capacity and output levels, general forest seedling industry conditions and cyclical changes in the global and Chinese economies, any of which can have a significant impact on the sales price of seedling products. These activities are, in turn, subject to fluctuations due to, among other factors:
 
 
·
changes in domestic and international economic conditions;
 
·
changes in market prices of commodities;
 
·
governmental regulations and policies;
 
·
interest rates;
 
·
population growth and changing demographics; and
 
·
seasonal weather cycles and other factors affecting tree growth.
 
 
10

 
 
Any adverse change in demand or price of our seedling products may materially and adversely affect our business, financial condition and results of operations.

Failure to protect our intellectual property rights in China may materially and adversely affect our business, financial condition and results of operations.

Our business is substantially dependent on our ability to apply and commercialize TFPPT, with respect to which we were granted by Mr. Cho-Po Chang, or Mr. Chang, the inventor of TFPPT, a worldwide exclusive license regarding all of its intellectual property rights.  TFPPT is an emerging technology for agricultural and botanical cultivation, and can be used to optimize the growth conditions critical for cultivation and propagation of high-quality seeds, seedlings, plantlets, plants and transplants to achieve fast, pathogen-free and uniform growth. The application for an invention patent for “Aeroponics Cultivation System” was granted by the State Intellectual Property Office of the PRC on March 7, 2011. The application for a utility model for “Aeroponics Cultivation System and Method” is in the process of review by the State Intellectual Property Office of the PRC. Mr. Chang has not applied for intellectual property rights with respect to TFPPT in any other jurisdictions.

We regard our patentable technology, trade secrets, and other intellectual property as important to our business. Unauthorized use of such intellectual property, whether owned by us or licensed to us, may materially and adversely affect our business, financial condition, results of operations, reputation and competitive advantages.  In addition, TFPPT is not subject to any intellectual property rights protection in jurisdictions other than China, and the validity, enforceability and scope of protection of intellectual property in China are uncertain and still evolving, and could involve substantial risks. The laws and enforcement procedures in China are not yet well developed, and do not protect intellectual property rights to the same extent as laws and enforcement procedures in the United States and other jurisdictions. Furthermore, litigation may be necessary in the future to enforce our intellectual property rights, which could result in substantial costs and diversion of our resources and have a material adverse effect on our business, financial condition and results of operations.  If we are unable to adequately protect the intellectual property rights that we own or use, we may lose these rights and our business, growth prospects and profitability may suffer.

We may be subject to intellectual property rights claims or other claims in the future which could result in substantial costs and diversion of our financial and management resources away from our business.
 
We are subject to the risk that the products, technology and processes that we plan to apply in our production may infringe upon patents, copyrights, trademarks or other intellectual property rights held by third parties. We may be subject to legal proceedings and claims relating to the intellectual property of others. If any such claim arises in the future, litigation or other dispute resolution proceedings may be necessary to retain our ability to offer our current and future products, which could result in substantial costs and diversion of our management resources and attention even if we prevail in contesting such claims. If we were found to have violated the intellectual property rights of others, we may be enjoined from using such intellectual property rights, incur additional costs to license or develop alternative products or be forced to pay fines and damages, which could materially and adversely affect our business and results of operations.

Failure to obtain or maintain the required approval, permits, licenses and certificates necessary to carry out our business in China may materially and adversely affect our business, financial condition and results of operations.

To carry out our business in China, we must obtain and maintain various government approvals, permits, business licenses, and certificates including, but not limited to, certificates of forestry ownership.   In the event that we are not able to obtain or maintain all of the required government approvals, permits, business licenses or certificates, our business operations may be subject to suspension, and our financial condition and results of operations may be materially and adversely affected.
 
 
11

 
 
The occurrence of extreme weather conditions, natural disasters, forest disturbances, terrorist attacks and other emergencies or events that are beyond our control may disrupt our seedling acclimatization and tree plantation activities and may have a material adverse effect on our business, financial condition and results of operations.

Our seedling acclimatization and tree plantation may be vulnerable to the occurrence of any extreme weather conditions, natural disasters, forest disturbances, terrorist attacks and other emergencies or events that are beyond our control and may have a material adverse effect on the economy and infrastructure in China and on the livelihood of the Chinese population.  In addition, the forest industry, especially seedling acclimatization and tree plantation, is subject to a variety of disturbances, including fire, drought, landslides, species invasions, insect and disease outbreaks, as well as climatic events including hurricanes, windstorms and ice storms.  Our seedling acclimatization and tree plantation sites are located in the coastal areas of southern China and are particularly susceptible to the typhoon season between July and September. Unfavorable conditions can reduce both size and quality of our seedling and tree production.  Our business, financial condition and results of operations may be materially and adversely affected should such events occur.  

We depend significantly on our management team and key personnel.

We are highly dependent on our senior management to manage our business and operations, and each of our executive officers is responsible for an important aspect of our operations.  In addition, we rely on management and senior personnel to ensure that our sourcing, production, sales, distribution and other business functions are effective. We also depend on certain key personnel with respect to development of our technology and products. In particular, we rely substantially on our chief executive officer, Ms. Anita Lai Lai Ho, or Ms. Ho, and our TFPPT technical advisor, Mr. Chang, with respect to development of our products and technology and management of our operations.  We do not have key-man life insurance for any of our executive officers or key personnel.  Competition for senior management and our other key personnel is intense and the pool of suitable candidates is limited.  We may be unable to locate a suitable replacement for any senior management or key personnel that we lose.  In addition, if any member of our senior management or key personnel joins a competitor or forms a competing company, they may compete with us for customers, business partners and other key professionals and staff members of our company.  Losing the services of our executive officers or key personnel could be detrimental to our operations.

We have limited insurance coverage in China.
 

The insurance industry in China is still at an early stage of development, and insurance companies in China currently do not offer as extensive an array of insurance products as insurance companies do in more developed economies.  We maintain insurance for workplace injuries, premises and certain vehicles in China.  However, we do not have insurance coverage on our other assets (including biological assets), inventories, business, interruption of business or key employees. Consequently, any occurrence of loss or damage to property, litigation or business disruption may result in our incurring substantial costs and the diversion of resources, which could have a material adverse effect on our operating results. The occurrence of certain incidents including fire, severe weather, earthquake, war, floods, power outages, windstorms and the consequences resulting from them are not covered at all by insurance policies. If we incur substantial liabilities that were not covered by insurance, or if our business operations were interrupted for more than a short period of time, we could incur costs and losses that could materially and adversely affect our results of operations.

We depend heavily on skilled research and development personnel, and any loss of such personnel, or any failure to continue to attract such personnel in the future, could harm our business.
 
The nature of our business requires the employment of personnel with significant scientific and operational experience in the industry. Accordingly, we must attract, recruit and retain a sizeable workforce of technically and scientifically competent employees. Our ability to effectively implement our business strategy will depend upon, among other factors, the successful recruitment and retention of additional management and other key personnel that have the necessary scientific, technical and operational skills and experience with the forest and agricultural industry. These individuals may be difficult to find in China and we may not be able to retain such skilled employees. If we are unable to hire individuals with the requisite experience, we may not be able to produce sufficient products to optimize our profits, our research and development initiatives may be delayed and we may encounter disruptions in production and research which may materially and adversely affect our business, financial condition and results of operations.
 
 
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The enforcement of labor contract law and an increase in labor costs in the PRC may adversely affect our business and our profitability.
 
China adopted a new labor contract law and its implementation rules effective on January 1, 2008 and September 18, 2008, respectively. The labor contract law and its implementation rules impose more stringent requirements on employers with regard to, among other things, minimum wages, severance payments upon permitted termination of employment by an employer and non-fixed term employment contracts, time limits for probation period as well as the duration and the times that an employee can be placed on a fixed-term employment contract. Due to the limited period of effectiveness of the labor contract law and its implementation rules and the lack of clarity with respect to their implementation and potential penalties and fines, it is uncertain how they will impact our current employment policies and practices. Compliance with the labor contract law and its implementation rules may increase our operating expenses, in particular our personnel expenses.  As a result of the new labor protection measures, our labor costs and those of our suppliers are expected to increase, which may adversely affect our business and our results of operations. It is also possible that the PRC government may enact additional labor-related legislations in the future, which may further increase our labor costs and affect our business, financial condition and results of operations.
 
Our failure to comply with increasingly stringent environmental regulations and related litigation may result in significant penalties, damages and adverse publicity for our business.

Our operations and properties are subject to extensive and increasingly stringent laws and regulations pertaining to, among other things, the discharge of materials into the environment and the handling and disposition of wastes (including solid and hazardous wastes) or otherwise relating to protection of the environment.  Failure to comply with any laws and regulations and future changes to them may result in significant consequences to us, including civil and criminal penalties, liability for damages and negative publicity.

We have not completed the environmental impact assessments as required by the PRC law for our production bases. Although we intend to complete these environmental impact assessments, a penalty may be imposed on us and our production may be suspended. We are also undergoing a test and assessment conducted by local environmental agency in Xiamen with respect to whether use of probiotic organic fertilizer has caused excessive water pollution.  If we fail to pass the test and assessment, we will be required to remedy the water pollution caused by our use of the probiotic organic fertilizer.

We may incur significant capital and operating expenditures to comply with these environmental laws and regulations. We cannot assure you that additional environmental issues will not require currently unanticipated investigations, assessments or expenditures, or that requirements applicable to us will not be altered in ways that will require us to incur significant additional costs.

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

Following this offering, we will become subject to the periodic disclosure requirements of the Securities and Exchange Commission, or the SEC.  After we become a public company, we will incur significant legal, accounting and other expenses that a private company does not incur, which are estimated to be approximately $300,000 annually. In addition, the Sarbanes-Oxley Act of 2002, as well as rules subsequently implemented by the SEC and stock exchanges have required changes in corporate governance practices of public companies. We expect that compliance with these rules and regulations will increase our legal and financial compliance costs, which are estimated to be approximately $400,000 for the first year after we become a public company and approximately $200,000 for each subsequent year. We also expect that these rules and regulations will make some activities more time-consuming and costly. We also expect these rules and regulations will make it more difficult and more expensive for us to obtain directors’ and officers’ liability insurance. As a result, our general and administrative expenses will likely increase and it may be more difficult for us to attract and retain qualified persons to serve on our board of directors or as executive officers. We cannot predict or estimate the amount of additional costs that we may incur with respect to these rules or the timing of such costs.
 
 
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If we fail to develop and maintain an effective system of internal controls, we may not be able to accurately report our financial results or prevent fraud; as a result, current and potential shareholders may lose confidence in our financial reports, which may harm our business and the trading price of our shares.

Effective internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud. In addition, we will be subject to the reporting obligations under the U.S. securities laws.  After we become a reporting company, Section 404 of the Sarbanes-Oxley Act of 2002 will require that we include a management report that assesses the effectiveness of our internal controls over financial reporting and may require our independent registered public accounting firm to attest to our evaluation in our annual report on Form 20-F beginning with our annual report for the fiscal year ending December 31, 2012.  As a company in the early stage of our development, we are in the process of establishing our internal control over financial reporting system to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our consolidated financial statements for external reporting purposes. We cannot be certain that the measures we have undertaken to comply with Section 404 will ensure that we will maintain adequate controls over our financial processes and reporting in the future. Furthermore, if we are able to rapidly grow our business, the internal controls that we will need will become more complex, and significantly more resources will be required to ensure our internal controls remain effective.  Failure to implement required controls, or difficulties encountered in their implementation, could harm our operating results or cause us to fail to meet our reporting obligations.  If we or our auditors discover a material weakness in our internal controls, the disclosure of that fact, even if the weakness is quickly remedied, could diminish investors’ confidence in our financial statements, which in turn may have an adverse effect on our share price. In addition, non-compliance with Section 404 could subject us to a variety of administrative sanctions, including the suspension of trading, ineligibility for listing on one of the national securities exchanges and the inability of registered broker-dealers to make a market in our shares, which could result in a decline in our share price.

The resources we devote to research and development may not result in commercially viable or competitive products.
 
Our success depends in part on our ability to successfully apply and commercialize TFPPT to our cultivation of bamboo-willow and other plants we later identify. Research and development in bamboo-willow plantation operation may be expensive and prolonged.  Our products may not ultimately be commercially viable, or may not pass government testing in the relevant provinces of China.  If the resources we devote to research and development do not result in products that survive the development stage, do not result in products that we can sell to our customers, or do not pass government testing, our business, financial condition and results of operations may be materially and adversely affected.

Our research and development have been subject to constraints on our financial resources.

As we are a start-up company in the early stage of our development, our research and development have been subject to constraints on our financial resources.  If such constraints adversely affect our successful application and commercialization of TFPPT, our business, financial condition and results of operations may be materially and adversely affected.

The global economic downturn may have a material and adverse effect on our business, financial condition, results of operations and liquidity.

The global capital and credit markets have experienced increased volatility and disruption over the past two years, making it more difficult for companies to access financing markets. We depend in part on stable, liquid and well-functioning capital and credit markets to fund our growth. Although we believe that our operating cash flows, access to capital and credit markets and existing borrowings will permit us to meet our financing needs for the foreseeable future, we cannot assure you that continued or increased volatility and disruption in the capital and credit markets will not impair our liquidity or increase our costs of borrowing. In addition, our major customers may have financial challenges unrelated to us that could result in a decrease in their business with us, delays in payment to us or defaults of payments. Similarly, parties to contracts may be forced to breach their obligations under those contracts with us. These consequences of the global economic downturn may have a material and adverse effect on our business, financial condition, results of operations and liquidity.
 
 
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Risks Related to Doing Business in China

Adverse changes in China’s economic, political and social policies could materially and adversely affect our business, financial condition and results of operations.

Our business and operations are primarily conducted in China. Accordingly, our financial condition and results of operations have been, and are expected to continue to be, affected by the economic, political and social developments in China. A slowdown of economic growth in China could reduce the market demand of our products, which in turn could materially and adversely affect our business, financial condition and results of operations.

The PRC economy differs from the economies of most developed countries in many respects, including: a higher level of government involvement; the on-going development of a market-oriented economy; a rapid growth rate; a higher level of control over foreign exchange; and a less efficient allocation of resources.
 
The PRC economy has been transitioning from a centrally-planned economy to a more market-oriented economy. Although the PRC government has implemented measures since the late 1970s to encourage economic growth and guide the allocation of resources and emphasize the utilization of market forces for economic reform, the PRC government continues to play a significant role in regulating industry development by imposing industrial policies. Some of the measures benefit the overall PRC economy but may also have a negative effect on us. For example, our financial condition and results of operations may be adversely affected by changes in tax regulations applicable to us, and the PRC government continues to implement interest rate increases to control the pace of the economic growth.  These measures may cause deceased economic activity in China, which in turn could adversely affect our business, financial condition and results of operations. In addition, any changes in China’s economic, political and social conditions, as well as government policies, may materially and adversely affect our business, financial condition and results of operations.

Uncertainties inherent in the PRC legal system could limit the legal protections available to you and us.

The PRC legal system is a civil law system based on written statues.  Unlike common law systems, it is a system in which decided legal cases have limited precedential value.  In 1979, the PRC government began to promulgate a comprehensive system of laws and regulations governing economic matters in general.  The overall effect of legislation over the past three decades has significantly increased the protections afforded to various forms of foreign investment in China.  Some regulatory requirements issued by certain PRC government authorities may not be consistently applies by other government authorities (including local government authorities), thus making strict compliance with all regulatory requirements impractical or, in some circumstances, impossible.  For example, we may have to resort to administrative and court proceedings to enforce the legal protections that we enjoy either by law or contract.  However, since PRC administrative and court authorities have significant discretion in interpreting and implementing statutory and contractual terms, it may be more difficult to evaluate the outcome of administrative and court proceedings and the level of legal protection we enjoy than in more developed legal systems.  These uncertainties may impede our ability to enforce our contracts.  These uncertainties, together with any development or interpretation of PRC law that is adverse to us, could materially and adversely affect our business, financial condition, results of operations and prospects.

It may be difficult to effect service of process upon us or our directors or senior management who live outside of the United States.

Our main operating subsidiary is incorporated in the PRC and our operations are conducted and our assets are located outside of the United States. In addition, all of our directors and our senior management personnel reside outside of the United States. You may experience difficulties in effecting service of process upon us, our directors or our senior management as it may not be possible to effect such service of process outside the United States upon them. In addition, China does not have treaties with the United States and many other countries providing for reciprocal recognition and enforcement of court judgments. Therefore, recognition and enforcement in the PRC of judgments of a court in the United States or certain other jurisdictions may be difficult or impossible.
 
 
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Future changes in laws, regulations or enforcement policies in China could adversely affect our business.

We are subject to PRC laws and regulations relating to land use rights, forest industry, and environmental protection, among others.  Laws, regulations or enforcement policies in China, including those relating to the forest industry, are evolving and subject to frequent changes. Further, regulatory agencies in China may periodically, and sometimes abruptly, change their enforcement practices. Therefore, prior enforcement activity, or lack of enforcement activity, is not necessarily predictive of future actions. Any enforcement actions against us could have a material and adverse effect on us and the market price of our shares. In addition, any litigation or governmental investigation or enforcement proceedings in China may be protracted and may result in substantial cost and diversion of resources and management attention, result in negative publicity and damage to our reputation.  The price of our shares may decline accordingly.

We will rely principally on dividends and other distributions on equity paid by our current and future subsidiaries in China to fund our cash and financing requirements, and any limitation on the ability of our current and future subsidiaries to make payments to us could have a material and adverse effect on our ability to conduct our business.
 
We are an offshore holding company, and we will rely principally on dividends from our subsidiaries in China for our cash requirements, including for the service of any debt we may incur. Current PRC regulations permit our current and future subsidiaries to pay dividends to us only out of their accumulated profits, if any, determined in accordance with Chinese accounting standards and regulations. In addition, each of our current and future subsidiaries in China is required to set aside at least 10% of its after-tax profit based on PRC accounting standards each year to its general reserves or statutory capital reserve fund until the aggregate amount of such reserves reaches 50% of its registered capital. These reserves are not distributable as cash dividends. Furthermore, if our current and future subsidiaries in China incur debt on their own behalf in the future, the instruments governing the debt may restrict their ability to pay dividends or make other payments to us. In addition, any income that we source from China is subject to PRC withholding tax under the new Enterprise Income Tax Law of the PRC, or the EIT Law. Under the EIT Law and its implementation regulations, both of which became effective on January 1, 2008, we will be subject to a withholding tax rate of 10% for any dividends paid to us by our current and future subsidiaries in China if we are deemed a non-PRC tax resident. Any limitation on the ability of our current and future subsidiaries to distribute dividends or other payments to us could materially and adversely limit our ability to grow, make investments or acquisitions that could be beneficial to our businesses, pay dividends or otherwise fund and conduct our business.

If we were deemed as a “resident enterprise” by PRC tax authorities, we could be subject to tax on our global income at the rate of 25% under the new Enterprise Income Tax Law (“New EIT Law”) in the PRC and our non-PRC shareholders could be subject to certain PRC taxes.

Under the New EIT Law and the implementing rules, both of which became effective January 1, 2008, an enterprise established outside of the PRC with “de facto management bodies” within the PRC may be considered a PRC “resident enterprise” and will be subject to the enterprise income tax at the rate of 25% on its global income as well as PRC enterprise income tax reporting obligations. The implementing rules of the New EIT Law define “de facto management” as “substantial and overall management and control over the production and operations, personnel, accounting, and properties” of the enterprise. If we were to be considered a “resident enterprise” by the PRC tax authorities, our global income would be taxable under the New EIT Law at the rate of 25% and, to the extent we were to generate a substantial amount of income outside of PRC in the future, we would be subject to additional taxes. In addition, the dividends we pay to our non-PRC enterprise shareholders and gains derived by such shareholders from the transfer of our shares may also be subject to PRC withholding tax at the rate up to 10%, if such income were regarded as China-sourced income. In addition, the recent circular mentioned above details that certain Chinese-invested enterprises controlled by Chinese enterprises or Chinese group enterprises will be classified as “resident enterprises” if the following are located or resident in China: senior management personnel and departments that are responsible for daily production, operation and management; financial and personnel decision making bodies; key properties, accounting books, company seal, and minutes of board meetings and shareholders’ meetings; and half or more of the directors with voting rights or senior management. However, as of the date hereof, no final interpretation on the implementation of the “resident enterprise” designation is available. Moreover, any such designation, when made by PRC tax authorities, will be determined based on the facts and circumstances of individual cases. As a result, we cannot determine the likelihood or consequences of our being designated a “resident enterprise” as of the date hereof.
 
 
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If the PRC tax authorities determine that we are a “resident enterprise,” we may be subject to enterprise income tax at a rate of 25% on our worldwide income. In addition, the dividends paid by us to our non-PRC shareholders as well as capital gains recognized by them with respect to the sale of our shares may be subject to a PRC withholding tax. This may have a material adverse effect on our net income and results of operations, and may require us to withhold tax on our non-PRC shareholders.

PRC regulation of loans to and direct investments in PRC entities by offshore holding companies may delay or prevent us from using the proceeds of any public offering to make loans or additional capital contributions to our PRC operating subsidiaries.

We may make loans to our current and future PRC subsidiaries. Any investments in or foreign loans to our PRC current and future subsidiaries are subject to approval by or registration with relevant governmental authorities in China. We may also decide to finance our subsidiaries by means of capital contributions. According to the relevant PRC regulations on foreign-invested enterprises in China, depending on the total amount of investment and the industries of the investment, capital contributions to our PRC operating subsidiaries may be subject to the approval of the PRC Ministry of Commerce, or MOFCOM, or its local counterparts. We may not obtain these government approvals on a timely basis, if at all, with respect to future loans or capital contributions by us to our current and future PRC subsidiaries. If we fail to receive such approvals, our ability to use the proceeds from any public offering and to capitalize our PRC operations may be adversely affected, which could adversely affect our liquidity and our ability to fund and expand our business.

We expect to derive a substantial portion of our sales from the PRC.

We have not generated any revenues as of the date of this prospectus, and expect that substantially all of our sales will be generated from the PRC. We anticipate that sales of our products in the PRC will represent a substantial proportion of our total sales in the near future. Any significant decline in the condition of the PRC economy could adversely affect consumer demand for our products, among other things, which in turn could have a material adverse effect on our business and financial condition.

Inflation in China could negatively affect our profitability and growth.

While the PRC economy has experienced rapid growth, it has been uneven among various sectors of the economy and in different geographic areas of the country. Rapid economic growth can lead to growth in the money supply and rising inflation. If prices for our products do not rise at a rate that is sufficient to fully absorb inflation-driven increases in our costs of supplies, our profitability can be adversely affected. These fluctuations and economic factors have led to the adoption by the Chinese government, from time to time, of various corrective measures designed to restrict the availability of credit or regulate growth and contain inflation. In order to control inflation in the past, the PRC government has imposed controls on bank credits, limits on loans for fixed assets and restrictions on state bank lending.  The implementation of these and other similar policies can impede economic growth and thereby harm the market for our products.

Fluctuations in the value of the Renminbi may have a material adverse effect on your investment.

The value of the Renminbi against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in China’s political and economic conditions and China’s foreign exchange policies. The conversion of Renminbi into foreign currencies, including the U.S. dollar, has historically been set by the People’s Bank of China. On July 21, 2005, the PRC government changed its policy of pegging the value of the Renminbi to the U.S. dollar. Under the new policy, the Renminbi is permitted to fluctuate within a narrow and managed band against a basket of certain foreign currencies. This change in policy caused the Renminbi to appreciate more than 20% against the U.S. dollar over the following three years. Since reaching a high against the U.S. dollar in July 2008, however, the Renminbi has traded within a narrow band against the U.S. dollar, remaining within 1% of its July 2008 high but never exceeding it. As a consequence, the Renminbi has fluctuated sharply since July 2008 against other freely traded currencies, in tandem with the U.S. dollar. In June 2010, the PRC government indicated that it would again make the foreign exchange rate of the Renminbi more flexible, which increases the possibility of sharp fluctuations in the Renminbi’s value in the future as well as the unpredictability associated with the Renminbi’s exchange rate. It is difficult to predict how long the current situation may last and when and how it may change again.
 
 
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There remains significant international pressure on the PRC government to adopt an even more flexible currency policy, which could result in a further and more significant appreciation of the Renminbi against foreign currencies. Our revenues and costs are mostly denominated in Renminbi, and a significant portion of our financial assets are also denominated in Renminbi. As we rely entirely on dividends paid to us by our subsidiaries, any significant revaluation of the Renminbi may have a material adverse effect on our revenues and financial condition, and the value of, and any dividends payable on, our shares in foreign currency terms. For example, to the extent that we need to convert U.S. dollars into Renminbi for our operations, appreciation of the Renminbi against the U.S. dollar would reduce the Renminbi amount we receive from the conversion. Conversely, if we decide to convert our Renminbi into U.S. dollars for the purpose of making dividend payments on our shares or for other business purposes, appreciation of the U.S. dollar against the Renminbi would reduce the U.S. dollar amount available to us. Any fluctuations in the exchange rate between the Renminbi and the U.S. dollar could also result in foreign currency translation losses for financial reporting purposes.

Governmental control of currency conversion may limit our ability to utilize our revenues effectively and affect the value of your investment.

The PRC government imposes controls on the convertibility of the Renminbi into foreign currencies and, in certain cases, the remittance of currency out of China. We expect to receive most of our revenues in Renminbi. Under our current corporate structure, our holding company may rely on dividend payments from our current and future PRC subsidiaries to fund any cash and financing requirements we may have. Under existing PRC foreign exchange regulations, payments of current account items, including profit distributions, interest payments and trade and service-related foreign exchange transactions, can be made in foreign currencies without prior approval from the State Administration of Foreign Exchange, or SAFE, by complying with certain procedural requirements. Therefore, our current and future PRC subsidiaries are able to pay dividends in foreign currencies to us without prior approval from SAFE by complying with certain procedural requirements. However, approval from or registration with appropriate government authorities is required where Renminbi is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of loans denominated in foreign currencies. This could affect the ability of our current and future PRC subsidiaries to obtain foreign exchange through debt or equity financing, including by means of loans or capital contributions from us. The PRC government may also at its discretion restrict access in the future to foreign currencies for current account transactions. If the foreign exchange control system prevents us from obtaining sufficient foreign currencies to satisfy our foreign currency demands, we may not be able to pay dividends in foreign currencies to our shareholders, including holders of our shares.

Risks Related to Our Shares

We do not intend to issue dividends to our shareholders.  Our shares may never reach or maintain a price higher than the price investors pay for the shares and investors may never receive a return on their investment in our company.

Although our shareholders are entitled to dividends when, as and if they are declared by our board of directors, we do not intend to issue dividends to our shareholders in the foreseeable future.  If we do not issue dividends, the only way for investors to realize a return on their investment in our company would be through the sale of the shares at a price higher than the price they paid for our shares.  Our shares may never reach or maintain such a share price and investors may never receive a positive return on their investment in our company.

Our shares are not liquid and shareholders may be unable to sell their shares.

Our shares are not now and have never been listed or quoted on any exchange or quotation service.  We intend to become quoted on the OTC Bulletin Board or another quotation system, such as OTCQX, but we cannot guarantee that this will happen.  Quotation on the OTC Bulletin Board or OTCQX is expected to occur only after a market maker is appointed.  There is currently a limited market for our shares and a liquid market may never develop.  If a market for our shares does not develop, our shareholders may not be able to resell our shares that they have purchased and they may lose all of their investment.  As a result of the foregoing, investors may be unable to liquidate their investment for any reason.
 
 
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Your percentage ownership in us may be diluted by future issuances of our shares, which could reduce your influence over matters on which shareholders vote.

Subject only to any applicable shareholder approval requirements, our board of directors has the authority to issue all or any part of our authorized but unissued shares. Issuances of our shares would reduce your influence over matters on which our shareholders vote.

Should we be successful in having our common shares quoted on the OTC Bulletin Board or OTC QX, holders of our common stock may be subject to the Penny Stock Rules of the SEC and the trading market in our shares would be very limited, which will make transactions in our stock cumbersome and may reduce the value of an investment in our shares. These rules may affect your ability to resell your shares.

The SEC has adopted regulations that generally define a “penny stock” to be any equity security other than a security excluded from such definition by Rule 3a51-1 under the Securities Exchange Act of 1934, as amended. For our purposes, penny stock is any equity security that has a market price of less than $5.00 per share, subject to certain exceptions.

Our shares are not currently traded on any stock exchange or quoted on any stock quotation system. We intend to have our shares quoted on the OTC Bulletin Board or another quotation system, such as OTC QX.  It is anticipated that our shares will be regarded as penny stock to the extent the market price for our shares is less than $5.00 per share.  The penny stock rules require a broker-dealer that wishes to engage in transactions in our shares to deliver a standardized risk disclosure document prepared by the SEC, provide the customer with additional information including current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its salesperson in the transaction, provide monthly account statements showing the market value of each penny stock held in the customer's account, and make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser's written agreement to the transaction.  To the extent these requirements are applicable they will reduce the level of trading activity in the secondary market for our shares and may severely and adversely affect the ability of broker-dealers to sell our shares.
 
We may be classified as a passive foreign investment company, or PFIC, which could result in adverse United States federal income tax consequences to U.S. holders of our shares.
 
Depending upon the value of our shares and the nature and composition of our assets and income over time, we could be classified as a passive foreign investment company, or PFIC, for United States federal income tax purposes.  Based in part on our estimates of the value of our assets as determined based on the price of our shares in this offering, we do not expect to be a PFIC for our current taxable year ending on December 31, 2011.  However, there can be no assurance that we will not be a PFIC for the taxable year 2011 or any future taxable year as PFIC status is tested each taxable year and depends on the composition of our assets and income in such taxable year.  Our PFIC status for the current taxable year 2011 will not be determinable until the close of the taxable year ending on December 31, 2011.
 
We will be classified as a PFIC for any taxable year if either (i) at least 75% of our gross income for the taxable year is passive income or (ii) at least 50% of the value of our assets (based on an average of the quarterly values of the assets during the taxable year) is attributable to assets that produce or are held for the production of passive income.  In determining the average percentage value of our gross assets, the aggregate value of our assets will generally be deemed to be equal to our market capitalization (determined by the sum of the aggregate value of our outstanding equity) plus our liabilities.  Therefore, a drop in the market price of our shares would cause a reduction in the value of our non-passive assets for purposes of the asset test.  Accordingly, we would likely become a PFIC if our market capitalization were to decrease significantly while we hold substantial cash and cash equivalents.  If we are classified as a PFIC in any taxable year in which U.S. Holders (as defined in “Taxation—United States Federal Income Taxation”) hold our shares, certain adverse United States federal income tax consequences could apply to such U.S. Holders.  See “Taxation—United States Federal Income Taxation—Passive Foreign Investment Company.”
 
 
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SPECIAL NOTES REGARDING FORWARD-LOOKING STATEMENTS

This prospectus contains forward-looking statements.  We have based these forward-looking statements on our current expectations and projections about future events.  These statements include but are not limited to:

 
·
statements regarding our completion of the development of our potential product and its use in a pilot project;
 
·
statements regarding the competitive advantages of our potential product;
 
·
expectation as to the market opportunities for our potential product, as well as our ability to take advantage of those opportunities;
 
·
statements as to our ability to protect our intellectual property and avoid infringing upon others’ intellectual property;
 
·
statements regarding our estimates of future performance, expenses, costs and revenues; and
 
·
statements as to our ability to meet anticipated cash needs based on our current business plan.

These statements may be found throughout this prospectus, specifically in the sections entitled “Prospectus Summary,” “Risk Factors,” “Use of Proceeds,” “Management’s Discussion and Analysis” and “Business.”  Actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, including all the risks discussed in “Risk Factors” and elsewhere in this prospectus.

Statements that use the terms “believe,” “expect,” “plan,” “intend,” “estimate,” “anticipate” and similar expressions are intended to identify forward-looking statements.  All forward-looking statements in this prospectus reflect our current views about future events and are based on assumptions and are subject to risks and uncertainties that could cause our actual results to differ materially from future results expressed or implied by the forward-looking statements.  Many of these factors are beyond our ability to control or predict and include all the risks discussed in “Risk Factors” and elsewhere in this prospectus.  You should not put undue reliance on any forward-looking statements.  Unless we are required to do so under U.S. federal securities laws or other applicable laws, we do not intend to update or revise any forward-looking statements.


USE OF PROCEEDS

The shares offered by this prospectus are being registered for the account of the selling shareholders named in this prospectus.  As a result, all proceeds from the resale of the shares will go to the selling shareholders and we will not receive any proceeds from the resale of the shares by the selling shareholders.  However, we will pay all costs associated with this prospectus and the registration statement of which this prospectus forms a part.  We estimate that the total costs that will be incurred by us in connection with this prospectus and the registration statement of which this prospectus forms a part will be approximately $326,000.


DIVIDEND POLICY

Although our shareholders are entitled to dividends when, as and if they are declared by our board of directors, we do not intend to issue dividends to our shareholders in the foreseeable future.  We intend to reinvest any profits we may make in the future back into the company for working capital.
 
 
20

 
 
EXCHANGE RATE INFORMATION

Our reporting and financial statements are expressed in the U.S. dollar, which is our reporting currency. However, substantially all of our expected revenues and expenses are denominated in Renminbi. This prospectus contains translations of Renminbi amounts into U.S. dollars at specific rates solely for the convenience of the reader. For all dates and periods through December 31, 2008, conversions of Renminbi into U.S. dollars are based on the noon buying rate in The City of New York for cable transfers of Renminbi as certified for customs purposes by the Federal Reserve Bank of New York. For January 1, 2009 and all later dates and periods, the exchange rate refers to the exchange rate as set forth in the H.10 statistical release of the Federal Reserve Board. Unless otherwise indicated, conversions of Renminbi amounts into U.S. dollars in this prospectus are based on the exchange rate on December 31, 2010. We make no representation that any Renminbi or U.S. dollar amounts could have been, or could be, converted into U.S. dollars or Renminbi, as the case may be, at any particular rate, or at all. The PRC government imposes control over its foreign currency reserves in part through direct regulation of the conversion of Renminbi into foreign exchange and through restrictions on foreign trade. On September 9, 2011, the daily exchange rate reported by the Federal Reserve Board was RMB 6.3880 to $1.00.
 
The following table sets forth information concerning exchange rates between the Renminbi and the U.S. dollar for the periods indicated. These rates are provided solely for your convenience and are not necessarily the exchange rates that we used in this prospectus or will use in the preparation of our periodic reports or any other information to be provided to you.
 
 
   
Noon Buying Rate
Period
 
Period End
 
Average(1)
 
Low
 
High
   
(RMB per $1.00)
2006
   
7.8041
     
7.9579
     
8.0702
     
7.8041
 
2007
   
7.2946
     
7.5806
     
7.8127
     
7.2946
 
2008
   
6.8225
     
6.9193
     
7.2946
     
6.7800
 
2009
   
6.8259
     
6.8295
     
6.8470
     
6.8176
 
2010
   
6.6000
     
6.7603
     
6.8330
     
6.6000
 
2010
                               
September
   
6.6905
     
6.7396
     
6.8102
     
6.6869
 
October
   
6.6705
     
6.6675
     
6.6912
     
6.6397
 
November
   
6.6670
     
6.6538
     
6.6892
     
6.6791
 
December
   
6.6000
     
6.6497
     
6.6745
     
6.6000
 
2011
                               
January
   
6.6017
     
6.5843
     
6.6017
     
6.5809
 
February
   
6.5713
     
6.5761
     
6.5965
     
6.5520
 
March
   
6.5483
     
6.5645
     
6.5483
     
6.5743
 
April
   
6.4900
     
6.5267
     
6.4900
     
6.5477
 
May
   
6.4786
     
6.4957
     
6.4786
     
6.5073
 
June
   
6.4635
     
6.4746
     
6.4628
     
6.4830
 
July
   
6.4360
     
6.4575
     
6.4360
     
6.4720
 
August
   
6.3778
     
6.4036
     
6.3778
     
6.4401
 
September (through September 9)
   
6.3880
     
6.3865
     
6.3812
     
6.3940
 
 
Source: Federal Reserve Bank of New York and Federal Reserve Board
 
(1) 
Annual averages are calculated by using the average of the exchange rates on the last day of each month during the relevant year. Monthly averages are calculated by using the average of the daily rates during the relevant month.
 
 
21

 
 
CAPITALIZATION

We set forth below our capitalization as of December 31, 2010.  Amounts are presented in accordance with IFRS.
 
   
As of December 31, 2010
 
       
       
Share capital                                                            
  $ 60,824  
         
Share premium                                                            
    1,754,316  
         
Foreign exchange reserves (1)
    1,510  
         
Accumulated losses                                                            
    (153,010 )
         
Total equity attributable to equity shareholders of the Company
    1,663,640  
         
Non-controlling interest                                                            
    (14,600 )
         
Total capitalization                                                            
  $ 1,649,040  

 
(1)
Foreign exchange reserves arise from translation of consolidated financial statements into U.S. reporting currency.

We have financed our business primarily through cash generated from the sale of our shares. In 2010, Dragon Bright HK issued 399,900,000 shares to seven founding shareholders and 72,000,000 shares to ten investors for total cash of $1,906,930, of which $60,811 represented share capital and $1,754,316 represented share premium. Offering costs of $91,803 related to these issuances were accrued on December 31, 2010.

On January 14, 2011, Dragon Bright HK issued 45,950,000 shares at approximately $0.025 per share for $1,181,834 in cash, of which $1,175,925 represented share premium.

On February 1, 2011, Dragon Bright HK issued 3,500,000 shares at approximately $0.05 per share for $179,620 in cash, of which $175,130 represented share premium.

On May 25, 2011, we issued 4,500,000 shares at $0.06 per share for $270,000 in cash, of which $269,550 represented share premium.

On August 15, 2011, we issued 5,050,000 shares at $0.10 per share for $505,000 in cash, of which $504,495 represented share premium.

DILUTION

The shares to be sold by the selling shareholders are shares that are currently issued and outstanding.  Accordingly, there will be no dilution to our existing shareholders.

CORPORATE STRUCTURE

Our History

We are a holding company established on February 17, 2011 as an exempted company incorporated with limited liability under the laws of the Cayman Islands. We expect to conduct substantially all of our business through Fujian Qianlon, a company organized under the laws of the PRC and a direct subsidiary of HK Dragon Holdings.

Our wholly-owned subsidiary Dragon Bright HK was incorporated in July 2007 as a limited liability company under the laws of Hong Kong.
 
 
22

 
 
On March 11, 2011, we entered into a share swap agreement with Dragon Bright HK and all of its shareholders. Pursuant to the share swap agreement, the shareholders of Dragon Bright HK exchanged an aggregate of 521,450,000 shares of Dragon Bright HK, representing all of the issued and outstanding shares of Dragon Bright HK, for an aggregate of 521,450,000 of our newly issued shares, representing all of our issued and outstanding shares, at an exchange rate of 1-for-1. As a result of the share swap, Dragon Bright HK became our wholly-owned subsidiary and the former shareholders of Dragon Bright HK, including several of our directors and officers and their family members, became our shareholders. In May 2011, we issued an aggregate of 4,500,000 shares at $0.06 per share for aggregate proceeds of $270,000. In August 2011, we issued an aggregate of 5,050,000 shares at $0.10 per share for aggregate proceeds of $505,000.

HK Dragon Holdings is a limited liability company incorporated under the laws of Hong Kong on August 11, 2010. HK Dragon Holdings is a 57%-owned subsidiary of Dragon Bright HK and its other shareholders include Ms. Ho, our chairwoman and chief executive officer, Stanley Ang, our director and chief administrative officer, Million Max Limited, whose sole shareholder, Antonio Chau, is the brother-in-law of Ms. Ho, and Wealth Vantage International Limited, an unaffiliated investor. On December 9, 2010, Fujian Qianlon was established by HK Dragon Holdings with a registered capital of $2,573,437. We are required by the PRC law to pay such amount in full by the end of 2012.  As of December 31, 2010, we paid $1,287,470, and expect to pay the balance before the end of 2012.The business of Fujian Qianlon is research and development of agricultural technologies, propagation of bamboo-willow tree seedlings and plantation of bamboo-willow trees.

The following chart summarizes our corporate structure as of the date of this prospectus:

 
 
(1)
The rest of the shares of Hong Kong Dragon Holdings Limited are held by Ms. Ho, our chairwoman and chief executive officer, Stanley Ang, our chief administrative officer and director, Million Max Limited, whose sole shareholder, Antonio Chau, is the brother-in-law of Ms. Ho, and Wealth Vantage International Limited, an unaffiliated investor.
 
(2)
The rest of the shares of China Hainan Agriculture Holdings Ltd. are held by 11 unaffiliated investors.
 
 
23

 
 
SELECTED CONSOLIDATED FINANCIAL DATA

The following table sets forth our selected financial data as of and for the year ended December 31, 2008, 2009 and 2010, respectively, which have been derived from our audited financial statements included elsewhere in this prospectus. You should read the following selected financial data in conjunction with the section “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our audited financial statements and related notes included elsewhere in this prospectus. Our financial statements have been prepared in accordance with IFRS, as adopted by the International Accounting Standards Board.

 
Year ended December 31,
 
 
2010
   
2009
   
2008
 
  $     $     $  
                   
Other income                                                       
  11       -       -  
                       
Administrative expenses                                                       
  (166,863 )     (4,321 )     (4,045 )
                       
Loss before income tax expense                                                       
  (166,852 )     (4,321 )     (4,045 )
                       
Income tax expense                                                       
  -       -       -  
                       
Loss for the year                                                       
  (166,852 )     (4,321 )     (4,045 )
                       
Other comprehensive income/(loss)
                     
Exchange differences on translating foreign
operations recognized directly in equity
  6,918       -       (19 )
                       
Total comprehensive loss for the year
  (159,934 )     (4,321 )     (4,064 )
                       
                       
Loss attributable to:
                     
Equity shareholders of the Company
  (144,644 )     (4,321 )     (4,064 )
Non-controlling interest
  (22,208 )     -       -  
                       
    (166,852 )     (4,321 )     (4,064 )
                       
Total comprehensive loss attributable to:
                     
Equity shareholders of the Company
  (143,115 )     (4,321 )     (4,064 )
Non-controlling interest
  (16,819 )     -       -  
                       
    (159,934 )     (4,321 )     (4,064 )
                       
Loss per share – Basic and Diluted
  (* )   $ (0.04   $ (0.04 )
 
*Less than (0.01) per share.
 
 
As of December 31,
 
 
2010
   
2009
   
2008
 
                       
Financial Position
                     
                       
Current assets                                                          
$ 1,798,414     $ 13     $ 13  
                       
Non-current assets                                                          
  389,490       -       -  
                       
Total liabilities (all current)                                                          
  538,864       8,385       4,064  
                       
Long-term debt                                                          
  -       -       -  
                       
Total equity (deficit)                                                          
$ 1,649,040     $ (8,372 )   $ (4,051 )
                       
Weighted average number of shares outstanding
  116,962,192       100,000       100,000  
 
 
24

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

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with the section entitled “Selected Consolidated Financial Data” and our consolidated financial statements and the related notes included elsewhere in this prospectus. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results and the timing of selected events could differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth under “Risk Factors” and elsewhere in this prospectus.

Overview

We are in the initial stages of developing a business in the forest seedling industry. Our main business is the mass propagation and sale of bamboo-willow seedlings and our secondary business is the sale of bamboo-willows as wood pulp generated from our trial bamboo-willow tree plantation business.  We have developed a three-year plan of operations to develop our bamboo-willow seedling cultivation base and we expect to start generating revenue in the first quarter of 2012.  However, there is no guarantee that we will generate any revenues.

Bamboo-willow is a type of Salicaceae plant and is a hybrid of Chimonobambusa Marmorea, Chosenia Arbutifria and Salix Linearistipularis. Its natural characteristics include fast growth, high cultivation density and strong resistance to diseases.  It is also highly adaptable to a wide range of climatic and soil conditions. Bamboo-willow is expected to have an economic life of 13 years. Based on studies of the wood density, natural lightness, chemical constitution and fiber quality of bamboo-willow conducted by China National Pulp & Paper Research Institute, Beijing in 2009, it also can be used as a fast growing pulp material for papermaking.

We are also developing a business model focusing on the application and commercialization of TFPPT.  TFPPT is an emerging technology for rapid, uniform and mass propagation and growth of high-quality seedlings and plantlets.  We believe the successful application of TFPPT can provide us with significant competitive advantages in our business of mass propagation of bamboo-willow seedlings.

Since November 2010, we have been planning for the development of our business.  We had planted 10,000 bamboo-willow super mother saplings for our seedling propagation operation by mid-March 2011. Propagation of bamboo-willow is done by stem cutting and transplanting the stems to soil. On average, we cut 18 seedlings every 20 days from each super mother sapling tree. Super mother sapling trees are 1.5 meter bamboo-willow trees.  They are the sources for our seedling propagation through a cutting method. Therefore, we expect 3,200,000 seedlings each year can be cut from our existing super mother saplings.  We have been building our initial base site in Xiamen since September 2010 and finished the infrastructure construction at the end of August 2011. We started our bamboo-willow seedlings propagation in November 2010 and intend to start our bamboo-willow tree plantation in September 2011. We expect to generate our initial revenue from the sale of bamboo-willow seedlings beginning in the first quarter of 2012.  However, there is no guarantee that we will generate any revenues.  Beginning the third quarter of 2012, we expect a secondary source of revenue to come from the sale of young bamboo-willow (two to three years old) for wood pulp in papermaking.  As of the date of this prospectus, we have not yet generated any operating revenue.  The loss attributable to our equity shareholders for the year ended December 31, 2010 was $144,644 and our accumulated losses as of December 31, 2010 were $153,010. We anticipate that our initial markets will be in the PRC.

Our business of mass propagation of bamboo-willow is substantially dependent on our ability to protect and commercialize TFPPT.  TFPPT has three components: (i) a probiotics-based organic fertilizer formulated and processed using certain proprietary technology; (ii) an aeroponics cultivation system using a process of growing plants suspended in a closed and semi-closed misty environment by spraying the plants’ dangling roots, lower stems and leaves with an atomized, nutrient-rich water solution without the use of soil or an aggregate medium; and (iii) a stereoscopic cultivation method using a 3-dimensional system that suspends roots of plants in a closed trellis where they are sprayed with an atomized nutrient-rich solution at regular intervals, which enhances output per square meter of land per year.  In our business of cultivating bamboo-willows, it is only necessary to apply two of the TFPPT components, the probiotics-based organic fertilizer and the aeroponics cultivation system, at and throughout the 20-day nursery stage. As bamboo-willows collected by stem cutting from the super mother sapling trees do not have roots and must be stabilized with a small amount of planting soil (or distilled sand) for the probiotics-based fertilizer mist to be sprayed on the stems and leaves in an aeroponics system, the stereoscopic cultivation method is not used in our aeroponics cultivation technology for bamboo-willow seedlings.
 
 
25

 
 
China is currently the world’s second largest wood-consuming country, with a utilization rate of approximately 400 million cubic meters per year, accounting for 25% of the world’s consumption. In addition, the Chinese forestry sector is in the midst of a significant transformation. According to the State Forest Administration, the increase in China’s domestic log production will not be able to match the increased demand. We expect that such trend will continue; therefore we expect China’s future economic development to depend in part on developing a fast-growth plant species. Since our bamboo-willows seedlings have already been shown in scientific studies to be successful in producing paper pulp, we expect that a large number of companies, organizations and customers will purchase our bamboo-willow seedlings.

Recent Developments

On August 15, 2011, we issued 5,050,000 shares at $0.10 per share for $505,000 in cash, of which $504,495 represented share premium.

On June 8, 2011, HK Dragon Holdings remitted approximately $645,470 to Fujian Qianlon as the final tranche of Fujian Qianlon’s registered capital to fulfill the obligation of remitting a total registered capital of $2,583,704 within two years from the date of Fujian Qianlon’s establishment.

On May 25, 2011, we issued 4,500,000 shares at $0.06 per share for $270,000 in cash, of which $269,550 represented share premium.

On February 1, 2011, Dragon Bright HK issued a total of 3,500,000 shares at approximately $0.05 per share and received $179,620.

On January 14, 2011, Dragon Bright HK issued a total of 45,950,000 shares at approximately $0.025 per share and received $1,181,834.

Critical Accounting Policies and Estimates

Our discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with IFRS, as issued by the International Accounting Standards Board.  The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses for each period.  Below is a summary of our critical accounting policies, defined as those policies that we believe are crucial to the portrayal of our financial condition and results of operations and that require management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effects of matters that are inherently uncertain.

Fair value of biological assets

We account for biological assets at fair value.  Our management estimates that the initial costs incurred on the biological assets through December 31, 2010 approximate their fair value, and believes that little biological transformation has taken place because the biological assets were planted immediately prior to the end of the reporting period.

Our management evaluates fair value of our biological assets in consideration of the applicable accounting standards, which provide that a biological asset shall be measured on initial recognition and at the end of each reporting period at its fair value less the costs to sell. There is a presumption that fair value can be measured reliably for a biological asset.

If an active market exists for a biological asset or agricultural product in its present location and condition, the quoted price in that market is the appropriate basis for determining the fair value of that asset. If a company has access to different active markets, the entity uses the most relevant one. If an active market does not exist, a company uses one or more of the following, when available, in determining the fair value:

 
·
the most recent market transaction price, provided that there has not been a significant change in the economic circumstances between the date of that transaction and the end of the reporting period;
 
·
the market prices for similar assets with adjustment to reflect differences; and
 
·
sector benchmarks.
 
 
26

 
 
In some cases, the information sources listed above may suggest different conclusions as to the fair value of a biological asset or agricultural product. A company considers the reasons for those differences in order to arrive at the most reliable estimate of the fair value within a relatively narrow range of reasonable estimates. Alternatively, the fair value of biological assets is determined independently by professional valuers.

In some circumstances, market-determined prices or values may not be available for a biological asset in its present condition. In these circumstances, an entity uses the present value of expected net cash flows from the asset discounted at a current market-determined rate in determining the fair value. The objective of a calculation of the present value of expected net cash flows is to determine the fair value of a biological asset.

Cost may sometimes approximate fair value, particularly when:

 
·
little biological transformation has taken place since the initial cost incurrence (for example, for fruit tree seedlings planted immediately prior to the end of a reporting period); or
 
·
the impact of the biological transformation on the price is not expected to be gain or loss arising on initial recognition, and subsequent changes in fair values less costs to sell biological assets are recognized in profit or loss in the period in which they arise.  Upon the sale of the agricultural produce as forestry products, the carrying amount is transferred to cost of forestry products sold in the statement of comprehensive income.

Our business is subject to the usual natural hazards from fire, wind and insects.  Forces of nature such as temperature and rainfall may also affect harvest efficiency.  Our management considers adequate preventive measures are in place to minimize exposure. However, to the extent that unanticipated factors may affect our production, they may result in remeasurement or harvest losses in future accounting periods.

Useful life of property, plant, equipment and intangible assets

Management estimates the expected useful life for our property, plant, equipment and intangible assets and determines the related depreciation policy.  The estimated useful life of the property, plant, equipment and intangible assets and the residual value reflects management’s estimates of the number of years that we intend to derive future economic benefits from the use of property, plant, equipment and intangible assets.  These estimates could change significantly as a result of technological innovations in response to industry cycles.  The depreciation and amortization expenses in future accounting periods may be adjusted if there are significant changes in those estimates.

Determination of functional currency

We measure foreign currency transactions in the respective functional currencies of us and our current and future subsidiaries. In determining our functional currencies, judgment is required to determine the currency that mainly influences sales prices for goods and services and of the country whose competitive forces and regulations mainly determines the sales prices of our goods and services. The functional currencies of our entities are determined based on management’s assessment of the economic environment in which we operate and our process of determining sales prices.

Revenue recognition

As of December 31, 2010, we had no revenue-generating activities. When we begin to generate revenue, we expect to recognize our revenue from the sale of forestry products when:

 
·
persuasive evidence of a sale exists (such as an executed sales agreement);

 
·
the revenue can be measured reliably;

 
·
the significant risks and rewards of ownership have been transferred to the buyer (such as through delivery, acceptance and transfer of title); and

 
·
collection of the consideration is probable.
 
 
27

 
 
Results of Operations

The following table sets forth a summary of our consolidated results of operations for the periods indicated. This information should be read together with our consolidated financial statements and related notes included elsewhere in this prospectus. The operating results in any period are not necessarily indicative of the results that may be expected for any future period.

Consolidated Statements of Comprehensive Loss

 
Year ended December 31,
 
     
 
2010
   
2009
   
2008
 
  $     $     $  
                   
Other income                                                       
  11       -       -  
                       
Administrative expenses                                                       
  (166,863 )     (4,321 )     (4,045 )
                       
Loss before income tax expense                                                       
  (166,852 )     (4,321 )     (4,045 )
                       
Income tax expense                                                       
  -       -       -  
                       
Loss for the year                                                       
  (166,852 )     (4,321 )     (4,045 )
                       
Other comprehensive income/(loss)
                     
Exchange differences on translating foreign
    operations recognized directly in equity
  6,918       -       (19 )
                       
Total comprehensive loss for the year
  (159,934 )     (4,321 )     (4,064 )
                       
                       
Loss attributable to:
                     
Owners of the Company                                                       
  (144,644 )     (4,321 )     (4,064 )
Non-controlling interest                                                       
  (22,208 )     -       -  
                       
    (166,852 )     (4,321 )     (4,064 )
                       
Total comprehensive loss attributable to:
                     
Owners of the Company                                                       
  (143,115 )     (4,321 )     (4,064 )
Non-controlling interest                                                       
  (16,819 )     -       -  
                       
    (159,934 )     (4,321 )     (4,064 )
                       
Loss per share – Basic and Diluted
  (* )   $ (0.04 )   $ (0.04 )
                       
                           *Less than $(0.01) per share.                      
 
 
28

 
 
Year Ended December 31, 2010 Compared To Year Ended December 31, 2009

Other income. Our other income in 2010 was $11 due to receiving bank interest. We did not have any other income in 2009.

Administrative expenses. Our operating expenses consist of administrative expenses. Our administrative expenses increased by $162,542 to $166,863 for the year ended December 31, 2010 from $4,321 for the year ended December 31, 2009, primarily due to the significant increase in (i) professional fees of $50,913 to various professional services, including legal and consultant fees, (ii) research and development expenses of $11,071 in association with our enhanced research and development activities, and (iii) increased administrative expenses relating to salaries of $32,127 and corporate secretarial fees of $16,413.

Loss before income tax expense. As we did not have any revenue in 2010 and 2009, our loss before income tax expense equaled the sum of administrative expenses and other income.

Income tax expenses. We did not have any revenue in 2010 and 2009. Therefore, we did not incur any income tax expenses in 2010 and 2009.

Loss for the year. Our loss for 2010 and 2009 equaled loss before income tax expense.

Other comprehensive income.  We recorded other comprehensive income of $6,918 in 2010 and no other comprehensive income in 2009, as a result of exchange differences on translating consolidated financial statements recognized directly in equity.

Year Ended December 31, 2009 Compared to the Year Ended December 31, 2008

Administrative expenses. Our operating expenses consist of administrative expenses. Our operating expenses increased by $276, or 6.9%, from $4,045 in 2008 to $4,321 in 2009 mainly due to the increase in the management consulting fees paid to our CEO, Ms. Ho, who was engaged as a consultant performing administrative services for us.

Loss before income tax expense. As we did not have any revenue in 2009 and 2008, our loss before income tax expense equaled the sum of administrative expenses and other income.

Income tax expenses. We did not have any revenue in 2009 and 2008. Therefore, we did not incur any income tax expenses in 2009 and 2008.

Loss for the year. Our loss for 2010 and 2009 equaled loss before income tax expense.

Other comprehensive income. We recorded no other comprehensive income of in 2009 and loss of $19 in 2008, as a result of exchange differences on translating consolidated financial statements recognized directly in equity.

Liquidity and Capital Resources
 
As of December 31, 2010, we had cash of $1,772,943, of which $1,297,749 was denominated in Renminbi and $475,194 was denominated in HK dollars.  Our cash increased significantly compared to December 31, 2009.  Cash was raised from the issuance of shares and a loan from a related party during the year.

Based on our financial position as of December 31, 2010, we believe our working capital is sufficient to meet our short-term cash requirements to create and expand our business capability, market development initiatives, research and development and product distribution infrastructure for the foreseeable future.

To obtain additional financing, we intend to sell additional shares or arrange debt financing to the extent it is available.

 
29

 
 
The following table sets out certain information with respect to our condensed consolidated statements of cash flows information for the years ended December 31, 2010, 2009 and 2008, respectively:

 
Year ended December 31,
 
                 
 
2010
   
2009
   
2008
 
                 
  $     $     $  
                       
Net cash used in operating activities                                                           
  (178,623 )     (3,870 )     (3,593 )
                       
Net cash used in investing activities                                                           
  (392,014 )     -       -  
                       
Net cash generated from financing activities
  2,336,890       3,870       3,612  
                       
Net increase in cash                                                           
  1,766,253       -       19  
                       
Effect of foreign exchange rate changes
  6,690       -       (19 )
                       
Cash at beginning of the year                                                           
  -       -       -  
                       
Cash at end of the year                                                           
  1,772,943       -       -  

Net cash used in operating activities

Our net cash used in operating activities in 2010 was $178,623, primarily consisting of an increase in other receivables of $14,011, an increase in supplies inventories of $8,032, as well as administrative expenses for our restructuring, and operating costs incurred in connection with building the initial base site in Xiamen.

Our cash flow used in operating activities in 2009 was $3,870, primarily due to payment of professional fees of $3,483 and secretarial fees of $387.

Our cash flows used in operating activities in 2008 of $3,593 were related to administrative expenses.

Net cash used in investing activities

In 2010, we paid $353,787 as capital expenditures to build the infrastructure in Xiamen, including the purchase of plant and equipment as well as investment in construction in progress. We also purchased biological assets for $32,021, invested $578 in China Hainan Agriculture Holdings Ltd., and paid $5,628 for the exclusive licensing rights to use TFPPT.

There were no cash flows used in investing activities in 2009 and 2008.

Net cash generated from financing activities

Our net cash flows generated from financing activities in 2010 were mainly attributable to the gross proceeds from the issuance of shares of $1,906,930 and advances from related parties of $434,131.

We had $3,870 and $3,612 of cash flow generated from financing activities in 2009 and 2008, respectively, which represented advances from directors.

Current Liabilities

As we are an early-stage start-up company, we have not financed our business through long-term borrowings.  Our current liabilities increased to $538,864 in 2010 from $8,385 in 2009, mainly due to a loan to us of $435,223 from Ms. Hsui Ping Tsai, or Ms. Tsai, the mother-in-law of Ms. Ho.  There was no loan agreement, and the loan is unsecured, non-interest bearing and payable on demand.
 
 
30

 
 
In 2008 and 2009, our current liabilities were $4,064 and $8,385, respectively, mainly due to financings from Ms. Ho, our chief executive officer.

Financial Instruments

We did not have any hedging contracts or financial derivatives outstanding for the year ended December 31, 2010.

Contractual Obligations

As of December 31, 2010, the terms and amounts of our significant contractual obligations were as follows:
 
     
Payments due by Period
 
               
 
Less than
 
One to
 
More Than
   
 
One Year
 
Five Years
 
Five Years
Total
 
Advances payable, related parties
$ 434,131   $ -   $ -   $ 434,131
Operating lease obligations                                               
  38,845     81,524     212,934     333,303
Total                                               
$ 472,976   $ 81,524   $ 212,934   $ 767,434
 
As we are an early-stage start-up company, we have not financed our business through borrowings from commercial banks. In 2008 and 2009, the business operation was financed by Ms. Ho, our chief executive officer. As of December 31, 2010, there was an outstanding short-term non-interest bearing loan of $434,131 advanced by Ms. Tsai, the mother-in-law of Ms. Ho, without any promissory note. We repaid this loan in full in January 2011.

Seasonality
 
The sales of our products are expected to fluctuate on a seasonal basis each year. Our seedling acclimatization and tree plantation sites are located in the coastal areas of southern China and are particularly susceptible to the typhoon season between July and September.

Off-Balance Sheet Commitment and Arrangements

At the end of each reporting period, we had the following off-balance sheet capital commitments:

 
2010
   
2009
   
2008
 
  $     $     $  
Authorized and contracted but not
   provided for:
               
                 
- acquisition of property, plant and
       equipment and construction in
       progress
  141,590       -       -  
                 
  141,590     -     -  
 
 
31

 
 
Inflation

Inflationary factors, such as increases in the cost of our products and overhead costs, could impair our future operating results. Although we do not believe that inflation has had a material impact on our financial position or results of operations to date, a high rate of inflation in the future may have an adverse effect on our future business operations and results of operations.

Plan of Operation

We are in the initial stages of developing our business, and have had no revenues since our inception.  We have limited financial backing and assets, and have primarily financed our operations through sales of our shares. Our plan of operation is to build a business of mass propagation and sale of bamboo-willow seedlings by application and commercialization of TFPPT.  

We will focus on expanding our business operations in the following areas during the next 12 months of operations as we emerge from the development stage.

Infrastructure

Tianzhu Mountain, Xiamen

As of March 31, 2011, we had invested approximately $352,170.03 in an initial basic production and research infrastructure in Tianzhu Mountain, Xiamen, Fujian Province, or Tianzhu Mountain Infrastructure.  The initial basic infrastructure unit is expected to have 100 mu of land, and its purpose is to demonstrate the effectiveness of the application of TFPPT technology in propagating bamboo-willow seedlings. As of March 31, 2011, we had completed the construction on 70 mu of land at the initial infrastructure unit and we had spent approximately $3,579 in Tianzhu Mountain site management. Set forth below is the allocation of the Tianzhu Mountain Infrastructure by function:

Tianzhu Mountain Infrastructure Land Allocation
Area (mu)
-      Dorm and Site office
-      Super mother sapling supply zone  (containing 10,000 super mother trees)
-      Greenhouses (three greenhouses for research and development and four greenhouses for seedlings propagation)
-      Acclimatization zone (for seedlings to become accustomed to the natural environment)
-      Acclimatization zone for research and development
-      Machine room for aeroponics cultivation system
-      Production base for organic fertilizer
-      Roads
25
10
10
9
6
1
3
6
Total
70
 
 
32

 
 
Set forth below are the investments that we have made with respect to the construction of the Tianzhu Mountain Infrastructure:

Tianzhu Mountain Infrastructure Cost Allocation
Invested Amount ($)
-      Dorm and Site office
-      Greenhouses (three greenhouses for research and development
and four greenhouses for bamboo-willow seedlings propagation)
-      Machine room for aeroponics cultivation system
-      Production base for organic fertilizer
-      Roads
-      Unallocable common costs
       (e.g. site electrical supply and water supply)
-      Super mother sapling supply zone
-      Acclimatization zone (for seedlings to become accustomed to the natural environment)
-      Acclimatization zone for research and development
-
 
248,713.33
9,963.29
12,841.00
5,298.69
 
67,063.06
3,316.26
2,984.64
1,989.76
Total
352,170.03

We plan to complete one infrastructure base every half year and expect to have a total of four infrastructure bases by the end of 2012.

Year
Construction Starting
Month
Site – Fujian Province
Area (mu)
2011
March
Yong Chun, Quanzhou
961.9
2011
September
Ji Mei, Xiamen
125
2012
March
Chang Tai, Xiamen
200

Yong Chun, Quanzhou

We have also leased 961.9 mu of land in Yong Chun, Quanzhou, Fujian Province for propagation of additional bamboo-willow seedlings by entering into eight land lease agreements with Xi Dong Village, Hu Yang Town of Yong Chun County and Xi Xi Village, Hu Yang Town of Yong Chun County in February 2011. As of April 30, 2011, we had spent approximately $20,862 on such land leases. In the fourth quarter of 2011, we expect to complete establishing a new infrastructure unit in Yong Chun on the leased land, or Yong Chun Infrastructure. Set forth below is the estimated allocation of the Yong Chun Infrastructure by function:

Yong Chun Infrastructure Land Allocation
Area (mu)
-      Super mother sapling supply zone (including 20,000 super mother trees
       (with three-years lifetime) expected to generate six million seedlings each year)
-      Acclimatization zone (for seedlings to become accustomed to the natural environment)
-      Plantation zone (mountain area)
-      Production base for organic fertilizer
-      Road
 
25
50
878.9
2
6
Total
961.9
 
 
33

 
 
Set forth below are investments that we have made and expect to make with respect to the construction of the Yong Chun Infrastructure:

Yong Chun Infrastructure Cost Allocation
As of
April 30,
2011
($)
Expected
Total
Investment
($)
-      Super mother sapling supply zone
-      Acclimatization zone (for seedlings to become accustomed to the natural environment)
-      Plantation zone - mountain area
-           Production base for organic fertilizer
-           Road
-           Unallocable common costs
            (e.g. site electrical supply and water supply)
1,500.00
12,664.20
50,835.68
15,656.00
-
12,266.80
1,500.00
12,664.20
61,320.68
15,656.00
5,000.00
12,266.80
Total
92,922.68
108,407.68

Yong Chun’s site will be used for bamboo-willow and research and development acclimatization. The seedlings produced from the Yong Chun super mother sapling supply zone by the cutting method will be delivered to Tianzhu Mountain’s greenhouse for propagation.

Ji Mei, Xiamen

We completed the site selection of the Ji Mei Infrastructure in May 2011, and are undergoing the legal procedure for land leasing which is expected to be completed by September 2011.

The Ji Mei Infrastructure is 125 mu and will be used for bamboo-willow acclimatization and research and development acclimatization. The seedlings for acclimatization will be supplied by the nursery zone at the Tianzhu Mountain site. The travel time between Ji Mei and Tianzhu Mountain is approximately 30 minutes. Set forth below is the estimated allocation of the Ji Mei site by function:

Ji Mei Infrastructure Land Allocation
Area (mu)
-      Dorm and Site office
-      Acclimatization zone (for seedlings to become accustomed to the natural environment)
-      Acclimatization zone for research and development
-      Production base for organic fertilizer
-      Roads
3
95
15
3
9
Total
125
 
 
34

 
 
Set forth below are the investments that we expect to make with respect to the construction of the Ji Mei Infrastructure:

Ji Mei Infrastructure Cost Allocation
Expected
Total
Investment
($)
-      Dorm and site office
-      Acclimatization zone (for seedlings to become accustomed to the natural environment)
-      Acclimatization zone for research and development
-      Production base for organic fertilizer
-      Roads
-      Unallocable common costs*
15,300
15,364
3,799
15,656
3,000
2,000
Total
55,119
* The Ji Mei site already has basic infrastructure in place, including water supply and electrical supply.

Chang Tai, Xiamen

We completed the site selection of the Chang Tai Infrastructure in June 2011, and are undergoing the legal procedure for land leasing which is expected to be completed by March 2012.

The Chang Tai Infrastructure is 200 mu and will be used for bamboo-willow acclimatization. The plantlets for acclimatization will be supplied by the nursery zone in Tianzhu Mountain. The travel time between Chang Tai and Tianzhu Mountain is approximately one hour. We expect to spend $36,816 on the land lease annually. Set forth below is the estimated allocation of the Chang Tai Infrastructure by function:

Chang Tai Infrastructure Land Allocation
Area (mu)
-      Dorm and Site office
-      Acclimatization zone (for seedlings to become accustomed to the natural environment)
-      Production base for organic fertilizer
-      Roads
3
184
3
10
Total
200

Set forth below are the investments that we expect to make with respect to the construction of the Chang Tai Infrastructure:

Chang Tai Infrastructure Cost Allocation
Expected
Total
Investment
($)
-      Dorm and Site’ office
-      Acclimatization zone (for seedlings to become accustomed to the natural environment)
-      Production base for organic fertilizer
-      Roads
-      Unallocable common costs (e.g. site electrical supply and water supply)
15,300
30,368
15,656
3,000
12,267
Total
76,591
 
 
35

 
 
Sales of Seedlings

We expect that the majority of our revenue will originate from the sales of bamboo-willow seedlings to sub-licensed companies. Consistent with industry practice, we expect to receive payment for the sales of bamboo-willow seedlings shortly after the sales are made, which we expect to provide sufficient cash flow to support our business expansions.

We expect the TFPPT sub-licensee, China Hainan Agriculture Holdings Ltd. to purchase 1,000,000 bamboo-willow seedlings by the first quarter of 2012. The revenue to be generated is expected to be $300,000, based on an expected unit price of $0.30 per bamboo-willow seedling.

We have targeted two potential investors who plan to set up companies to sub-license TFPPT. The companies will be established in Sichuan Province and Guangdong Province. We expect these two companies to purchase 800,000 and 1,600,000 bamboo-willow seedlings, respectively, by the first quarter of 2012. The revenue to be generated is expected to be $720,000, based on an expected unit price of $0.30 per bamboo-willow seedling.

Personnel

Our employees can be classified into three groups: operational, technicians and R&D, and administrative. Operational employees include plantation workers, maintenance workers and cooks. Due to the seasonal nature of our plantation activities, most of the plantation workers are employed on a part-time basis. In order to streamline the operation, most of the plantation workers are local farmers. Technicians and R&D employees are responsible for training the plantation workers and doing research and development in agricultural science. Administrative employees are responsible for strategic planning and backup support. We expect to spend $390,000 and $450,000 on our employees’ salaries and benefits in 2011 and 2012, respectively.

Set forth below is the expected number of our employees and part-time workers in each of our areas of operation and as a percentage of our total workforce for each of the years ended December 31, 2011 and 2012.

 
Average Number of Employees/Part-time Workers for the Years Ending December
31,
2011
2012
Full-time
Employees
Part-time
Workers
Percentage
Full-time
Employees
Part-time
Workers
Percentage
Operational
5
45
71.4%
7
60
74.4%
Technicians and R&D
4
-
5.7%
5
-
5.6%
Administrative
16
-
22.9%
18
-
20.0%
Total
25
45
100.0%
30
60
100.0%


Expected Purchase and Significant Equipment

In order to enhance our competitiveness, we expect to spend a total of $304,407 from April 2011 to March 2012, to purchase equipment and company vehicles.

The equipment and fixed assets we will be purchasing include biological assets, office equipment, irrigation and spray equipments, research and development equipment, water pumps and drilling machines.
 
 
36

 
 
Set forth below is a summary of expenses that we expect to incur from April 2011 to March 2012 for biological assets, office equipment, site equipment and fixed assets.
 
 
 
Total Expenses ($)
 
Biological Assets
 
Bamboo-willow Super Mothers
24,432
Other Vegetable Seedlings
3,040
Fertilizer
50,000
Office Equipment
 
Office Equipment
20,000
Site Equipment
 
Irrigation and Greenhouses with Spray Equipments
9,118
Sand Seedbed
5,471
250KW Transformer and Installation Fees
53,191
Research & Development Equipment
6,078
Water Pumps
700
Drilling Machines
3,500
Mixers
9,510
Fixed Assets
 
Automobile A
30,395
Automobile B
88,972
Total
304,407 
 
 
 
 
 
 
 
37

 
 
Estimated Expenses for the Next Twelve Months
 
Set forth below is an overview of our estimated expenses to fund our plan of operation from April 2011 to March 2012.  
 
Description
 
Fees ($)
Infrastructure
· Yong Chun Site
· Ji Mei Site
· Chang Tai Site
 
Employees
 
Expected Purchases and Significant Equipment
(including automobiles, plantation tools and electrical and water equipment)
 
Land Leases
· Yong Chun Site
· Chang Tai Site
 
 
108,407
55,119
76,591
 
405,000
 
 
304,407
 
 
12,149
9,204
 
Total
970,877

Capital Raising

We have raised a total of approximately $4,043,384 through private equity financing. We believe we will have sufficient cash to operate the Tianzhu Mountain Infrastructure and complete the additional three infrastructures by December 2012. For the remainder of 2011, we plan to raise an additional amount of $3,000,000 through another round of private equity financing to accelerate the expansion of our operations. There is no assurance that we will be successful in raising additional capital or achieving profitable operations.

Quantitative and Qualitative Disclosure about Market Risk

Credit risk

The carrying amounts of cash and other receivables present us with credit risk.  The maximum exposure to credit risk is the carrying amounts of the respective financial assets at the end of the reporting period. The credit risk of our cash arises from default of the counterparty.

Liquidity risk

Liquidity risk is the risk that we will encounter difficulty in raising funds to meet commitments associated with financial instruments. Our policy is to regularly monitor current and expected liquidity requirements to ensure that we maintain sufficient reserves of cash to meet our liquidity requirement in the short and long term. We currently do not expect any liquidity risk as we have sufficient cash flow at the early stage of our business operations.  However, we may encounter liquidity risk in the long term with the expansion of our business.
 
 
38

 
 
Foreign currency risk

Our businesses are located in the PRC and our operating transactions are conducted in Renminbi. Most of our fixed assets and liabilities are denominated in Renminbi, except for transactions related to share issuances and our promissory note, which are denominated in Hong Kong dollars. Since the Renminbi is not freely convertible, there is a risk that the PRC government may take actions affecting exchange rates which may have a material adverse effect on our net assets, earnings and any dividends we declare if such dividends are to be exchanged or converted into foreign exchange. Moreover, we have not hedged our foreign exchange rate risk.

We mainly operate in the PRC with most of the transactions denominated and settled in Renminbi, which is not freely convertible into other foreign currencies.  Conversion of Renminbi into foreign currencies is subject to rules and regulations of foreign exchange control promulgated by the PRC government.  Our current and future PRC subsidiaries are expected to transact business in their functional currency and therefore no currency risk is expected to arise in respect of these subsidiaries.  Our financial statements are presented in U.S. dollars and fluctuations of Renminbi against U.S. dollars will result in adjustment to financial amounts.  We currently do not utilize any forward contracts, currency borrowings or other means to hedge against our foreign currency exposure.

Recent Accounting Pronouncements

The following new and amended IFRS accounting pronouncements, potentially relevant to our operations, have been issued but are not yet effective and have not been early adopted by us.

 
·
IFRSs (Amendments) - Improvements to IFRSs 2010, effective from annual periods beginning on or after July 1, 2010 or January 1, 2011, as applicable.

Improvements to IFRSs 2010 set out amendments to a number of IFRSs.  We expect to adopt the amendments from January 1, 2011.  There are separate transitional provisions for each standard.  While the adoption of some of the amendments may result in changes in accounting policies, none of these amendments are expected to have a significant financial impact on us.  Those amendments that are expected to have a significant impact on our policies are as follows:

 
(i)
IAS 1 Presentation of Financial Statements, which clarifies that an analysis of other comprehensive income for each component of equity can be presented either in the statement of changes in equity or in the notes to the financial statements.

 
(ii)
IAS 27 Consolidated and Separate Financial Statements, which clarifies that the consequential amendments from IAS27 (as revised in 2008) made to IAS21, IAS 28 and IAS 31 shall be applied prospectively for annual periods beginning on or after July 1, 2009 or earlier if IAS 27 is applied earlier.

 
·
IFRIC – Interpretation 19 Extinguishing Financial Liabilities with Equity Instruments, effective for annual periods beginning on or after July 1, 2010

IFRIC Interpretation 19 provides guidance regarding the accounting for the extinguishment of a financial liability by the issue of equity instruments. Under IFRIC Interpretation 19, equity instruments issued under such arrangements will be measured at their fair value, and any difference between the carrying amount of the financial liability extinguished and the fair value of equity instruments issued will be recognized in profit or loss.

 
·
IAS 24 (Revised) Related Party Disclosures, effective for annual periods beginning on or after January 1, 2011

IAS 24 (Revised) clarifies and simplifies the definition of related parties. It also provides for a partial exemption of related party disclosure to government-related entities for transactions with the same government or entities that are controlled, jointly controlled or significantly influenced by the same government.
 
 
39

 
 
 
·
Amendments to IFRS 7 - Disclosures – Transfers of Financial Assets, effective for annual periods beginning on or after July 1, 2011

The amendments to IFRS 7 improve the derecognition of disclosure requirements for transfer transactions of financial assets and allow users of financial statements to better understand the possible effects of any risks that may remain with the entity on transferred assets. The amendments also require additional disclosures if a disproportionate amount of transfer transactions are undertaken around the end of a reporting period.

 
·
IFRS 9 - Financial Instruments, effective for annual periods beginning on or after January 1, 2013

Under IFRS 9, financial assets are classified into financial assets measured at fair value or at amortized cost depending on the entity’s business model for managing the financial assets and the contractual cash flow characteristics of the financial assets. Fair value gains or losses will be recognized in profit or loss except for those non-trade equity investments, which the entity will have a choice to recognize the gains and losses in other comprehensive income.  IFRS 9 carries forward the recognition and measurement requirements for financial liabilities from IAS 39, except for financial liabilities that are designated at fair value through profit or loss, where the amount of change in fair value attributable to change in credit risk of that liability is recognized in other comprehensive income unless that would create or enlarge an accounting mismatch.  In addition, IFRS 9 retains the requirements in IAS 39 for derecognition of financial assets and financial liabilities.

We are in the process of making an assessment of the potential impact of these new and amended accounting pronouncements and, to date, we do not expect the application of these new and amended accounting pronouncements will have a material impact on our results or financial position.
 
 
 
 

 
 
40

 
 
INDUSTRY

We operate in the forest seedling industry and we plan to provide bamboo-willow seedlings to forest tree plantation companies, seedling growers, manufacturers of paper pulp products and dealer agents. We believe these industries in China are highly fragmented and competitive with a large number of participants including individual farmers and small private forest companies.

We are in the initial stages of developing our business. As of the date of this prospectus, we have identified bamboo-willow seedlings as the primary plant that we will grow for our business.  Since November 2010, we have started propagation of bamboo-willow seedlings. We had planted 10,000 bamboo-willows as super mother bamboo-willow saplings by mid-March 2011. We expect that our super mother bamboo-willow saplings will produce up to 3,200,000 seedlings at the end of 2011.

Our business is dependent on the successful application of bamboo-willow as wood pulp and the successful application and commercialization of TFPPT in our business. We expect to compete primarily with private seedling and plantation growers and manufacturers of paper pulp products.

Bamboo-willow as Wood Pulp in Papermaking

According to a 2008 report entitled “Analysis on China’s Paper Manufacturing Industry” published in China Industry Reports, in China, straw pulp has historically been used for papermaking due to its low production costs and China’s concern over forest conservation.  Globally, manufacturers generally use wood pulp for paper production.  Typical straw pulp papermaking factories are limited in scale as compared to wood pulp paper making factories.  According to the same 2008 report, in 2008, the largest production capacity of a straw pulp papermaking factory in China was about 100,000 tons per year and the average capacity of these factories was between 10,000 and 30,000 tons per year.  This is so primarily because of the seasonality of straw production, which is harvested only in one season.  Thus, straw pulp paper manufacturers must forecast their annual straw consumption accurately and purchase sufficient straw for their annual consumption within a short period.  The raw material needs a large stack space for storage and is easily damaged by rainfall and contact with sunshine.  Because straw is easily damaged and the storage of straw requires careful handling, the transportation radius of straw is generally smaller than that of timber.  This, in turn, requires papermaking factories to be built near the source, thus constricting the supply of raw materials and production capacity.  Additionally, we believe that technologies and equipment used in straw pulp papermaking are far less advanced than those used in wood pulp paper making.  We believe that there is generally a close relationship between the level of environmental pollution and the scale of a papermaking operation.  Recently, pollution problems from the straw pulp papermaking industry have been exacerbated due to the increasing usage of chemicals during the production process.  Using wood pulp for production is more environmentally friendly than straw pulp as fewer chemical materials are used in the wood pulp production process.

According to a 2010 SWS Research report published by SWS Research, in China, the forest land available per citizen is less than 1/4 of the world average. In developing countries, the income of farmers could be increased by investing in the forestry industry. In many developed countries, papermaking is regarded as a sustainable industry and a substantial part of the national economy.  The Chinese government has been promoting development of a domestic wood pulp industry, with upstream supply of fiber cultivated by plantation and downstream paper production.  The government has been providing various economic incentives such as loans with discounted interest and government subsidies to encourage the development of a domestic wood pulp industry.

We believe that, based on China’s macroeconomic outlook and other drivers for wood-consuming industries, the significant supply and demand imbalance will likely persist in China for the foreseeable future and the domestic pulp price will grow at a minimum of 5% per year.  Moreover, with lower production from state-owned forests, the PRC government relies increasingly on the private sector to develop fast growth high yield (FGHY) tree species based on a research report entitled “China Forestry Industry – Seeing the forest for the trees,” published by Deutsche Bank in July 2007.

We believe the forest seedlings industry in China is highly fragmented and competitive with a large number of participants, including individual farmers and small private forest companies. We do not expect to compete with any state-owned agriculture companies.  We may face intense competition from other companies that provide seedlings, wood pulp products, substitute wood pulp products and other alternative materials used in the paper making industry in China.  Many of these firms are well-established and possess technical and financial resources far greater than we do.
 
 
41

 
 
BUSINESS

Overview

We are in the initial stages of developing a business in the forest seedling industry. Our main business is the mass propagation and sale of bamboo-willow seedlings and our secondary business is the sale of bamboo-willows as wood pulp generated from our trial bamboo-willow tree plantation business.  We have developed a three-year plan of operations to develop our bamboo-willow seedling cultivation base and we expect to start generating revenue in the first quarter of 2012.  However, there is no guarantee that we will generate any revenues.

Bamboo-willow is a type of Salicaceae plant and is a hybrid of Chimonobambusa Marmorea, Chosenia Arbutifria and Salix Linearistipularis. Its natural characteristics include fast growth, high cultivation density and strong resistance to diseases.  It is also highly adaptable to a wide range of climatic and soil conditions. Bamboo-willow is expected to have an economic life of 13 years. Based on studies of the wood density, natural lightness, chemical constitution and fiber quality of bamboo-willow conducted by China National Pulp & Paper Research Institute, Beijing in 2009, it also can be used as a fast growing pulp material for papermaking.

We are also developing a business model focusing on the application and commercialization of TFPPT.  TFPPT is an emerging technology for rapid, uniform and mass propagation and growth of high-quality seedlings and plantlets.  We believe the successful application of TFPPT can provide us with significant competitive advantages in our business of mass propagation of bamboo-willow seedlings.

Since November 2010, we have been planning for the development of our business.  We had planted 10,000 bamboo-willow super mother saplings for our seedling propagation operation by mid-March 2011. Propagation of bamboo-willow is done by stem cutting and transplanting the stems to soil. On average, we cut 18 seedlings every 20 days from each super mother sapling tree. Super mother sapling trees are 1.5 meter bamboo-willow trees.  They are the sources for our seedling propagation through a cutting method. Therefore, we expect 3,200,000 seedlings each year can be cut from our existing super mother saplings.  We have been building our initial base site in Xiamen since September 2010 and finished the infrastructure construction at the end of August 2011. We started our bamboo-willow seedlings propagation in November 2010 and intend to start our bamboo-willow tree plantation in September 2011. We expect to generate our initial revenue from the sale of bamboo-willow seedlings beginning in the first quarter of 2012.  However, there is no guarantee that we will generate any revenues.  Beginning with the third quarter of 2012, we expect a secondary source of revenue to come from the sale of young bamboo-willow (two to three years old) for wood pulp in papermaking.  As of the date of this prospectus, we have not yet generated any operating revenue.  The loss attributable to our equity shareholders for the year ended December 31, 2010 was $144,644 and our accumulated losses as of December 31, 2010 were $153,010.  We anticipate that our initial markets will be in the PRC.

Our business of mass propagation of bamboo-willow is substantially dependent on our ability to protect and commercialize TFPPT.  TFPPT has three components: (i) a probiotics-based organic fertilizer formulated and processed using certain proprietary technology; (ii) an aeroponics cultivation system using a process of growing plants suspended in a closed and semi-closed misty environment by spraying the plants’ dangling roots, lower stems and leaves with an atomized, nutrient-rich water solution without the use of soil or an aggregate medium; and (iii) a stereoscopic cultivation method using a 3-dimensional system that suspends roots of plants in a closed trellis where they are sprayed with an atomized nutrient-rich solution at regular intervals, which enhances output per square meter of land per year.  In our business of cultivating bamboo-willows, it is only necessary to apply two of the TFPPT components, the probiotics-based organic fertilizer and the aeroponics cultivation system, at and throughout the 20-day nursery stage. As bamboo-willows collected by stem cutting from the super mother sapling trees do not have roots and must be stabilized with a small amount of planting soil (or distilled sand) for the probiotics-based fertilizer mist to be sprayed on the stems and leaves in an aeroponics system, the stereoscopic cultivation method is not used in our aeroponics cultivation technology for bamboo-willow seedlings.

The application for an invention patent for “Aeroponics Cultivation System” was granted by the State Intellectual Property Office of the PRC on March 7, 2011, and the application for a utility model for “Aeroponics System and Method” is in the process of review by the State Intellectual Property Office of the PRC.  Mr. Chang has not applied for intellectual property rights with respect to TFPPT in any other jurisdictions.
 
 
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Our Competitive Strengths

We believe that the following strengths give us a competitive advantage:

 
·
Our intellectual property rights to TFPPT. TFPPT is applied to plants at their nursery stage which creates favorable growing conditions for plants that are superior to natural conditions. Our management believes that, as compared to other aeroponics cultivation and stereoscopic trellising cultivation technologies, the combined effects of our TFPPT with the extra component of our proprietary probiotics-based organic fertilizer would provide competitive advantages in our business of mass propagation of bamboo-willow seedlings and secondarily production of young bamboo-willows for the paper pulp industry.

 
·
Our shorter cultivating cycle, which increases production yield within a given cultivation period. Based on data gathered from our bamboo-willow cultivating experiment at our Xiamen site, the application of our aeroponics system and probiotics-based organic fertilizer mist in the 20-day nursery stage of cultivation of bamboo-willow seedlings has stimulated the growth of bamboo-willow better than regular chemical fertilizer and provides a closed-loop environment which optimizes the conditions necessary for the better performance of bamboo-willow cultivation in a shorter period of time.  In our study, bamboo-willows fertilized with our probiotics-based organic fertilizer generated a height approximately 1.5 times that of bamboo-willows using regular chemical fertilizer. Therefore, we expect that the application of TFPPT in our mass bamboo-willow seedling propagation operation would result in a shorter cultivating cycle which leads to higher production yield within a given cultivation period.

 
·
Minimized seasonality of seedling growth. In applying TFPPT to our bamboo-willow seedlings at their nursery stage in a closed-loop environment, we control and regulate various conditions such as light, temperature, water, humidity and nutrition to keep them constant and at the optimal level for the best performance of bamboo-willows. Such control minimizes the effect of seasonality and other natural conditions that would ordinarily affect cultivating activities carried out in a natural environment.
 
 
·
Our balanced management and external consultancy team with expertise from a variety of professional areas. Mr. Chang started as a mechanical engineer and has over 30 years of experience in strategizing operational plans and implementing aeroponics cultivation systems. In addition, we receive advice from our external consultant, Mr. Dominick Mark, who has over 30 years of experience in international professional accounting and auditing services. He is a corporate finance strategist, specializing in business development.

Our Strategy

Our overall strategy is to capitalize on our competitive strengths based on our ability to utilize TFPPT to grow and expand our forest seedling business and eventually to benefit from the anticipated increase in demand for wood pulp products in China.  We plan to implement the following elements of our strategy:
 
 
·
Focus on the application and commercialization of TFPPT.   Our business is dependent upon the successful application and commercialization of TFPPT to our cultivation of bamboo-willow seedlings. Mr. Chang conducted a six-month bamboo-willow tree plantation experiment using TFPPT in Xiamen since April 2010 and since November 2010, and we have propagated bamboo-willow seedlings. Our plan is to apply our TFPPT in a mass bamboo-willow seedling propagation operation, which we expect to result in a shorter cultivating cycle leading to higher production yield within a given cultivation period and better growing potential as compared to cultivation using regular propagation technology and chemical fertilizer.

 
·
Focus on research and development and expand the application of TFPPT.   Upon successful application and commercialization of TFPPT on bamboo-willows, we plan to further develop our advanced cultivation formula and identify other high-value seedlings and plantlets for mass cultivation and propagation in response to changing market trends and demands. We will focus our research and development efforts on the suitable and efficient application of TFPPT on each of these plants to achieve the maximum cultivation results, economic efficiency and high organic quality. Additionally, we plan to direct our research and development efforts to improve the performance and suitability of our probiotics-based organic fertilizer in our forest seedling business.
 
 
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·
Expand application and commercialization of TFPPT through technology transfer.  Upon successful application and commercialization of TFPPT on bamboo-willow seedlings, we plan to further leverage our intellectual property rights to TFPPT through technology sublicensing.  Leveraging TFPPT by way of sublicensing would allow us to further commercialize TFPPT with less capital investment and generate additional revenues.

Our Technology

Our business is based on the sucessful application and commericialization of TFPPT.  The application for an invention patent for “Aeroponics Cultivation System” was granted by the State Intellectual Property Office of the PRC on March 7, 2011, and the application for a utility model for “Aeroponics System and Method” is in the process of review by the State Intellectual Property Office of the PRC.  Mr. Chang has not applied for intellectual property rights with respect to TFPPT in any other jurisdictions.

TFPPT is an emerging technology that can be used to optimize the growth conditions critical for cultivation and propagation of seedlings, plantlets, plants and transplants to achieve fast, pathogen-free and uniform growth. TFPPT regulates and controls plant growing conditions such as the level of nutrition, temperature, humidity and light intensity to accelerate the growth of plants. We believe that it permits better water, nutrient and oxygen absorption in plants by maintaining the optimum size of the droplets within the system to achieve faster growth as well as higher yields as compared to many traditional methods of plant production. TFPPT provides the seedlings with an enclosed and disease-free environment because it keeps seedlings physically separated from one another and each spray pulse is sterile.

TFPPT includes three key components: (1) probiotics-based organic fertilizer; (2) aeroponics cultivation system; and (3) stereoscopic trellising cultivation method.

(1)
Probiotics-based Organic Fertilizer

Organic fertilizers, such as manure, slurry, peat, seaweed and straw, are naturally occurring. Processed organic fertilizers include compost, blood meal, bone meal, humic acid, amino acids, and seaweed extracts. TFPPT’s organic fertilizer includes probiotics, which help control diseases effectively in the soil by decomposing calcium phosphate and potassium, and toxic substances and heavy metals in the soil. In addition, probiotics provide essential elements for development and strengthening of plants’ rooting systems.

Our probiotics-based organic fertilizer is based on animal manure, milk and some marine organisms such as media, which is subject to a fermentation process. Even though the ingredients used in our probiotics-based organic fertilizer are commonly available, the formula and process of making our probiotics-based organic fertilizer are proprietary.  It is a unique blend of different probiotics which contains no harmful chemicals. The way the ingredients interact with each other produces a synergistic effect that promotes vegetative reproduction. Our probiotics-based organic fertilizer is capable of modifying and activating soil and effectively degrading soil pollution. Moreover, it promotes better growth and higher resistance to pests and diseases by enhancing development and strengthening the rooting systems of plants. The use of probiotics-based organic fertilizer enhances plant cultivation and improves soil composition and fertility and use of chemical fertilizers and pesticides can be reduced significantly.
Successful production of plants involves optimizing soil fertility, which is dependent on a series of complex interactions of the numerous components of the soil in various physical, chemical and biological processes and phenomena. Deriving agronomic benefits from the application of compost-based fertilizers to croplands requires a compost product that interacts beneficially with all such physical, chemical and biological processes and phenomena that occur in the soil. Factors influencing soil fertility include soil pH, the form of resident nutrients, temperature, moisture content, atmosphere and microbial populations that are present in the soil. Plants need nitrogen, phosphorus and potassium, as well as micronutrients and symbiotic relationships with fungi and other organisms to flourish. However, getting enough nitrogen at the right time is a significant challenge for organic farming. Incorporation of compost, such as our probiotics-based organic fertilizer, into the soil can improve all these factors. The probiotics-based organic fertilizer helps to provide nitrogen through legumes which draw nitrogen from the atmosphere through symbiosis with the bacteria Rhizobia. Through the use of probiotics-based organic fertilizer and legumes, organic farming can become more effective and generate healthier yields.
 
 
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We believe our probiotics-based organic fertilizer provides the following advantages in our plant cultivation:

 
·
Soil fertilization  Beneficial bacteria and derivatives in the probiotics-based organic fertilizer accelerate the transformation of nutrients that nourish the soil and provide the plant with assimilable substances.  The usage of probiotics-based organic fertilizer results in multiplication of the number of microorganisms in the soil that improves soil fertility.

 
·
Anti-salinization  The halotolerant and halophilic strains contained in the bacteria in the probiotics-based organic fertilizer can deactivate bases in the soil, remove base-related obstacles and alleviate salinity by regulating soil pH levels.

 
·
Anti-pathogen  There are a large number of resting spores of beneficial organisms in the probiotics-based organic fertilizer. When our fertilizer is applied to a plant after being diluted with water, reproduction of the beneficial organisms makes it difficult for pathogens to breed and adhere to the plant, or to transmit diseases to the plant. The algae extracts contained in the probiotics-based organic fertilizer inhibit diseases caused by some bacteria like fusaria.

 
·
Nitrogen fixation  The probiotics-based organic fertilizer contains diazotrophs that make it possible for nitrogen gas in the atmosphere to be converted into substances that plants can assimilate. The assimilated nitrogen can then be used by plants to synthesize fatty acids.

 
·
Phosphoric acid and release of potassium  One of the roles of effective organism (EM) fertilizers is to release phosphoric acid, thereby converting phosphates confined in the soil into water-soluble phosphates. The probiotics-based organic fertilizer is also capable of effectively releasing some elements which tend to form water-insoluble salts, such as potassium, calcium, iron and magnesium.

 
·
High efficacy  Use of the probiotics-based organic fertilizer helps to speed up the growth of plants by promoting root development and photosynthesis.

(2)
Aeroponics Cultivation System
 
Our aeroponics cultivation system is the process of growing plants in air or in a misty environment without the use of soil or an aggregate medium (known as geoponics). Unlike hydroponics, which uses water as the growing medium, and uses essential minerals to sustain plant growth, aeroponics does not need a growing medium. The basic method of aeroponics cultivation is to grow plants suspended in a closed or semi-closed environment by spraying the plants’ dangling roots, lower stems and leaves with an atomized, nutrient-rich water solution. The nutrient/mist is delivered via a spray that pulses an atomized nutrient-rich solution at specific intervals for a specific duration to the plant. Plants are supported in individual plant support structures, allowing them to grow and supported by very little sand in the case of nursery for bamboo-willows or without soil or aggregate media in general. Monomial contact between a plant and the support structure allows for the entire plant to be in the air. Physical contact is minimized so that it does not hinder natural growth and root expansion, or access to pure water, air exchange and disease-free conditions.

The Aeroponics cultivation system requires a set of equipment including sprayers, misters, foggers, and other devices to create an atomized nutrient-rich solution that permits plant roots to better absorb nutrients and oxygen. TFPPT uses a custom hydraulic cylinder to regulate the system, which is fully automated, and operates with high accuracy and reliability. It can effectively convert solution into droplets, each with an ideal size for better absorption of nutrients and oxygen by the plants.

High-pressure aeroponics techniques, where the mist is generated by high-pressure pumps, are typically used in cultivation of high value crops and plant specimens that can offset the higher setup costs associated with this method of horticulture. High-pressure aeroponics systems include technologies for air and water purification, nutrient sterilization, low-mass polymers and pressurized nutrient delivery. The biological system matrix includes enhancements for extended plant life and crop maturation. Biological subsystems and hardware components include effluent control systems, disease prevention, pathogen resistance features, precision timing equipment, nutrient solution pressurization system, heating and cooling sensors, thermal controls for solutions, fail-safe sensors and protection, features for low maintenance and for reducing labor deployment, and ergonomic and long-term reliability features. Advanced commercial systems include data gathering, monitoring and analytical feedback to various subsystems.
 
 
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The chart below provides an illustration of our aeroponics cultivation system:
 

The aeroponics cultivation system sprays our atomized, nutrient-rich probiotics-based organic fertilizer and water onto lower stems, leaves or dangling roots of seedlings (either intermittently or continuously, regulated by a hydraulic cylinder), where water droplet size is crucial for sustaining aeroponic growth. If the droplet size is too large, less oxygen can be delivered to the stem, leaf or root system; if it is too small, such as droplets produced by ultrasonic mister, this leads to excessive stem, leaf or root hair growth at the expense of lateral root system growth. The optimum size of the droplets is maintained within the system for maximum efficiency. The optimal size results in an appropriate nutrient content uptake by plants, which boosts their growth. When compared to other aeroponics systems, we believe that our TFPPT approach delivers more oxygen to plant stems, leaves or roots through increased aeration of nutrient solutions, which will stimulate growth. We believe that these conditions allow better plant nutrition assimilation in a more balanced way, resulting in faster growth of cultivated plants. We believe that our aeroponics cultivation system provides the following advantages in our seedling cultivation:

 
·
Less Water and Nutrient Consumption  The aeroponics cultivation system works in a closed loop environment that permits the atomized nutrient-rich solution to recirculate in a closed system. The closed-loop system minimizes evaporative loss of water, ensuring that all nutrient droplets will be completely absorbed by plants. Water consumption of an aeroponic system is less than that required for a normal greenhouse. In addition, the closed-loop feature of the aeroponics cultivation system allows all the atomized solution to be absorbed by the plants.

 
·
Yields Independent of Seasonal Adversities  The aeroponics cultivation system is sheltered within a machine room. It produces an atomized nutrient-rich solution and is transferred from the system to greenhouses through underground pipes. Since the whole structure is in a closed, hermetically sealed environment, yields are not affected by weather or other seasonal adversities. Further, as TFPPT optimizes the growing conditions for the plants within the greenhouse, it ensures high cultivation yields. This feature of TFPPT allows a year-round production cycle and ensures constant market supply of plants with greater price stability.
 
 
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·
Higher Organic Qualities of Products  The aeroponics cultivation system is a closed-loop cultivation system where every component in the closed-loop system is sterilized, including plants. This helps to prevent pathogen, and eliminates the need for pesticides. The 3-dimensional A-frame is designed to reduce plant-to-plant contact by hang plants up in the air. This allows the plants to grow without media, such as soil, resulting in less disease transmission. Any infected plant can be removed individually and immediately. The pesticide-free Aeroponics cultivation results in higher organic qualities of products.

 
·
Automated Process Produces Consistent Results and Reduces Costs  The aeroponics cultivation system uses a custom hydraulic cylinder to regulate the system. This fully automated, closed-loop system can produce consistent results based on pre-determined conditions with minimal attention and maintenance. The system effectively converts solution into droplets with a pre-determined optimal size. The automated process reduces operational and maintenance costs.

(3) Stereoscopic Trellis Cultivation Method

Our stereoscopic trellis cultivation method uses a 3-dimensional system that increases the output per square foot of land per year.  It combines many mist propagation benches with an A-frame designed bench which triples the capacity for commercial propagation and germination without sacrificing additional floor space. This method is not used in our mass propagation of bamboo-willow seedlings.

Roots are suspended in the closed trellis where they are sprayed with an atomized nutrient-rich solution at regular intervals. The humidity in this trellis remains close to 100 percent which allows the roots to hang in the chamber without drying out. Most often, the plants are placed in net pots that contain a small amount of growing medium.

The stereoscopic trellis does not allow plant-to-plant contact. Because this system does not use any growing medium (besides the small amount in the net pot used for stabilization), this soilless growing eliminates transmission of disease through a growth media. Any infected plant can be removed to prevent spread of the pest. This disease-inhibiting environment promotes plant growth in higher densities compared to traditional forms of cultivation such as the hydroponics, soil and nutrient film technique (a hydroponic technique whereby a shallow stream of water containing the entire dissolved nutrient required for plant growth is recirculated past the bare roots of plants in a watertight gully).

Intellectual Property

Our business is substantially dependent on our ability to apply and commercialize TFPPT, which is an emerging technology for agricultural and botanical cultivation, and can be used to optimize the growth conditions critical for cultivation and propagation of high-quality seeds, seedlings, plantlets, plants and transplants to achieve fast, pathogen-free and uniform growth. The application for an invention patent for “Aeroponics Cultivation System” was granted by the State Intellectual Property Office of the PRC on March 7, 2011, and the application for a utility model for “Aeroponics System and Method” is in the process of review by the State Intellectual Property Office of the PRC.  Mr. Chang has not applied for intellectual property rights with respect to TFPPT in any other jurisdictions.

In July 2010, Ms. Tsai entered into the Taiwan Fast Plant Propagation Technology Exclusive License Agreement, or TFPPT License Agreement, with Mr. Chang. Pursuant to the TFPPT License Agreement, Mr. Chang granted a worldwide exclusive license to Ms. Tsai with respect to all intellectual property rights in and to TFPPT for a period of 30 years commencing July 1, 2010.  Such intellectual property rights include worldwide copyright, design rights, know-how, confidential information, trade secret and any other similar rights related to TFPPT and its components, including applications of any of the foregoing. Mr. Chang further granted Ms. Tsai the exclusive right, for 30 years commencing on July 1, 2010, to use TFPPT and all related proprietary rights including all related applications of the technology and its enhancements created in the past, present and in the future, owned and continually developed and enhanced by Mr. Chang and his affiliates.  Pursuant to the TFPPT License Agreement, Ms. Tsai agreed to pay to Mr. Chang a non-refundable license fee of approximately $128 and a royalty fee, payable quarterly, equal to 6% of the income received by Ms. Tsai and her sub-licensees from the use and application of the patentable technology related to TFPPT.  On July 20, 2010, pursuant to an assignment agreement with Ms. Tsai, we obtained all Ms. Tsai’s rights, title and interests in and to the patentable technology related to TFPPT granted to her by Mr. Chang under TFPPT License Agreement. Dragon Bright HK agreed to directly pay Mr. Chang, commencing December 31, 2010 and at the end of every quarter thereafter, as a royalty fee, an amount equal to 6% of the income received by Dragon Bright HK, its subsidiaries and its sub-licensees from the use and application of TFPPT for the period December 31, 2010 to June 30, 2040.
 
 
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Pursuant to a technology assignment agreement dated as of January 7, 2011, by and between Mr. Chang and Ms. Tsai, Mr. Chang assigned and transferred to Ms. Tsai all his rights, title and interest in and to the technological process related to the formulation of the probiotics-based organic fertilizer. On January 10, 2011, Ms. Tsai further assigned and transferred all of the foregoing rights, title and interest to us pursuant to an assignment agreement.

The Aeroponics cultivation system is one of the three key components and the patentable technology of TFPPT.  The application for an invention patent for “Aeroponics Cultivation System” was granted by the State Intellectual Property Office of the PRC on March 7, 2011, and the application for a utility model for “Aeroponics System and Method” is in the process of review by the State Intellectual Property Office of the PRC.  Mr. Chang has not applied for intellectual property rights with respect to TFPPT in any other jurisdictions.

Our Products and Business Segments

We are in the initial stages of developing our business using TFPPT and plan to operate in the forest seedling industry and, secondarily, the paper pulp industry. We have identified bamboo-willow as the primary plant that we will grow for our business because we believe young bamboo-willows can be used to produce wood pulp in papermaking.

We expect to have two businesses as follows:

 
·
mass propagation of bamboo-willow seedlings and plantlets for sale to seedling growers and forest tree planters and secondarily for our tree plantation projects; and

 
·
bamboo-willow tree plantation to produce young bamboo-willow trees for sale as wood pulp for paper making.

We plan to commence our business in stages.  We expect that our mass propagation of bamboo-willow seedlings and plantlets will be our primary business at least for the first three years of our operation.  During these three years, we plan to secure various sites for our production, complete the building of infrastructure at these sites, cultivate bamboo-willow seedlings from super mother bamboo-willow saplings to commence and expand our mass propagation operation, and in the fourth quarter of 2011, commence a small scale of 1,000 mu of bamboo-willow tree plantation operation. We plan to build one bamboo-willow seedling cultivation infrastructure every six months, starting from the first quarter of 2011, and expect to build a total of 6 infrastructures during the first three years of operation. Future construction of greenhouses in these infrastructures will be solely for bamboo-willow seedling propagation.

As of the date of this prospectus, we have not yet generated any operating revenue.  We expect to generate our initial revenue from the sale of bamboo-willow seedlings beginning from the first quarter of 2012, and from the sale of young bamboo-willows (two to three years old) for wood pulp in papermaking beginning in approximately 2013.  However, there is no guarantee that we will generate any revenues.

Since November 2010, we have started propagation of bamboo-willow seedlings. We had planted 10,000 super mother bamboo-willow saplings by mid-March 2011. From our super mother bamboo-willow saplings, we expect to propagate 3,200,000 seedlings at the end of 2011.

Mass propagation of bamboo-willow seedlings and plantlets

We purchase bamboo-willow saplings from the market as super mother bamboo-willows to cut seedlings for propagation in our business.  Propagation of bamboo-willow is done by stem cutting and transplanting to soil. It takes approximately 100 days in three stages in the propagation process as described below.
 
 
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(i)           Super mother sapling supply zone – 20 days

We purchase 1.2 meter-height bamboo-willow saplings to be used as super mother bamboo-willows and plant them in a designated zone known as a “super mother bamboo-willow seedling supply zone.”  Bamboo-willow used as super mother for seedlings propagation can be planted at a density of up to 10,000 pieces per mu (or 0.067 acre). On average, we can cut 18 seedlings every 20 days from each super mother sapling. When seedlings have grown and are ready to be transplanted, they are collected from the super mother bamboo-willow sapling supply zone and transplanted to a designated zone known as a “nursery zone.”

(ii)           Nursery  Zone – 20 days

In the nursery zone, bamboo-willow seedlings are cultivated in an enclosed greenhouse environment applying our probiotics-based organic fertilizer and aeroponics cultivation system for 20 days. We provide bamboo-willow stem cuttings that can quickly take root once planted in the sand and also reduce the cost of transportation. The stems are the specialized cuttings derived from mother saplings and are easy to propagate – a cutting taken out from the plant and simply pushed into the aeroponic system will take root.

The bamboo-willow stems are planted in distilled sand floor inside a completely enclosed greenhouse, rather than using the stereoscopic trellis cultivation method. An atomized, nutrient-rich solution that is made from the probiotics-based organic fertilizer is sprayed on the plants. Growing them inside an enclosed greenhouse will ensure the nutrient absorption efficiency of the stems. Under such conditions, the seedlings are completely exposed to nutrients, water and carbon dioxide, the key components for the plants to grow. The stems will quickly take root once they are planted on the sand. Since the growing materials are atomized and completely diffused inside a closed environment, they can be easily absorbed by the stems, leaves or roots, further enhancing the growth of the plant.  Distilled sands are used, instead of soil, because of the silica structure; toxins can be easily distilled by our microbe solution. This ensures that the growing environment for the seedlings is disease-free, which results in a higher survival rate for the seedlings. Different devices are installed inside the greenhouse to maintain the internal temperature and humidity giving the optimized conditions for growing.

(iii)           Acclimatization Zone – 60 days

Post-nursery, seedlings are transferred to the acclimatization zone, which is an open area. In this area, the seedlings are planted into the soil directly. Seedlings require extra strength to adapt to the external environment before actual plantation. As the acclimatization zone is in an open area, we cannot apply the Aeroponics cultivation system. However, we continue to apply our probiotics-based organic fertilizer. At this stage, the roots mature to help absorption of nutrients and water from the soil. Acclimatization of seedlings aims to provide seedlings adjustment to changes in environment. This process is called hardening, which involves changes such as lowering the water content and increasing the sugar content of the plant. The whole acclimatization process takes about 60 days and, at the end, the seedlings are usually around 60 cm long. The bamboo-willow seedlings are expected to have adjusted to the external environment by that time and will be ready to be transported to the designated plantation sites or for sale.

Bamboo-willow tree plantation

After acclimatization, seedlings will be either transplanted into the soil or sold to seedling growers and forest tree planters.

One of the key components to the successful application of TFPPT in bamboo-willow tree plantations is forest management. Our forest management plan will be based on the following specific guidelines for the establishment and sustainable management of forest tree plantations.

 
(i)
Choice of Plantation Sites

We will first select sites based on the relevant environmental impact assessment, the economic features of the site, logistics and the local environment.

 
(ii)
Site Protection

Sufficiently broad and completely protected buffer strips along stream banks and adjacent riparian areas will be kept under special management to reduce environmental problems.
 
 
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(iii)
Site Preparation

We will closely monitor site preparation to avoid serious environmental damage through soil compaction, erosion and loss of top soil nutrients. Proper site preparation enhances the early growth and development of tree species through improvement of the soil’s physical conditions and reduction in competition from other vegetation during the establishment phase.

 
(iv)
Fertilization

When necessary, especially in the case of degraded land, we plan to apply nutrient supplements such as our probiotics-based organic fertilizer to improve soil fertility to enhance the survival and growth rates of trees.

 
(v)
Tending and Weed Control

We plan to develop effective tending and weed control based on the dynamic competition between tree species and other vegetation, not only during the establishment phase but also later in the rotation to facilitate access for fire control, harvesting and other management activities.

 
(vi)
Thinning and Pruning

Thinning and pruning of tree plantations significantly affect the end use and profitability of products. Timely pruning and thinning are important in reducing costs and achieving maximum yield.

 
(vii)
Pest Control and Disease Management

Pest and disease outbreaks can occur at any stage of plantation development. We plan to design preventive, control and contingency strategies and develop practices to minimize outbreaks and to effectively handle the aftermath of outbreaks.
 
 
(viii)
Fire Control

Fire can be a serious threat to productivity, ecological stability, quality of planted forests, and their growing stock. We plan to design preventive control and contingency strategies and plans for fire management to minimize and control instances of fire.

 
(ix)
Monitoring
 
Suitable systems for growth and yield prediction by means of simulation will be applied, allowing forest managers to respond to changing community and market demands in a manner consistent with the overall objective of sustainable production.
 
 
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Research and Development

We believe that our core competitive advantage lies in our rights to utilize TFPPT and its successful application and commercialization in our mass propagation of bamboo-willow seedlings and, secondarily, to grow bamboo-willows for the paper pulp industry.  We expect that successful application of TFPPT in our business of mass propagation of bamboo-willow seedlings will reduce their cultivating cycle, which may enhance the production yield of bamboo-willow seedlings in a given period of time.  Therefore, strong research and development capabilities are critical to the success of our business and we plan to spend approximately $152,000 annually for our research and development projects in the next few years.

Our research and development efforts will initially focus on providing technical support for the sustainable growth of our bamboo-willow seedlings operation and further improving our technologies.  Specifically, we plan to further refine the specifications and cultivating formula in the application of TFPPT.  We also plan to improve our probiotics-based organic fertilizer with the aims of enhancing the quality of bamboo-willow timber, increasing the harvest yields and reducing our cultivation costs.  In addition, we will also emphasize continued efforts in searching for and cultivating various other plants with higher economic value suitable for our business model.

In addition to building strong internal research and development capabilities, we also plan to work with outside research entities when appropriate. We plan to license the technologies and advanced methods resulting from our research and development efforts to generate additional revenues. Currently, we have reserved three greenhouses for research and development activities.

The following chart shows the expected activities of our research and development greenhouses:

 
Raw Materials

The primary raw materials for our bamboo-willow seedling operation are bamboo-willow super mother saplings, and the various ingredients used in making our probiotics-based organic fertilizer. Each bamboo-willow super mother sapling has a life expectancy of three years.  We expect to replace our current super mother saplings in April 2013. Bamboo-willow saplings are readily available in China and we do not anticipate a shortage of bamboo-willow saplings in the forseable furture.

Our probiotics-based organic fertilizer uses commonly available ingredients, except that there may be a limited number of suppliers of certain key components of the fertilizer, such as microorganisms.  Our current provider of microorganisms is Yue Nong Seedling & Flowers Company Limited, for which Mr. Chang, one of our shareholders and the inventor of TFPPT, serves as the sole agent for sale of our products in China. We expect most of the raw materials for our seedling propagation operation to be easily available in the market and we do not expect to rely on any one supplier to supply our raw materials.
 
 
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Our Customers

We seek to build a long-term relationship with a range of customers, specifically targeting domestic seedling growers and planters, wood pulp dealers and papermaking factories.  With the surging demand for wood pulp for papermaking in China, we believe that our products will have a significant market.

For our bamboo-willow seedlings mass propagation business, we expect to sell most of our bamboo-willow seedlings to seedling growers and forest tree planters.  We intend to use the rest of the seedlings for our own small-scale tree plantation.

For our small-scale bamboo-willow tree plantation business, we expect to focus on the wood pulp supply market and have been developing relationships with various wood pulp dealers in China.

Properties

Both of our bamboo-willow seedling cultivation and tree plantation sites are located at Tianzhu Mountain in Xiamen, which is about 30 minutes drive from the Xiamen Airport. The location of the site will allow us to deliver our products to anywhere in China within 40 hours. Xiamen is located in a subtropical zone with abundant rainfall, bright sunshine and a high level of groundwater. These climatic conditions are appropriate for the growth of bamboo-willow.

In May 2010, we entered into a co-operation agreement with Xiamen Tianzhu Industrial Development Company Limited, or Xiamen Tianzhu. Pursuant to the co-operation agreement, Xiamen Tianzhu is responsible for providing land for our use, and negotiating with local agencies regarding approval of business license. In addition, Xiamen Tianzhu is also responsible for building friendly relationship with local farmers and assisting us with relevant government procedures.  We are responsible for financing, infrastructure and the business operation.

Pursuant to the co-operation agreement, we are entitled to use a maximum of 100 mu (66,667 square meters) of agricultural land in Xiamen Tianzhu Mountain for our bamboo-willow seedling cultivation. We pay a fixed amount of RMB 1,000 per mu (667 square meters) per year based on the actual areas used every year for 20 years. We plan to divide this land into various functional zones such as parent saplings, offspring plantlet nursery, acclimatization of plantlets and engine room to support the aeroponic cultivation system. As of June 2011, ten greenhouses (one mu or 667 square meters per greenhouse), a machine room and an organic fertilizer production base had been built on this site. We have commenced operation in the bamboo-willow nursery zone and have started the research and development greenhouses planting other seedlings for potential test purposes in plantation racks.  We have invested approximately RMB 2.2 million to establish the infrastructure at this site.

We entered into a land-leasing framework agreement in December 2010 with each of Xi Dong Village and Xi Xi Village of Hu Yang Town, Yong Chun County, Quanzhou City respectively, to lease up to 1,300 mu (approximately 867,000 square meters) of farm land in Yongchun County, Quanzhou City, for our bamboo-willow tree plantation at the Tianzhu Mountain site at a price range between approximately $8 and approximately $32 per mu (667 square meters) per year for 30 years.  Pursuant to the two land-leasing framework agreements, we entered into eight land lease agreements with Xi Dong Village and Xi Xi Village in February 2011 to lease 961.9 mu of land in Yong Chun, Quanzhou, Fujian Province for propagation of additional bamboo-willow seedlings.  All of the eight land lease agreements have a term of 30 years at a price range between approximately $8 and approximately $55 per mu per year. As of April 30, 2011, we had spent approximately $20,862 in the land lease in Yong Chun.

Our principal executive offices are located at Room B, 19th Floor, Hillier Commercial Building, 89-91 Wing Lok Street, Hong Kong. We pay rent of approximately $1,480 per month, and the lease term is two years from November 23, 2010 to November 22, 2012. This office in Hong Kong was established as part of our efforts to foster and improve relationships with international investors on a continuous basis. As of December 31, 2010, we had spent approximately $7,415 on office fixed assets. In addition, since December 2010, we have also leased office facilities in Xiamen, China under a two-year operating lease expiring in December 2012 with monthly rental payments of approximately $665.
 
 
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Environmental Matters
 
Our business operations are subject to a broad range of evolving environmental laws and regulations in China. We place strong emphasis on environmental protection in conducting our business. Compliance with these laws and related regulations is an ongoing process that is not expected to have a material effect on our capital expenditures, future earnings or competitive position. However, environmental concerns are inherent in most major agricultural operations, and there can be no assurance that future developments, such as increasingly strict environmental laws and enforcement policies thereunder, will not result in increased compliance costs. See “Risk Factors — Risks Related to Our Business — Our failure to comply with increasingly stringent environmental regulations and related litigation may result in significant penalties, damages and adverse publicity for our business.”

Sales, Marketing and Distribution

As both of our bamboo-willow seedlings and bamboo-willow wood pulp will be sold as commodities, we do not expect to engage in significant marketing and branding efforts. We plan to develop sales channels through certain B2B online platforms.

We plan to sell our products to forest tree plantation companies, seedlings growers, manufacturers of paper pulp producers and dealer agents.

Competition

We believe the forest seedlings industry in China is highly fragmented and competitive with a large number of participants, including individual farmers and small private forest companies. We do not expect to compete with any state-owned agriculture companies as no state-owned agriculture companies are engaged in our business.  We may face intense competition from other companies that provide seedlings, wood pulp products, substitute wood pulp products and other alternative materials used in the paper making industry in China.  Many of these firms are well-established and possess technical and financial resources far greater than we do.

We expect our competition to be primarily affected by our ability to apply, commercialize and customize our TFPPT, the length of our cultivation cycle, product quality, distribution capability and pricing. Our product can be considered a commodity; therefore, we expect our competition to be less affected by brand recognition and perception. The level of competition may affect our ability to control our prices, and subsequently our profit margins and results of operations.
 
We need to establish and further expand our production scale and enhance our product offerings in order to compete with our competitors successfully.

Insurance
 
We maintain insurance for workplace injuries in Hong Kong and we maintain insurance for workplace injuries, premises and certain vehicles in China. We do not have insurance coverage on our other assets (including biological assets), inventories, business, interruption of business or key employees. See “Risk Factors — Risks Related to Our Business — We have limited insurance coverage in China.”

Employees

As of December 31, 2010, we had a total of 37 employees, including 18 plantation workers and research and development employees as well as 19 management and administrative employees. For the year ended December 31, 2010, our staff costs were $32,181. We review our remuneration policies and packages on a regular basis and will make necessary adjustment commensurate with the pay level in the industry. In addition to basic salaries, employees may be offered discretionary bonuses and cash awards based on individual performance.

We provide systematic training to our employees. We invite industry experts and farm managers to give regular training to our technical personnel as well as orientation programs to our newly hired technical personnel. We provide our managerial personnel with extensive training on business management and industry technology by experts and scholars associated with research institutes.
 
 
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We do not have collective bargaining agreements with our employees. We do not have labor unions. We consider our relations with our employees to be amicable.

Legal Proceedings

As of August 31, 2011, there were no material legal proceedings, regulatory inquiries or investigations pending or threatened against us.

REGULATIONS

Guidance of Foreign Investment Industries

Investment in the PRC conducted by foreign investors and foreign-owned enterprises is governed by the Guidance Catalogue of Industries for Foreign Investment, or the Catalogue, the latest edition of which was amended and promulgated on October 31, 2007. The Catalogue divides industries into three basic categories: encouraged, restricted and prohibited. Industries not listed in the Catalogue are generally open to foreign investment unless specifically prohibited under other PRC regulations. Foreign-invested enterprises in encouraged industries are often permitted to establish wholly foreign-owned enterprises, while foreign-invested enterprises in the restricted category may only be permitted to set up equity or contractual joint ventures, in some cases with the Chinese partner required to be the majority shareholder. Restricted category projects are also subject to the approval of higher-level governmental agencies. Foreign investment is not allowed for the industries in the prohibited category. Our business falls within the production of forestry seedlings industry, which is categorized as an encouraged foreign investment industry.

Agriculture Law

The PRC Agriculture Law sets forth various principles and measures designed to ensure the steady development of China’s agricultural industry, which is broadly defined under the Agriculture Law to include forestry. These include registration or licensing requirements for the production or the use of agricultural production materials, such as farm chemicals, seeds and fertilizers, that may affect the health of human beings or animals.

PRC Seed Law

According to the Seed Law of the PRC, any companies engaged in the forestry seedlings industry must acquire a “tree seed production and management permit” before conducting business in the industry. The permit is normally issued by forestry administrative departments at the county level of the people's government of provinces, autonomous regions and municipalities. Fujian Qianlon is in the process of applying for a tree seed production and management permit, and we expect to receive such a permit before September 26, 2011.

If Fujian Qianlon fails to obtain the tree seed production and management permit by the time that it starts formal operation (i.e. the time that it begins selling seedlings to third parties and receives operating income), it will be ordered to stop the seedlings production, and the seedlings and its operating income will be confiscated. In addition, Fujian Qianlon may be subject to a fine not less than the amount of the operating income received and not more than three times the operating income received.

Land Use Rights

Collectively Owned Agricultural Land in Rural Areas

According to the PRC Law on Land Administration, all lands in the PRC are either state-owned or collectively owned. Generally, lands in the urban areas of a city or town are state-owned, whereas lands in the rural areas of a city or town and all rural lands are, unless otherwise specified by law, collectively owned. When required, the state has the right to reclaim the collectively owned lands in accordance with law if such reclamation is beneficial to the public. For individuals, businesses and other organizations granted with the land use rights of state-owned or collectively owned agricultural land, they are permitted to hold, lease and develop these lands.
 
 
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Title Certificate of Collectively Owned Land

According to the PRC Law on Land Administration, land located within a village or rural collective economic organization is owned as a whole by the farmers of the village or rural collective organization collectively, except for those stipulated by laws as being owned by the State. The government at the county level must register and maintain a record of the collectively owned lands, and issue “collectively-owned land ownership certificates” for farmland or “forest title certificates” for forestlands to evidence and certify the ownership of the lands concerned. Lands collectively owned by rural residents are contracted to and operated by members of the respective village or rural collective economic organization for various uses such as plantation, forestry, livestock husbandry or fishery productions.
 
Rural Land Contracted Operation Rights

Under the Law of the People’s Republic of China on Land Contract in Rural Areas, or Land Contract Law, land in rural areas includes arable land, forestland and grasslands and other lands for agriculture use owned collectively by the farmers and by the State. The State applies the contractual management system in respect of lands in rural areas. These land contracts take the form of household contracts within the rural collective economic organization. Land that is not suitable for household contracts such as barren mountains, gullies, hills and beaches may be contracted in forms such as bid invitation, auction and public consultation. Anyone entering into a household contract must be a farmer household of the relevant rural collective economic organization. The term of the contracts is 30 years for arable land, 30 to 50 years for grassland, and 30 to 70 years for forestland.

A local villagers’ committee or rural collective economic organization is designated to operate and manage the rural land collectively owned by all the farmers within that village or rural collective economic organization. The local villagers’ committee or rural collective organization must enter into written contract with the farmer households granting the farmer households the right to operate the rural land. The contract becomes effective on the signing date and the farmer household is entitled, on the same date, to obtain the land contracted operation rights. Local governments at or above the county level issue to the farmer households the “land contracted operation right certificates” for farmland or the “forest title certificates” for forestland to evidence the rural land contracted operation right. The rural land contracted operation right obtained through the household contract may be transferred through subcontracts, leases, exchanges or other means as prescribed under PRC law, provided that certain approvals and procedures have been complied with. However, if the farmer households transfer or assign the rural land contracted operation right before obtaining the land contracted operation right certificates, other farmers of the village or rural collective economic organization have the right to claim the transfer or assignment invalid.

The farmer households who have obtained the rural land contracted operation have the right to decide whether to transfer or assign the rural land contracted operation right and the means of transfer or assignment. Under equal conditions, members of the same village or rural collective economic organization should enjoy preemptive rights. Such preemptive rights must be claimed within a reasonable period after the issuance of the written announcement of transfer or assignment, or in case of no written announcement, within two months after the land has been used by other persons or entities outside the local village or collective economic organization. The preemptive rights will not be supported by the court if not claimed within the stipulated time period. Where the rural land contracted operation right is transferred or assigned by way of subcontracts, leases, exchanges or other means, the parties must enter into a written contract and such transfer must be filed with the local villagers’ committee and government for registration.

Fujian Qianlon entered into farmland sub-contracting agreements with relevant local villagers’ committees for the lands leased in Yongchun, Quanzhou, and will enter into similar agreements with the relevant local villagers’ committees for our future leased lands.  Fujian Qianlon completed the government registration and filing process in July 2011.

Environmental Laws

According to the Environmental Protection Law of the PRC effective as of December 26, 1989, entities that cause environmental pollution and other public hazards must incorporate environmental protection into their plans and establish a responsibility system for environmental protection. These entities must adopt effective measures to prevent and control the pollution and harms caused to the environment by waste gas, waste water, waste residues, dust, malodorous gases, radioactive substances, noise, vibration and electromagnetic radiation generated in the course of production, construction or other activities. Under the PRC Environmental Impact Assessment Law, a company must complete an environmental impact assessment process with respect to its construction projects, subject to the approval by the local environmental administrative agencies.  We have not completed the environmental impact assessments as required by the PRC law for our production bases. Although we intend to complete these environmental impact assessments, a penalty may be imposed on us and our production may be suspended.
 
 
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According to the Law of the PRC on Prevention and Control of Environmental Pollution by Noise effective as of March 1, 1997, new construction, expansion or reconstruction projects that discharge pollutants into air are subject to the state regulations on environmental protection of construction projects. Industrial enterprises that discharge noise during industrial production with fixed facilities must report to the local environmental protection department categories and quantities of their existing facilities for discharging noise, and the noise volume of noise discharged under their normal operating conditions as well as treating facilities against noise, and also submit to the same department technical information concerning prevention and control of noise pollution. Entities that discharge noise exceeding the relevant standards must pay a discharge fee pursuant to the regulations.
 
According to the Law of the PRC on Prevention and Control of Atmospheric Pollution effective as of September 1, 2000, new construction, expansion or reconstruction projects that discharge pollutants into air are subject to the state regulations on environmental protection of construction projects. Entities that discharge atmospheric pollutants must report to the local administrative department of environmental protection their existing discharge and treatment facilities for pollutants and the categories, quantities and concentrations of pollutants discharged under normal operating conditions and submit to the same department their technical information concerning prevention and control of atmospheric pollution. The PRC implements a system of collecting fees for discharging pollutants on the basis of the categories and quantities of the atmospheric pollutants discharged, and establishing reasonable standards for collecting fees according to the needs of strengthening prevention and control of atmospheric pollution and economic and technological conditions.
 
According to the Law of the PRC on Prevention and Control of Environmental Pollution by Solid Waste amended and effective as of April 1, 2005, producers, distributors, importers and users of a product are responsible for the prevention and control of the solid wastes that they generate or discharge.
 
According to the Law of the PRC on Prevention and Control of Water Pollution which was amended on February 28, 2008 and became effective on June 1, 2008, new construction, expansion and reconstruction projects and other installations on water that directly or indirectly discharge pollutants into the water shall be subject to the state regulations on environmental protection of construction projects. Enterprises and institutions that discharge pollutants directly or indirectly into water must report to and register with the local environmental protection department their existing facilities for discharging and treating pollutants, and the categories, quantities and concentrations of pollutants discharged under their normal operating conditions, and also submit to the same department technical information concerning prevention and control of water pollution. Enterprises and institutions that directly discharge pollutants into a water body must pay a pollutant discharge fee according to the category and quantity of the pollution and the collection standard of the pollutant discharge fee.

As advised by our PRC counsel, Fujian Fazheng League Law Firm, because Fujian Qianlon is in the early stage of its operation, it is currently not subject to the environmental regulations with respect to noises, air pollutants and solid wastes. Fujian Qianlon uses probiotic organic fertilizer in its production of seedlings, and the use of such fertilizer is subject to the local environmental agency’s test and assessment as to whether it has caused excessive water pollution.  Fujian Qianlon is undergoing such a test and assessment in Xiamen.  If we fail to pass the test and assessment, we will be required to remedy the water pollution caused by our use of the probiotic organic fertilizer.

Employment
 
According to the Employment Contract Law of the PRC effective as of January 1, 2008, employment contracts must be entered into if employment relationships are to be established between an employer and its employees. The employer cannot require the employees to work in excess of the time limit as permitted under the relevant employment laws and regulations and must pay to the employees wages which are no lower than local standards on minimum wages. The entity must establish and perfect its system for labor safety and sanitation, strictly abide by rules and standards on labor safety and sanitation, and educate employees in labor safety and sanitation in the PRC.
 
 
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We have entered into written employment contracts with all of our employees.  As advised by Fujian Fazheng League Law Firm, we have complied with the PRC employment-related laws and regulations in all material respects.

Social Insurance Regulations
 
According to Interim Regulations concerning the Levy of Social Insurance effective as of January 22, 1999 and Interim Measures concerning the Management of the Registration of Social Insurance effective as of March 19, 1999, employers in the PRC must conduct the registration of social insurance with the competent authorities and make contributions to the basic pension insurance, basic medical insurance and unemployment insurance for their employees.
 
According to the Regulations on Occupational Injury Insurance effective as of January 1, 2004, employers in the PRC must pay the occupational injury insurance fees for their employees.
 
According to Interim Measures concerning the Maternity Insurance effective as of January 1, 1995, employers in the PRC must pay the maternity insurance fees for their employees.

We have registered with the local social insurance agency in Fujian province and made required contributions to the basic pension insurance, medical insurance and unemployment insurance for our employees.  We have also purchased occupational injury insurance and maternity insurance policies for our employees.  As advised by Fujian Fazheng League Law Firm, we have complied with the PRC social insurance-related regulations in all material respects.

Regulations on Foreign Exchange Control and Administration

Foreign exchange regulation in China is primarily governed by the following regulations:
 
 
 
Foreign Exchange Administration Rules, or the Exchange Rules, promulgated by the State Council on January 29, 1996, which were amended on January 14, 1997 and August 5, 2008; and
 
 
 
Administration Rules of the Settlement, Sale and Payment of Foreign Exchange, or the Administration Rules, promulgated by the People’s Bank of China on June 20, 1996.

Under the Exchange Rules, Renminbi is convertible for current account items, including the distribution of dividends, interest payments, trade and service-related foreign exchange transactions. As for capital account items, such as direct investments, loans, security investments and the repatriation of investment returns, the conversion of foreign currency is still subject to the approval of, or registration with, SAFE or its competent local branches. However, for foreign currency payments for current account items, SAFE approval is not necessary for the conversion of Renminbi except as otherwise explicitly provided by laws and regulations.

Under the Administration Rules, enterprises may only buy, sell or remit foreign currencies at banks that are authorized to conduct foreign exchange business after the enterprise provides valid commercial documents and relevant supporting documents and, in the case of certain capital account transactions, after obtaining approval from SAFE or its competent local branches. Capital investments by enterprises outside of China are also subject to limitations, which include approvals by the MOFCOM, SAFE and the National Development and Reform Commission, or their respective competent local branches.

Under PRC laws and regulations, we are permitted to provide funding to our PRC subsidiary only through capital contributions or loans and these uses are subject to PRC regulations and approvals. Capital contribution to Fujian Qianlon must be approved by MOFCOM or its local counterpart. Loans by us to Fujian Qianlon to finance its activities may not exceed statutory limits and must be registered with SAFE or its local branch. As of the date of this prospectus, we have obtained the approval from MOFCOM’s local counterpart and completed the registration with local SAFE with respect to the capital contributions and loans to Fujian Qianlon, and we have complied with the PRC foreign exchange regulations in all respects.
 
 
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We expect to derive substantially all of our revenues in Renminbi, which is not a freely convertible currency. Under our current structure, our income is expected to be primarily derived from dividend payments from our subsidiary in China. The value of the Renminbi against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in China’s political and economic conditions. The conversion of Renminbi into foreign currencies, including the U.S. dollar, has been based on rates set by the People’s Bank of China. On July 21, 2005, the PRC government changed its policy of pegging the value of the Renminbi to the U.S. dollar. Under the new policy, the Renminbi is permitted to fluctuate within a band against a basket of certain foreign currencies. In practice, the PRC government has adopted a substantial liberalization of its currency policy, which could result in a further and more significant appreciation in the value of the Renminbi against the U.S. dollar. See “Risk Factors—Risks Relating to Doing Business in China—Fluctuations in the value of the Renminbi may have a material adverse effect on your investment.”

MANAGEMENT

Directors and Senior Management

Members of our board of directors are elected by our shareholders. Our board of directors consists of four directors. The current term of office of each director is expected to expire at our next annual general meeting. Our executive officers are appointed by, and serve at the discretion of, our board of directors.

The following table sets forth information concerning our directors and executive officers as of the date of this prospectus. The business address of each of our directors and executive officers listed below is Room B, 19/F, Hillier Commercial Building, 89-91 Wing Lok Street, Sheung Wan, Hong Kong. Ms. Ho, our chairwoman and chief executive officer, is the mother of Mr. Stanley Ang, our chief administrative officer and director.  There are no other family relationships between any of our directors and executive officers.

Name and address
 
Age
 
Position
Anita Lai Lai Ho
 
49
 
Director, chairwoman and chief executive officer
Stanley Ang
 
26
 
Director and chief administrative officer
Jeffrey Chong Kee Hui
 
34
 
Director and general counsel
Yau Man Hwang
 
33
 
Director
Cho-Po Chang
 
60
 
Chief operating officer
Claire Yi-Chiun Chang
 
37
 
Chief financial officer

Ms. Anita Lai Lai Ho  Ms. Ho has served as our Chief Executive Officer since October 2009 and director since August 2007.  Between September 2005 and July 2007, Ms Ho was the owner and operator of Asia Euro Enterprises Limited, a company engaged in ladies’ fashion, with production facilities in China for export to European countries. From June 1988 to August 2005, Ms. Ho was the Managing Director of Foldwide Development Limited, a men’s and women’s garments manufacturing and exporting company, where she was responsible for corporate strategic planning.  Ms. Ho graduated as a professional corporate secretary from LTC College in Norwich, England in 1984.

Mr. Stanley Ang  Mr. Stanley Ang has served as our director since September 2010 and our chief administrative officer since January 2011.  From March 2010 to December 2010, Mr. Ang served as the assistant general manager of Fujian Qianlong Medicine Co. Limited, a wholesaler and distributor of medicines, Chinese herbs and healthcare products in Fujian, China. Mr. Ang received a bachelor’s degree in business administration from Jinan University.


Mr. Jeffrey Chong Kee Hui  Mr. Hui has served as our director since September 2010 and as our general counsel since November 2010. From November 2004 to March 2010, Mr. Hui worked as the judiciary executive for the Hong Kong Special Administrative Region Judiciary responsible for daily courtroom operations and assisting judges in all respects in the discharge of their judicial duties.  Mr. Hui received a bachelor’s degree in law from the City University of Hong Kong.
 
 
Mr. Yau Man Hwang  Mr. Hwang has been our director since November 2010.  Since May 2008, Mr. Hwang has been an investment advisor at Phillip Securities (Hong Kong), a member of Phillip Capital Group, which operates in ten financial hubs worldwide. He is responsible for providing advice and analysis on a variety of investments at Phillip Securities (Hong Kong). Mr. Hwang studied computer networking management at University of British Columbia in Canada between 1996 and 2000.
 
 
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Mr. Cho-Po Chang Mr. Chang is the owner and inventor of TFPPT and has been our chief operating officer since February 2011.  Having started his career as a mechanical engineer, Mr. Chang has over 30 years of experience in strategic and operations planning and implementation of aeroponics cultivation systems. Mr. Chang served as a former member of the Chinese People’s Political Consultative Conference, Qinzhou City, Guangxi Province and former executive director of Guangxi Province Fruit Association.  Mr. Chang is the sole distribution and marketing agent of Yue Nong Seedling and Flowers Company Limited in China.  He is the agricultural consultant of Guangxi Guoxiong Biological Agriculture Development Company Limited.
 
Ms. Claire Yi-Chiun Chang  Ms. Chang was appointed as our chief financial officer on June 15, 2011. Ms. Chang served as an associate analyst at Yuanta Securities (HK) Ltd. from 2010 to 2011 where she drafted research reports and updates on companies and industries and built financial models.  Ms. Chang also served as an asset manager at Spinnaker Capital LLC from 2008 to 2009, where she managed a team of four to five analysts with approximately $2 billion in alternative assets, including both direct and indirect investments in private equity, venture capital, real estate, mezzanine debt and hedge funds.  She was an assistant manager at Newegg.com, an international e-commerce company selling high-tech products, from 2005 to 2006, an auditor at PricewaterhouseCoopers from 2002 to 2004, and a senior management associate at Far Eastern Textile Ltd. from 1997 to 2002.  Ms. Chang received an MBA from MIT Sloan School of Management in June 2008, a bachelor of business degree from Tamkang University in June 1997 and an associate bachelor’s degree in international trade in June 1994 from Ming Chuan University.  Ms. Chang currently holds six professional certifications, including U.S. Certified Public Accountant, U.S. Certified in Financial Management, U.S. Certified Management Accountant, U.S. Certified Internal Auditor, Taiwan Certified Internal Auditor and Taiwan Certified Futures Broker.

Advisor

We have engaged Mr. Dominick Mark as our external advisor by entering into a consultancy agreement with Sky Vision Holdings Limited, a corporate consulting company in which Mr. Mark is a director.

Mr. Dominick Mark  Mr. Mark has been serving as our corporate finance strategist since July 2010.  Mr. Mark has over 30 years of experience in international professional accounting and auditing services. He is a corporate finance strategist specializing in business development, including operations management, risk management, organizational transformation, human resources and leadership development. Mr. Mark has advised many companies on conducting commercial transactions and undertaking due diligence in mergers and acquisitions transactions, preparing for pre-IPO and IPO equity financing, and assisting companies in listing on stock exchanges in Europe and the United States. Mr. Mark has also been the owner and operator of various business ventures in real estate development, restaurants, hotels, seafood processing, advertising and mass media in Asia and North America. Mr. Mark is a certified public accountant of the United States, a fellow of the Association of Chartered Certified Accountants of England and an International Affiliate of the Hong Kong Institute of Certified Public Accountants. In addition, Mr. Mark has served as a director of the Canadian Certified General Accountants Association of Hong Kong.

Professional Service Agreement

From October 2007 to September 2009, Team Profit Asia Limited (the former name of Dragon Bright HK) engaged Ms. Ho, on a non-exclusive basis, pursuant to a professional service agreement to perform business development related services at a monthly service fee of approximately $128 for the period between October 2007 and September 2008 and approximately $256 for the period between October 2008 and September 2009.  On October 1, 2009, Ms. Ho was appointed as the chief executive officer of Team Profit Asia Limited and her professional service agreement was terminated.  On March 1, 2011, Ms. Ho entered into an employment agreement with us and she was appointed as our chief executive officer for a term expiring on December 31, 2011.

We have no service contracts with our directors providing benefits upon termination of employment.
 
 
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Committees of the Board of Directors

All proceedings of the board of directors for the year ended December 31, 2010 were conducted by resolutions consented to in writing by the board of directors and filed with the minutes of the proceedings of the directors. Our company currently does not have nominating, compensation or audit committees or committees performing similar functions nor does our company have a written nominating, compensation or audit committee charter. Our board of directors does not believe that it is necessary to have such committees because it believes that the functions of such committees can be adequately performed by the board of directors.

We do not have any defined policy or procedural requirements for shareholders to submit recommendations or nominations for directors. The board of directors believes that, given the stage of our development, a specific nominating policy would be premature and of little assistance until our business operations develop to a more advanced level. We do not currently have any specific or minimum criteria for the election of nominees to the board of directors and we do not have any specific process or procedure for evaluating such nominees. The board of directors will assess all candidates, whether submitted by management or shareholders, and make recommendations for election or appointment.

A shareholder who wishes to communicate with our board of directors may do so by directing a written request addressed to the board of directors in care of our chief executive officer, Ms. Ho, at Room B, 19/F, Hillier Commercial Building, 89-91 Wing Lok Street, Sheung Wan, Hong Kong.

Audit Committee Financial Expert

We have no audit committee financial expert.  We believe that the cost related to retaining a financial expert at this time is prohibitive.  Further, because of our stage of development, we believe the services of a financial expert are not warranted.

Compensation of Directors and Executive Officers

Our directors and executive officers receive compensation in the form of annual salaries and bonuses. While we do not have a specific bonus plan setting the calculation of our annual bonuses, each director and executive officer is entitled to receive an annual discretionary bonus based upon his or her performance in such amount as shall be determined by the board of directors.

In the fiscal year ended December 31, 2010, the total compensation we paid to our executive officers and directors was approximately $11,150. In the fiscal year ended December 31, 2010, we did not have any pension, retirement or similar benefits for our executive officers and directors.
 
 
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PRINCIPAL AND SELLING SHAREHOLDERS

The following table sets forth information, as of the date of this prospectus, with respect to the beneficial ownership of our shares by:

 
the selling shareholders;

 
each other person known to us to own beneficially more than 5% of our shares; and

 
each of our directors and executive officers who beneficially own our shares.

As of August 31, 2011, we did not have any record holders in the United States.

Beneficial ownership is determined in accordance with the rules of the SEC and includes voting or investment power with respect to the shares. Except as indicated below, and subject to applicable community property laws, we believe, based on the information furnished to us, the persons named in the table have sole voting and investment power with respect to all shares shown as beneficially owned by them. A shareholder is also deemed to be, as of any date, the beneficial owner of all securities that such shareholder has the right to acquire within 60 days after that date through (1) the exercise of any option, warrant or right, (2) the conversion of a security, (3) the power to revoke a trust, discretionary account or similar arrangement, or (4) the automatic termination of a trust, discretionary account or similar arrangement. The percentages of beneficial ownership in the table below are based on 531,000,000 shares outstanding as of August 31, 2011.

The selling shareholders will offer and sell, as soon as practicable after the effective date of this registration statement, any or all of the shares issued.  To calculate the respective percentages of our shares owned by the selling shareholders, we have assumed that the selling shareholders will sell all 131,000,000 shares to be registered pursuant to this offering.

None of the selling shareholders is a broker-dealer or an affiliate of a broker-dealer.

We may require the selling shareholders to suspend the sales of the securities offered by this prospectus upon the occurrence of any event that makes any statement in this prospectus or the related registration statement untrue in any material respect or that requires the changing of statements in these documents in order to make statements in those documents not misleading.

Unless otherwise indicated, the principal address of each of the shareholders below is c/o Dragon Bright Mintai Botanical Technology Company Limited, Room B, 19/F , Hillier Commercial Building, 89-91 Wing Lok Street Sheung Wan, Hong Kong.
 
 
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Shares
Beneficially
Owned Prior to
this Offering
   
Shares to be Sold
in this Offering
   
Shares
Beneficially Owned
after
this Offering
 
 
 
Number
   
%
   
Number
   
%
   
Number
   
%
 
Directors and Executive Officers
                                   
Anita Lai Lai Ho                                                
    128,000,000       24.1       -       -       128,000,000       24.1  
Stanley Ang                                                
    100,000,000       18.8       -       -       100,000,000       18.8  
Cho-Po Chang                                                
    10,000,000       1.9       -       -       10,000,000       1.9  
Yau Man Hwang                                                
    25,000,000       4.7       25,000,000       4.7       -       -  
All directors and executive officers as a group (six persons)
    263,000,000       49.5       25,000,000       4.7       238,000,000       44.8  
                                                 
Other Shareholders
                                               
Shirley Sheung Hon                                                
    250,000       *       250,000       *       -       -  
Million Max Limited                                                
    130,000,000       24.5       -       -       130,000,000       24.5  
Wealth Vantage International Limited(1)
    32,000,000       6.0       -       -       32,000,000       6.0  
Yick Kam Lee                                                
    22,750,000       4.2       22,750,000       4.2       -       -  
Philip Chi Hung Ang (2)                                                
    21,850,000       4.1       21,850,000       4.1       -       -  
Kennen Hwang(3)                                                
    20,000,000       3.8       20,000,000       3.8       -       -  
Keneth C. Goyena(4)                                                
    7,500,000       1.4       7,500,000       1.4       -       -  
China Hainan Agriculture Holdings Ltd.(5)
    5,000,000       *       5,000,000       *       -       -  
Dongsheng Jiao                                                
    5,000,000       *       5,000,000       *       -       -  
Cho Lik Ma                                                
    4,000,000       *       4,000,000       *       -       -  
Shaun Kou                                                
    3,750,000       *       3,750,000       *       -       -  
Xuchang Li                                                
    2,200,000       *       2,200,000       *       -       -  
Wai Chi Chin                                                
    1,500,000       *       1,500,000       *       -       -  
Chuen Wong Ngie                                                
    850,000       *       850,000       *       -       -  
Cheney Chi Chuen Tsoi                                                
    800,000       *       800,000       *       -       -  
Kin Heung Poon                                                
    500,000       *       500,000