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General Agriculture Corp – ‘DRS’ from 6/25/14

On:  Wednesday, 6/25/14, at 6:35am ET   ·   Private-to-Public:  Filing ¶  –  Release Delayed to:  2/4/15   ·   Accession #:  1144204-14-39428   ·   File #:  377-00666

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  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 6/25/14  General Agriculture Corp          DRS¶        2/04/15    1:1.5M                                   Toppan Vintage/FA

Document/Exhibit                   Description                      Pages   Size 

 1: DRS         Draft Registration Statement by an Emerging Growth  HTML    813K 
                Company or a Foreign Private Issuer                              

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form S-1

REGISTRATION STATEMENT

UNDER

THE SECURITIES ACT OF 1933

GENERAL AGRICULTURE CORPORATION

(Exact name of registrant as specified in its charter)

Room 801, Plaza B, Yonghe Building,

No. 28 AnDingMen East Street

Dongcheng District

Beijing, China 100007

(Address, including zip code, and telephone number,

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

Business Filings Incorporated

108 W. 13^th Street

Wilmington, DE 19801

(800) 981-7183

(Name, address, including zip code, and telephone number, including area code, of agent for service)

Copies to:

Approximate date of commencement of proposed sale to the public: As soon as practicable following the effectiveness of this registration statement.

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

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

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

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

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

CALCULATION OF REGISTRATION FEE

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

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

PRELIMINARY PROSPECTUS

Subject to Completion, Dated June 24, 2014

GENERAL AGRICULTURE CORPORATION

Shares Of Common Stock

We are offering up to       shares of common stock of General Agriculture Corproation (the “Company”) with a par value of $0.0001 per share. The offering price per share is $       . We are not a reporting company under Section 13 or Section 15 of the Securities Exchange Act of 1934, as amended. However, we do file periodic reports with the Securities Exchange Commission voluntarily. Our common stock has been listed on the Financial Industry Regulatory Authority’s (“FINRA”) OTC Bulletin Board (“OTCBB”) under the symbol “GELT” and is not currently listed or quoted for trading on any national securities exchange. We intend to apply to have our common stock listed on the NASDAQ Capital Market under the symbol “GELT.” The last reported sales price per share of our common stock as reported on the OTCBB on June 23, 2014, was $5.10.

The offering price to the public will be determined by negotiation between us and Axiom Capital Management, Inc. (the “Underwriter”), but will be fixed prior to the commencement of the offering by the Underwriter. The offering will be on a “best efforts” basis such that the Underwriter will not be required to sell any specific number or dollar amount of our shares but will use its best efforts to sell the shares offered. Delivery of the shares will be made as soon as practicable after the effective date of this Registration Statement. We have not made any arrangements to place the funds in an escrow, trust, or similar account. Please see the “Plan of Distribution” section for more information.

We are an “emerging growth company” under the federal securities laws and will be subject to reduced public company reporting requirements. An investment in our common stock may be considered speculative and involves a high degree of risk, including the risk of a substantial loss of your investment. See “Risk Factors” beginning on page 7 to read about the risks you should consider before buying our common stock. An investment in our common stock is not suitable for all investors.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of the securities or passed upon the adequacy or accuracy of this Prospectus. Any representation to the contrary is a criminal offense.

(1) See “Plan of Distribution” for a description of compensation payable to the Underwriter.

Delivery of the common stock is expected to be made on or about      , 2014. We have granted the underwriter an option for a period of 45 days to purchase up to a total of      additional shares of common stock. If the underwriter exercises this option in full, the total underwriting discounts and commissions will be $     and our total proceeds, before expenses, will be $          .

AXIOM CAPITAL MANAGEMENT, INC.

The date of this Prospectus is _______________, 2014

TABLE OF CONTENTS

ABOUT THIS PROSPECTUS

You may rely only on the information contained in this Prospectus or that we have referred you to. We have not authorized anyone to provide you with different information. This Prospectus does not constitute an offer to sell or a solicitation of an offer to buy any securities other than the common stock offered by this Prospectus. This Prospectus does not constitute an offer to sell or a solicitation of an offer to buy any common stock in any circumstances in which such offer or solicitation is unlawful. Neither the delivery of this Prospectus nor any sale made in connection with this Prospectus shall, under any circumstances, create any implication that there has been no change in our affairs since the date of this Prospectus or that the information contained by reference to this Prospectus is correct as of any time after its date.

Until 90 days from the distribution date, all dealers that effect transactions in these securities, whether or not participating in this Offering, may be required to deliver a prospectus. This is in addition to the dealers’ obligation to deliver a prospectus when acting as underwriters and with respect to their unsold allotments or subscriptions.

“RMB” or “Renminbi” refers to the legal currency of China and “$” or “U.S. Dollars” refers to the legal currency of the United States.   The consolidated financial statements included in this Prospectus are presented in U.S. Dollars. Great China International’s functional currency is Hong Kong Dollar (“HKD”) and Nanchang Hanxin Agriculture Technology Co., Ltd, General Fruit and General Preservation’s functional currency is Renminbi. Transaction gains and losses may arise from exchange rate fluctuations. We make no representation that the RMB or U.S. Dollar amounts referred to in this prospectus could have been or could be converted into U.S. Dollars or RMB, as the case may be, at any particular rate or at all.

References in this Prospectus to the terms “we,” “us,” “our” or “the Company” or other similar terms mean General Agriculture Corporation and its consolidated subsidiaries, unless we state otherwise or the context indicates otherwise.

FORWARD-LOOKING STATEMENTS

Certain statements contained in this Prospectus may constitute forward-looking statements within the meaning of applicable securities laws. All statements that are not historical facts are forward-looking statements. Forward-looking statements include statements about matters such as: future prices and sales of, and demand for, our products; future industry market conditions; future changes in our business plans and objectives, production capacity and operations; future production, operating and overhead costs; future employment and contributions of personnel; tax and interest rates; capital expenditures and their impact on us; productivity, business process, rationalization, investment, acquisition, consulting, operational, tax, financial and capital projects and initiatives; contingencies; environmental compliance and changes in the regulatory environment; and future working capital, costs, revenues, business opportunities, debt levels, cash flows, margins, earnings and growth.

The words “believe,” “expect,” “anticipate,” “estimate,” “project,” “plan,” “should,” “intend,” “may,” “will,” “would,” “potential” and similar expressions identify forward-looking statements, but are not the exclusive means of doing so. These statements are based on assumptions and assessments made by our management in light of their experience and their perception of historical and current trends, current conditions, possible future developments and other factors they believe to be appropriate. Forward-looking statements are not guarantees, representations or warranties and are subject to risks and uncertainties that could cause actual results, developments and business decisions to differ materially from those contemplated by such forward-looking statements. Some of those risks and uncertainties include the risk factors discussed in “Risk Factors” beginning on page 7 and the following: changes in economic conditions, legislative/regulatory changes, availability of capital, interest rates, competition, and generally accepted accounting principles. These risks and uncertainties should also be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements. We undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

All subsequent written and oral forward-looking statements by or attributable to us or persons acting on our behalf are expressly qualified in their entirety by these factors. We undertake no obligation to publicly update or revise any forward-looking statement.

PROSPECTUS SUMMARY

This summary highlights information contained in this Prospectus. This summary may not contain all of the information that you should consider before investing in our common stock. We urge you to read this entire Prospectus carefully, including the section entitled “Risk Factors” and the financial statements and other information included in this Prospectus.

Company Overview

We are one of the leading producers of “Gannan” navel oranges in China, with operations that include the planting, growing, harvesting, post-harvest processing and temperature controlled preservation and storage of our oranges. Through our vertically integrated model, we exercise strict and direct control over the quality of our oranges, which we believe gives us a distinct competitive advantage.

We operate through a flexible procurement model by entering into contractual agreements with local farmers for the planting and harvesting work in our orchards on one hand, while also relying on third party farmers and cooperatives that do not use our land by purchasing some of their production on the other hand. We believe that this model provides us a stable and safe source of supply. Once the navel oranges are harvested or purchased, we commercially process and preserve them according to the standards of organic navel oranges, store and subsequently sell them throughout many regions in the PRC.

Led by a management team with extensive experience in the industry, we have put in place several investment programs that have allowed us to achieve our current strong position in the domestic market, with our scale and scope evidenced by the following:

Our goal is to become the largest integrated grower, packager and distributor of navel oranges in China. We plan to pursue continued growth and margin expansion through a strategy focused on the increase of our orchard and navel orange trees.

Industry Overview

According to Beijing Huqing Zongheng Information and Statistics Center, China’s domestic navel orange annual production grew from 270,000 metric tons to 3,140,000 metric tons between 2000 and 2013, a compound annual growth rate of 21%. In addition, as China’s economic transformation continues, the navel orange domestic production is forecasted to grow at 15% annually over the next three years.

The China navel orange industry is fragmented, with the different players scattered across the value-chain, which can be divided into three categories: production, post-harvest processing and preservation.

Navel orange production requires stringent climate conditions; therefore, there are limited areas in the world where navel oranges can be produced. As a result, production is primarily concentrated in warmer climates, such as California, Spain, South Africa, Australia, and “Gannan – Southern Hunan – Northern Guangxi” in China. The Chinese government has identified the Gannan area as “the hometown of the navel orange in China”, and has been supportive of local producers. The Ministry of Agriculture named Gannan navel oranges as one of the nine competitive agricultural products in the country, and listed Gannan as one of the key developing areas.

As one of the leading enterprises in Gannan, we play a decisive role in the navel orange industry. Furthermore, even though “Gannan Navel Orange” is the common brand shared by all producers in Gannan area, we believe that our “General Red” brand stands out among all of the other Gannan brands because of the measures we take to ensure the highest quality standards and our consistent branding strategy.

In regards to the post-harvest processing and preservation of harvested fruits, we believe that the Chinese market also presents high-growth potential. Post-harvest processing includes selecting, grading, cleaning, pre-cooling, waxing and packaging. Proper processing can minimize post-harvest loss, maintain the high nutritional content and freshness, slow down the metabolic process of fruit in its natural state, enhance the appearance of the fruit and extend the life of the fruit. Currently, 10% of fresh fruits are processed in the post-harvesting period in China, lower than the average level of 35% worldwide. As for the storage and preservation technology, China also lags behind that of developed countries in the citrus exports sector due to grossly inadequate storage and preservation facilities.

Competition

Even though we are one of the largest integrated navel orange companies with both growing areas and post-harvest processing and preservation facilities in Gannan, the industry is still very fragmented and we believe the industry will consolidate and present good opportunities for growth through acquisitions. Our competitors are pure navel orange growers, pure post-harvest processors, or both. The largest competitor in navel orange growing is Jiangxi Wangpin Agricultural Science and Technology Development Co. Ltd. with approximately 6,880 mu (1,133 acres) of navel orange groves. The largest competitors in post-harvest processing and preservation are Anyuan Shengda Fruit Industrial Co. Ltd with 20,000 metric ton of preservation capacity, and Xinfeng Yuhe Agricultural Development Co. Ltd. with 7,000 metric tons of preservation capacity.

Competitive Strengths

Our current strong market position and potential future growth can be attributed to the following key factors and competitive strengths:

Growth Strategy

As one of the leading vertically integrated producers of navel oranges in Gannan, we believe that we are in a unique position to take full advantage of the vast opportunities in our domestic market. We intend to leverage our current strengths and take full advantage of market opportunities in order to achieve continued growth and increased margin by:

Risk Factors

Our business is subject to a number of risks that you should understand before deciding to invest in our common stock, including the following:

(1) The market in which we participate is intensely competitive, and we may not be able to compete successfully with our current or future competitors.

(2) We rely on contracts with the PRC to use land. If the PRC revokes our land use rights, we would have no operational capabilities or ability to conduct our business.

(3) We are subject to PRC laws and regulations. Changes in the laws, regulations or current policies of the PRC could negatively affect our ability to conduct our business or eliminate certain tax-related privileges that we enjoy.

These and other risks are discussed more fully in the section of this Prospectus titled “Risk Factors” beginning on page 7.

Corporate Information

The Company’s executive offices are located at Room 801, Plaza B, Yonghe Building, No. 28 AnDingMen East Street, Dongcheng District, Beijing, China 100007 and its telephone number is 86-10-6409-7316. The Company’s registered office is located at Business Filings Incorporated, 108 W. 13^th Street, Wilmington, DE 19801 and its website is www.gelt-cn.com Information contained on or accessed through our website is not intended to constitute and shall not be deemed to constitute part of this Prospectus.

The Offering

Unless otherwise indicated, the share information in this Prospectus is as of June 16, 2014 and reflects and assumes our 1 for 8 reverse stock split effected on July 12, 2013.

Unless otherwise indicated, the number of shares of common stock presented in this Prospectus does not include

shares of common stock issuable pursuant to the exercise of the underwriter's over-allotment option;

SUMMARY CONSOLIDATED FINANCIAL INFORMATION

The following summary data of consolidated statements of operations data for the years ended September 30, 2013 and 2012 and six months ended March 31, 2014 and 2013, and the consolidated balance sheet data as of September 30, 2013 and 2012 and March 31, 2014 have been derived from our audited consolidated financial statements for the years ended September 30, 2014 and 2013 and the unaudited consolidated financial statements for the three and six months ended March 31, 2014 and 2013 appearing elsewhere in this Prospectus. You should read the following summary financial information in conjunction with the consolidated financial statement and related notes and the information under “Management’s Discussion and Analysis of Financial Consolidated and Results of Operations” included elsewhere in this Prospectus.

RISK FACTORS

The reader should carefully consider the risks described below together with all of the other information included in this Prospectus. Some of these risks relate principally to the Offering, while others relate principally to our business and the industry in which we operate or to the securities markets generally and ownership of our securities specifically. The statements contained in this Prospectus that are not historic facts are forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those set forth in or implied by forward-looking statements. If any of the following risks actually occurs, our business, financial condition, or results of operations could be harmed. In that case, the trading price of our common stock, if and when a market for our common stock develops, could decline, and an investor in our securities may lose all or part of their investment.

Risks Related to Our Business

If our products are unable to compete effectively with current and future products targeting similar markets as our potential products, our commercial opportunities will be reduced or eliminated.

We have established orchards on approximately 21,794 mu of land (3,590 acres). We also established one of the largest temperature facilities in the PRC with a 7,000 metric ton storage capacity in which we preserve and package our navel oranges. During fiscal year 2013, we sold over 21,531 metric tons of navel oranges. Even though we are one of the largest integrated navel orange companies with both growing areas and post-harvest processing our competitors are pure navel orange growers, pure post-harvest processors, or both. The largest competitor in navel orange growing is Jiangxi Wangpin Agricultural Science and Technology Development Co. Ltd. with 6,880 mu (1,133 acres) of navel orange groves. The largest competitors in post-harvest processing and preservation are Anyuan Shengda Fruit Industrial Co. Ltd with 20,000 metric ton of preservation capacity, and Xinfeng Yuhe Agricultural Development Co. Ltd. with 7,000 metric tons of preservation capacity.

Our ability to provide products at a competitive price is critical to our continued operations. Some of our competitors have greater financial resources, more established market positions and better opportunities for contracts and have lower costs of capital, labor and material than us. If our competition is such that we cannot compete and generate a sufficient return on our investment and operations, we may be forced to curtail our operations, resulting in a loss to investors.

We have agreements with a limited number of farmers to grow and supply us with oranges. Any disruption in supply breach of our agreements or failure to deliver products could adversely impact our distribution capabilities or increase our costs, which could harm our reputation or materially and adversely affect our business, results of operations and financial condition.

We purchase certain of our products from farmers with whom we have seasonal contracts. The failure of our farmers to supply oranges that satisfy our quality, quantity and cost requirements, the decision by farmers not to re-enter into contracts with us or a breach of the contracts, could have an adverse effect on our ability to maintain our distribution network. If we fail to maintain our relationships with these farmers or fail to develop new relationships with other farmers, our business, results of operations and financial condition would be materially adversely impacted.

We derive all of our sales from the PRC.

All of our sales are generated from the PRC. Although we have explored the exportation of oranges outside of the PRC, at this time we anticipate that sales of our oranges in the PRC will continue to represent all of our total sales in the near future. Any significant decline in the condition of the PRC economy could adversely affect consumer demand of our products, among other things, which in turn would have a material adverse effect on our business and financial condition.

Our earnings and, therefore our profitability, may be affected by price volatility.

Our earnings may be affected by the price of our oranges. There are many factors influencing the price including expectations for inflation; global and regional demand and production; political and economic conditions; and production costs. These factors are beyond our control and are impossible for us to predict. As a result, price changes may adversely affect our operating results.

If our land use rights are revoked, we would have no operational capabilities or ability to conduct our business.

Under PRC law, land is owned by state or rural collective economic organizations. The state issues tenants the rights to use property. Rights to use property can be revoked and tenants can be forced to vacate at any time when redevelopment of the land is in the public interest. The public interest rationale is interpreted broadly and the process of land appropriation may be less than transparent. Because production of oranges is dependent on having land to grow oranges on, we rely on these land use rights as the cornerstone of our operations, and the loss of such rights by us or the farmers from whom we purchase oranges would have a detrimental effect on our business.

Weather and other environmental factors may affect our harvesting season, and a reduction in the quality or quantity of our orange supplies may have a detrimental effect on our revenues.

Our business may be adversely affected by weather and environmental factors beyond our control, such as adverse weather conditions during the growing season. We have no control over such forces of nature. A significant reduction in the quantity or quality of oranges harvested resulting from adverse weather conditions, disease to the crops or other factors could result in increased per unit processing costs and decreased production, with adverse financial consequences to us.

We may require additional capital to fund the expansion of our business, and our inability to obtain such capital could harm our business.

To support our expanding business, we must have sufficient capital to continue to make significant investments in our existing products and advertising. We cannot assure you that cash generated by our operations will be sufficient to allow us to fund such expansion. If cash flows from operations are not sufficient, we may need additional equity or debt financing to provide the funds required to expand our business. If such financing is not available on satisfactory terms or at all, we may be unable to expand our business or to develop new business at the rate desired and our operating results may suffer. Debt financing increases expenses, may contain covenants that restrict the operation of our business, and must be repaid regardless of operating results. Equity financing, or debt financing that is convertible into equity, could result in additional dilution to our existing stockholders.

Our inability to obtain adequate capital resources, whether in the form of equity or debt, to fund our business and growth strategies may require us to delay, scale back or eliminate some or all of our operations or the expansion of our business, which may have a material adverse effect on our business, operating results, financial condition or prospects.

If we make any acquisitions, they may disrupt or have a negative impact on our business.

Although we have no present plans for any specific acquisitions, in the event that we make acquisitions, we could have difficulty integrating the acquired companies’ personnel and operations with our own. In addition, the key personnel of the acquired business may not be willing to work for us. We cannot predict the effect expansion may have on our core business. Regardless of whether we are successful in making an acquisition, the negotiations could disrupt our ongoing business, distract our management and employees and increase our expenses. In addition to the risks described above, acquisitions are accompanied by a number of inherent risks, including, without limitation, the following:

Our business could be severely impaired if and to the extent that we are unable to succeed in addressing any of these risks or other problems encountered in connection with these acquisitions, many of which cannot be presently identified, these risks and problems could disrupt our ongoing business, distract our management and employees, increase our expenses and adversely affect our results of operations.

Our growth could strain our personnel and infrastructure resources, and if we are unable to implement appropriate controls and procedures to manage our growth, we may not be able to successfully implement our business plan.

Our success will depend in part upon management’s ability to manage growth. To do so, we must continue to hire, train and manage new employees as needed. If our new hires perform poorly, or if we are unsuccessful in hiring, training, managing and integrating these new employees, or if we are not successful in retaining our existing employees, our business may be harmed. To manage the expected growth of our operations and personnel, we will need to continue to improve our operational, financial and management controls and our reporting systems and procedures. The additional headcount and capital investments we are adding will increase our cost base, which will make it more difficult for us to offset any future revenue shortfalls by offsetting expense reductions in the short term. If we fail to successfully manage our growth, we will be unable to execute our business plan.

Risks Related to our Industry

Our financial and operating performance may be adversely affected by epidemics, adverse weather conditions, natural disasters and other catastrophes.

Orange tree disease, insect infestation, severe weather conditions, such as floods, droughts, windstorms and hurricanes, and other adverse environmental conditions and natural disasters, may adversely affect our supply of our product, reduce our sales volumes, increase our unit production costs or prevent or impair our ability to ship products as planned. Because a significant portion of our costs are fixed and contracted in advance of each operating year, volume declines due to production interruptions or other factors could result in increases in unit production costs, which could result in substantial losses and weaken our financial condition. Severe weather conditions may occur with higher frequency or may be less predictable in the future due to the effects of climate change. An occurrence of such an event might result in material disruptions to our operations, to the operations of our distributors or suppliers, resulting in a decline in the agriculture industry and our financial and operating performance. There can be no assurance that our facilities or products will not be affected by any such occurrence in the future, which occurrence may lead to adverse conditions to our operations and financial results. The centralization of our fruit trees in the Jiangxi Province exacerbates this concern.

For example, in early 2003, several economies in Asia, including China, were affected by the outbreak of severe acute respiratory syndrome, or SARS. During May and June of 2003, many businesses in the PRC were closed by the PRC government to prevent transmission of SARS. Our business could be materially and adversely affected by the effects of H1N1 flu (swine flu), avian flu, severe acute respiratory syndrome or other epidemics or outbreaks. In April 2009, an outbreak of H1N1 flu first occurred in Mexico and quickly spread to other countries, including the U.S. and China. In the last decade, China has suffered health epidemics related to the outbreak of avian influenza and severe acute respiratory syndrome. Any prolonged occurrence or recurrence of H1N1 flu (swine flu), avian flu, SARS or other adverse public health developments in the PRC may have a material adverse effect on our business and operations. These health epidemics could result in severe travel restrictions and closures that would restrict our ability to ship our products. Potential outbreaks could also lead to temporary closure of our manufacturing facilities, our suppliers’ facilities and/or our distributors’ facilities, leading to reduced production, delayed or cancelled orders, and decrease in demand for our products. Any future health epidemic or outbreaks that could disrupt our operations and/or restrict our shipping abilities may have a material adverse effect on our business and results of operations. Furthermore, the 2008 Sichuan earthquake also had a negative impact on many businesses in the region. Losses caused by epidemics, adverse weather conditions, natural disasters and other catastrophes, including SARS, avian flu, swine flu, earthquakes or typhoons, could adversely affect our financial and operating performance.

Concerns over food safety and public health may affect our operations by increasing our costs and negatively impacting demand for our products.

We could be adversely affected by diminishing confidence in the safety and quality of certain food products or ingredients, even if our practices and procedures are not implicated. As a result, we may also elect or be required to incur additional costs aimed at increasing consumer confidence in the safety of our products. For example, a crisis in the PRC over melamine-contaminated milk in 2008 adversely impacted overall PRC food exports since October 2008, as reported by the PRC General Administration of Customs, even though most foods exported from China were not implicated by the melamine-contaminated milk. Our success depends on our ability to maintain the quality of our products. Product quality issues, real or imagined, or allegations of product contamination, even if false or unfounded, could tarnish our image and may cause consumers to choose other products. However, most of our sales are generated from the PRC and not from exports. Although we have explored the exportation of oranges outside of the PRC, at this time we anticipate that sales of our oranges in the PRC will continue to represent a substantial proportion of our total sales in the near future.

Risks Related to Our Company

Adverse Chinese and international economic and market conditions may adversely affect our product sales and business.

Current U.S. and international economic and market conditions are uncertain. Our revenues and operating results may be affected by uncertain or changing economic and market conditions, including the challenges faced in the credit markets and financial services industry. If domestic and global economic and market conditions remain uncertain or persist or deteriorate further, we may experience material impacts on our business, financial condition and results of operations. Adverse economic conditions impacting our distributors, including, among others, increased taxation, higher unemployment, lower distributor confidence in the economy, higher distributor debt levels, lower availability of distributor credit, higher interest rates and hardships relating to declines in the stock markets, could cause purchases of oranges and orange products to decline, resulting in a decrease in purchase of our products, which could adversely affect our financial condition and results of operation. Adverse economic market conditions could also negatively impact our business by negatively affecting the parties with whom we do business, including among others, distributors and our suppliers.

We do not currently hedge our risk exposure to market fluctuations in the price and demand of oranges.

We sell our oranges at market prices. Our only product is oranges, and the market price of oranges directly affects the profitability of our operations. Additionally, demand for our products depends primarily on consumer-related factors such as demographics, local preferences and food consumption trends, macroeconomic factors such as the condition of the economy and the level of consumer confidence, as well as seasonal factors such as weather and festivities, and the market price of oranges. We do not currently hedge our risk exposure to market fluctuations in the price of our oranges. However, due to our superior preservation capabilities, we are able to extend our fruits’ life cycle to June of the year following harvesting, which enables us to sell navel oranges at a higher price during the off-season when other producers may not have sufficient supply. If the market price for oranges declines, our revenue will decrease and our failure or inability to follow or adapt to changes in market demand or market price in a timely manner, if at all, may have a material adverse effect on our results of operations and financial condition.

Prices of agricultural products are subject to supply and demand, which is not predictable which could have a material adverse effect on our results of operations and financial conditions.

Because our agricultural products are commodities, we are not able to predict with certainty what price we will receive for our products. Additionally, the growth cycle of such products in many instances dictates when such products must be marketed to achieve the maximum profitability. Excessive supplies tend to cause severe price competition and lower prices throughout the industry affected. Conversely, shortages may drive the prices higher. Shortages often result from adverse growing conditions which can reduce the availability of the agricultural products affected. Since multiple variables can affect supply and demand, we cannot accurately predict or control from year to year what prices, either favorable or unfavorable, it will receive from the market.

In addition, general public perceptions regarding the quality, safety or health risks associated with particular food products could reduce demand and prices for some of our products. To the extent that consumer preferences evolve away from products that we produce for health or other reasons, and we are unable to modify our products or to develop products that satisfy new consumer preferences, there will be a decreased demand for our products. Our preservation capabilities allow us to preserve our oranges for approximately six months which enables us to sell at a higher price during the off season when other producers may not have sufficient supply. However, even if market prices are unfavorable at the end of the life of our oranges, as extended by our preservation capabilities, our oranges must be brought to market promptly. A decrease in the selling price received for our products due to the factors described above could have a material adverse effect on our business, results of operations and financial condition.

We are subject to the risk of product contamination and product liability claims which may cause us to incur litigation expenses and to devote significant management time to defending such claims and, if determined adversely to us, could require us to pay significant damage awards.

The sales of our products may involve the risk of injury to consumers. Such injuries may result from tampering by unauthorized personnel, product contamination or spoilage, including the presence of foreign objects, substances, chemicals, or residues introduced during the growing, packing, storage, handling or transportation phases. While we are subject to governmental inspection and regulations and believe our facilities comply in all material respects with all applicable laws and regulations, including internal product safety policies, we cannot be sure that consumption of our products will not cause a health-related illness in the future or that we will not be subject to claims or lawsuits relating to such matters. Even if a product liability claim is unsuccessful, the negative publicity surrounding any assertion that our products caused illness or injury could adversely affect our reputation with existing and potential distributors and our brand image. We do not maintain product liability insurance.

Unlike the United States and many other countries, product liability claims and lawsuits in the PRC are rare. We cannot guaranty that product liability exposures and litigation will not become more commonplace in the PRC. In addition to the genetic traits and the quality of our products, the performance marketability of our oranges depends on climate, geographical areas, cultivation method, farmers’ degree of knowledge and other factors. At the same time, the viability of some farmland in the PRC has deteriorated due to toxic and hazardous materials from farmers’ overuse of herbicides. These factors are beyond our control and can result in sub-optimal production yields. However, farmers generally attribute sub-optimal production yields to poor seed quality. We may be required from time to time to recall products. Product recalls could adversely affect our profitability and our brand image.

While we have not experienced any credible product liability litigation to date, there is no guarantee that we will not experience such litigation in the future. In the event we do experience product liability claims or a product recall, our financial condition and business operations could be materially adversely affected.

One or more of our distributors could engage in activities that are harmful to our brand and to our business.

Our products are sold primarily through distributors, and those distributors are responsible for ensuring that our oranges are kept at the right temperature to be fresh and meet shelf life terms. If our products are sold under another brand, the purchasers will not be aware of our brand name, and we will be unable to cross-market other seed varieties or other products as effectively to these purchasers. Furthermore, if any of our distributors sell inferior products under our brand name or do not store our oranges at the right temperature, our brand and reputation could be harmed, which could make marketing of our branded seeds more difficult.

We may fail to maintain the permits we currently hold. This could subject us to fines and other penalties, which could materially adversely affect our results of operations.

We are required to hold numerous permits and licenses to conduct business in the PRC. The approvals, permits or licenses required by governmental agencies may change without substantial advance notice, and we could fail to obtain or maintain the approvals, permits or licenses required to expand our business. If we do not possess a permit or license required, we fail to obtain or to maintain such permits or licenses, or if renewals are granted with onerous conditions, we could be subject to fines and other penalties and be limited in the number or the quality of the products that we could offer. As a result, our business, results of operations and financial condition could be materially and adversely affected.

We may experience major accidents in the course of our operations, which may cause significant property damage and personal injury.

We may experience major accidents in the course of our operations, which may cause significant property damage and personal injuries. Significant industry-related accidents and natural disasters may cause interruptions to various parts of our operations, or could result in property or environmental damage, increase in operating expenses or loss of revenue. The occurrence of such accidents and the resulting consequences may not be covered adequately, or at all, by the insurance policies we carry. We carry limited business interruption insurance and third party liability insurance for personal injury or environmental damage arising from accidents on our property or relating to our operations. Losses or payments incurred may have a material adverse effect on our operating performance if such losses or payments are not fully insured.

Risks Related to Doing Business in the PRC

We are subject to risks relating to the nature of China’s agriculture and food industry.

The agricultural and food industry in the PRC has issues that the agricultural industry does not have within the United States. In the PRC, insurance coverage is a relatively new concept compared to that of the United States and for certain aspects of a business operation, insurance coverage is restricted or expensive. Workers compensation for employees in the PRC may be unavailable or, if available, insufficient to adequately cover such employees. The environmental laws and regulations in the PRC set various standards regulating certain aspects of health and environmental quality, including, in some cases, the obligation to rehabilitate current and former facilities and locations where operations are or were conducted. Violation of those standards could result in a temporary or permanent restriction by the PRC of our operations. We cannot assure you that we will be able to adequately address any of these or other limitations.

If the PRC government were to change its presently favorable policy toward the agriculture industry, we would no longer enjoy our present tax-related privileges, which would materially and adversely impact our sales performance, margins, and net profit and our costs structure.

As producers active in the agriculture industry, our subsidiaries are presently exempt from income tax and enjoy various incentive grants and subsidies given by the PRC government. If the PRC government were to change its presently favorable policy toward the agriculture industry, we would no longer enjoy our present tax-related privileges, which would materially and adversely impact our sales performance, margins, and net profit and our costs structure. We have experienced, and may continue to experience, quick changes of policies by the PRC government. If we do not effectively and efficiently manage and respond to such changes of policy changes, we could suffer adversely from the consequences of any such policy changes.

Currency fluctuations and restrictions on currency exchange may adversely affect our business, including limiting our ability to convert PRC Renminbi, or RMB, into foreign currencies and, if the RMB were to decline in value, reduce our revenue in U.S. Dollar terms.

The exchange rate of the RMB is currently managed by the PRC government. On July 21, 2005, the People’s Bank of China, or the People’s Bank, with the authorization of the State Council of the PRC, announced that the RMB exchange rate would no longer be pegged to the U.S. Dollar and would float based on market supply and demand with reference to a basket of currencies. According to public reports, the governor of the People’s Bank has stated that the basket is composed mainly of the U.S. Dollar, the European Union Euro, the Japanese Yen and the South Korean Won. Also considered, but playing smaller roles, are the currencies of Singapore, the United Kingdom, Malaysia, Russia, Australia, Canada and Thailand. The weight of each currency within the basket has not been announced.

The initial adjustment of the RMB exchange rate was an approximate 2% revaluation from an exchange rate of 8.28 RMB per U.S. Dollar to 8.11 RMB per U.S. Dollar. The People’s Bank also announced that the daily trading price of the U.S. Dollar against the RMB in the inter-bank foreign exchange market would be allowed to float within a band of 0.3% around the central parity published by the People’s Bank, while the trading prices of the non-U.S. Dollar currencies against the RMB would be allowed to move within a certain band announced by the People’s Bank. The People’s Bank has stated that it will make adjustments of the RMB exchange rate band when necessary according to market developments as well as the economic and financial situation. In a later announcement published on May 18, 2007, the band was extended to 0.5%. Since July 2008, the RMB has traded at 6.83 RMB per U.S. Dollar. Recent reports indicate an upward revaluation in the value of the RMB against the U.S. Dollar may be allowed. The People’s Bank announced on June 19, 2010 its intention to allow the RMB to move more freely against the basket of currencies, which increases the possibility of sharp fluctuations in the value of the RMB in the near future and thus the unpredictability associated with the RMB exchange rate.

Despite this change in its exchange rate regime, the PRC government continues to manage the valuation of the RMB. The value of our common stock will be indirectly affected by the foreign exchange rate between the U.S. Dollar and the RMB. Appreciation or depreciation in the value of the RMB relative to the U.S. Dollar would affect our financial results reported in U.S. Dollar terms without giving effect to any underlying change in our business or results of operations. Fluctuations in the exchange rate will also affect the relative value of any dividend we issue that will be exchanged into U.S. Dollars, as well as earnings from, and the value of, any U.S. Dollar-denominated investments we make in the future.

The income statements of our operations are translated into U.S. Dollars at the average exchange rates in each applicable period. We are also exposed to foreign exchange rate fluctuations as we convert the financial statements of our foreign subsidiaries into U.S. Dollars in consolidation. If there is a change in foreign currency exchange rates, the conversion of the foreign subsidiaries’ financial statements into U.S. Dollars will lead to a translation gain or loss, which is recorded as a component of other comprehensive income.

Very limited hedging transactions are available in the PRC to reduce our exposure to exchange rate fluctuations. To date, we have not entered into any hedging transactions. While we may enter into hedging transactions in the future, the availability and effectiveness of these transactions may be limited, and we may not be able to successfully hedge our exposure at all. In addition, our foreign currency exchange losses may be magnified by PRC exchange control regulations that restrict our ability to convert RMB into foreign currencies.

The PRC economic cycle may negatively impact our operating results.

We believe that the rapid growth of the PRC economy before 2008 generally led to higher levels of inflation. We believe that the PRC economy has more recently experienced a decrease in its growth rate. We believe that a number of factors have contributed to this deceleration, including appreciation of the RMB, which has adversely affected China’s exports. In addition, we believe the deceleration has been exacerbated by the recent global crisis in the financial services and credit markets, which has resulted in significant volatility and dislocation in the global capital markets. It is uncertain how long the global crisis in the financial services and credit markets will continue and the significance of the adverse impact it may have on the global economy in general or the PRC economy in particular. Slowing economic growth in the PRC could result in weakening growth and demand for our products which could reduce our revenues and income. In the event of a recovery in the PRC, renewed high growth levels may again lead to inflation. The government’s attempts to control inflation may adversely affect the business climate and growth of private enterprise. In addition, our profitability may be adversely affected if prices for our products rise at a rate that is insufficient to compensate for the rise in inflation.

Under the PRC Enterprise Income Tax Law, we may be classified as a “resident enterprise” of China, and such classification would likely result in unfavorable tax consequences to us and our non-PRC shareholders.

On March 16, 2007, the National People’s Congress or the NPC, approved and promulgated the PRC Enterprise Income Tax Law, which we refer to as the New EIT Law. The New EIT Law took effect on January 1, 2008. Under the New EIT Law, Foreign Investment Enterprises (FIEs) and domestic companies are subject to a uniform tax rate of 25%. The New EIT Law provides a five-year transition period starting from its effective date for those enterprises which were established before the promulgation date of the New EIT Law and which were entitled to a preferential lower tax rate under the then-effective tax laws or regulations.

On December 26, 2007, the State Council issued a Notice on Implementing Transitional Measures for Enterprise Income Tax, or the Notice, providing that the enterprises that have been approved to enjoy a low tax rate prior to the promulgation of the New EIT Law will be eligible for a five-year transition period since January 1, 2008, during which time the tax rate will be increased step by step to the 25% unified tax rate set out in the New EIT Law. From January 1, 2008, for the enterprises whose applicable tax rate was 15% before the promulgation of the New EIT Law, the tax rate will be increased to 18% for year 2008, 20% for year 2009, 22% for year 2010, 24% for year 2011, 25% for year 2012. For the enterprises whose applicable tax rate was 24%, the tax rate will be changed to 25% from January 1, 2008.

Under the New EIT Law, an enterprise established outside of China with “de facto management bodies” within the PRC is considered a “resident enterprise,” meaning that it can be treated in a manner similar to a PRC enterprise for enterprise income tax purposes. 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. Because the New EIT Law and its implementing rules are new, no official interpretation or application of this new “resident enterprise” classification is available. Therefore, it is unclear how tax authorities will determine tax residency based on the facts of each case.

If the PRC tax authorities determine that we are “resident enterprises” for PRC enterprise income tax purposes, a number of unfavorable PRC tax consequences could follow. First, we may be subject to the enterprise income tax at a rate of 25% on our worldwide taxable income as well as PRC enterprise income tax reporting obligations. In our case, this would mean that income such as interest on offering proceeds and non-China source income would be subject to PRC enterprise income tax at a rate of 25%. Second, although under the New EIT Law and its implementing rules dividends paid to us from our PRC subsidiaries would qualify as “tax-exempt income,” we cannot guarantee that such dividends will not be subject to a 10% withholding tax, as the PRC foreign exchange control authorities, which enforce the withholding tax, have not yet issued guidance with respect to the processing of outbound remittances to entities that are treated as resident enterprises for PRC enterprise income tax purposes. Finally, it is possible that “resident enterprise” classification could result in a situation in which a 10% withholding tax is imposed on dividends we pay to our non-PRC shareholders and with respect to gains derived by our non-PRC shareholders from transferring our shares.

Uncertainties with respect to the PRC legal system could adversely affect us and we may have limited legal recourse under PRC law if disputes arise under our contracts with third parties.

Since 1979, we believe PRC legislation and regulations have significantly enhanced the protections afforded to various forms of foreign investments in the PRC. However, China has not developed a fully integrated legal system and recently enacted laws and regulations may not sufficiently cover all aspects of economic activities in the PRC. In particular, because these laws and regulations are relatively new, the interpretation and enforcement of these laws and regulations involve uncertainties. In addition, the PRC legal system is based in part on government policies and internal rules (some of which are not published on a timely basis or at all) that may have a retroactive effect. As a result, sometimes we may not be aware of our violation of these policies and rules until sometime after violation.

The PRC government has enacted some laws and regulations dealing with matters such as corporate organization and governance, foreign investment, commerce, taxation and trade. However, their experience in implementing, interpreting and enforcing these laws and regulations is limited, and our ability to enforce commercial claims or to resolve commercial disputes is unpredictable. The resolution of these matters may be subject to the exercise of considerable discretion by agencies of the PRC government, and forces unrelated to the legal merits of a particular matter or dispute may influence their determination. Any rights we may have to specific performance, or to seek an injunction under PRC law, in either of these cases, are severely limited, and without a means of recourse by virtue of the PRC legal system, we may be unable to prevent these situations from occurring. The occurrence of any such events could have a material adverse effect on our business, financial condition and results of operations.

Adverse changes in political and economic policies of the PRC government could have a material adverse effect on the overall economic growth of the PRC, which could reduce the demand for our products and materially and adversely affect our competitive position.

Our business, financial condition, results of operations and prospects are affected significantly by economic, political and legal developments in the PRC. The PRC economy differs from the economies of most developed countries in many respects, including:

While the PRC economy has grown significantly in the past 20 years, we believe the growth has been uneven, both geographically and among various sectors of the economy. The PRC government has implemented various measures to encourage economic growth and guide the allocation of resources. We believe some of these 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 government control over capital investments or changes in tax regulations that are applicable to us.

The PRC economy has been transitioning from a planned economy to a more market-oriented economy. Although in recent years the PRC government has implemented measures emphasizing the utilization of market forces for economic reform, the reduction of state ownership of productive assets and the establishment of sound corporate governance in business enterprises, a substantial portion of the productive assets in the PRC is still owned by the PRC government. The PRC government also exercises significant control over PRC economic growth through the allocation of resources, controlling payment of foreign currency-denominated obligations, setting monetary policy and providing preferential treatment to particular industries or companies.

Contract drafting, interpretation and enforcement in the PRC involve significant uncertainty.

We have entered into numerous contracts governed by PRC law, many of which are material to our business. As compared with contracts in the United States, contracts governed by PRC law tend to contain less detail and to not be as comprehensive in defining contracting parties’ rights and obligations. As a result, contracts in the PRC are more vulnerable to disputes and legal challenges. In addition, contract interpretation and enforcement in the PRC is not as developed as in the United States, and the result of any contract dispute is subject to significant uncertainties. Therefore, we cannot assure you that we will not be subject to disputes under our material contracts, and if such disputes arise, we cannot assure you that we will prevail.

The application of PRC regulations relating to the overseas listing of PRC domestic companies is uncertain, and we may be subject to penalties for failing to request approval of the PRC authorities prior to listing our shares in the U.S.

On August 8, 2006, six PRC government agencies, namely, the Ministry of Commerce (“MOFCOM”), the State Administration for Industry and Commerce (“SAIC”), the China Securities Regulatory Commission (“CSRC”), the State Administration of Foreign Exchange (“SAFE”), the State-Owned Assets Supervision and Administration Commission, (“SASAC”), and the State Administration for Taxation (“SAT”), jointly issued the Regulations on Mergers and Acquisitions of Domestic Enterprises by Foreign Investors (the “New M&A Rules “), which became effective on September 8, 2006. The New M&A Rules purport, among other things, to require offshore “special purpose vehicles”, that are (1) formed for the purpose of overseas listing of the equity interests of PRC companies via acquisition and (2) are controlled directly or indirectly by PRC companies and/or PRC individuals, to obtain the approval of the CSRC prior to the listing and trading of their securities on overseas stock exchanges. On September 21, 2006, pursuant to the New M&A Rules and other PRC Laws, the CSRC published on its official website relevant guidance with respect to the listing and trading of PRC domestic enterprises’ securities on overseas stock exchanges (the “Related Clarifications”), including a list of application materials regarding the listing on overseas stock exchanges by special purpose vehicles. We were and are not required to obtain the approval of CSRC under the New M&A Rules in connection with this transaction because we were and are not considered a special purpose vehicle formed or controlled by PRC companies or PRC individuals.

However, there are substantial uncertainties regarding the interpretation, application and enforcement of these rules, and CSRC has yet to promulgate any written provisions or formally to declare or state whether the overseas listing of a PRC-related company structured similar to ours is subject to the approval of CSRC. Any violation of these rules could result in fines and other penalties on our operations in the PRC, restrictions or limitations on remitting dividends outside of China, and other forms of sanctions that may cause a material and adverse effect to our business, operations and financial conditions.

The New M&A Rules also established additional procedures and requirements that are expected to make merger and acquisition activities by foreign investors more time-consuming and complex, including requirements in some instances that the Ministry of Commerce be notified in advance of any change-of-control transaction in which a foreign investor takes control of a PRC domestic enterprise that owns well-known trademarks or China’s traditional brands. We may grow our business in part by acquiring other businesses. Complying with the requirements of the New M&A Rules in completing this type of transaction could be time-consuming, and any required approval processes, including CSRC approval, may delay or inhibit our ability to complete such transactions, which could affect our ability to expand our business or maintain our market share.

We may face regulatory uncertainties that could restrict our ability to issue equity compensation to our directors and employees and other parties who are PRC citizens or residents under PRC law. The grant of stock options under any incentive plan that we adopt in the future would require registration with SAFE.

On April 6, 2007, SAFE issued the “Operating Procedures for Administration of Domestic Individuals Participating in the Employee Stock Ownership Plan or Stock Option Plan of An Overseas Listed Company,” also known as “Circular 78”. It is not clear whether Circular 78 covers all forms of equity compensation plans or only those that provide for the grant of stock options. For any equity compensation plan which is so covered and is adopted by a non-PRC listed company after April 6, 2007, Circular 78 requires all participants who are PRC citizens to register with, and obtain the approval of, SAFE prior to their participation in any such plan. In addition, Circular 78 also requires PRC citizens to register with SAFE and make the necessary applications and filings if they participate in an overseas listed company’s covered equity compensation plan prior to April 6, 2007. As of the date of this filing, we have not adopted any incentive plans, but may do so in the future. Any such plan may grant equity compensation, including, but not limited to, stock options, to our PRC employees and/or directors. The grant of any equity compensation under such a plan to a PRC citizen, however, may under Circular 78 require the PRC citizen to register with and obtain approval of SAFE. We believe that the registration and approval requirements contemplated in Circular 78 will be burdensome and time consuming. If it is determined that such a plan, or any equity compensation grant under such a plan, is subject to Circular 78, failure to comply with such provisions of Circular 78 may subject us and any recipients thereof to fines and legal sanctions and prevent us from being able to grant equity compensation to our PRC employees and/or directors. In that case, our ability to compensate our employees and directors through equity compensation would be hindered and/or prevented.

On February 15, 2012, SAFE promulgated the Notices on Issues Concerning the Foreign Exchange Administration for Domestic Individuals Participating in Stock Incentive Plans of Overseas Publicly-Listed Companies, or the Stock Option Rules, which replaced the Application Procedures of Foreign Exchange Administration for Domestic Individuals Participating in Employee Stock Ownership Plans or Stock Option Plans of Overseas Publicly-Listed Companies issued by SAFE on March 28, 2007. Under the Stock Option Rules and other relevant rules and regulations, PRC residents who participate in stock incentive plan in an overseas publicly-listed company are required to register with SAFE or its local branches and complete certain other procedures. Participants of a stock incentive plan who are PRC residents must retain a qualified PRC agent, which could be a PRC subsidiary of such overseas publicly listed company or another qualified institution selected by such PRC subsidiary, to conduct the SAFE registration and other procedures with respect to the stock incentive plan on behalf of its participants. Such participants must also retain an overseas entrusted institution to handle matters in connection with their exercise of stock options, the purchase and sale of corresponding stocks or interests and fund transfers. In addition, the PRC agent is required to amend the SAFE registration with respect to the stock incentive plan if there is any material change to the stock incentive plan, the PRC agent or the overseas entrusted institution or other material changes. We and our PRC employees who have been granted stock options will be subject to these regulations upon the completion of this Offering. Failure of our PRC stock option holders to complete their SAFE registrations may subject these PRC residents to fines and legal sanctions and may also limit our ability to contribute additional capital into our PRC subsidiaries, limit our PRC subsidiaries’ ability to distribute dividends to us, or otherwise materially adversely affect our business.

PRC regulation of loans to, and direct investment in, PRC entities by offshore holding companies and governmental control of currency conversion may restrict or prevent us from using the proceeds of this Offering to make loans to our PRC subsidiaries or to make additional capital contributions to our PRC subsidiaries, which may materially and adversely affect our liquidity and our ability to fund and expand our business.

We are an offshore holding company conducting our operations in the PRC through our PRC subsidiaries. We may make loans to our PRC subsidiaries, or we may make additional capital contributions to our PRC subsidiaries.

Any loans by us to our PRC subsidiaries, which are treated as foreign-invested enterprises under PRC law, are subject to PRC regulations and foreign exchange loan registrations. For example, loans by us to our wholly owned PRC subsidiaries to finance their activities cannot exceed statutory limits and must be registered with the local counterpart of SAFE. If we decide to finance our wholly owned PRC subsidiaries by means of capital contributions, these capital contributions must be approved by the Ministry of Commerce or its local counterpart.

On August 29, 2008, SAFE promulgated the Circular on the Relevant Operating Issues Concerning the Improvement of the Administration of the Payment and Settlement of Foreign Currency Capital of Foreign-Invested Enterprises, or SAFE Circular 142, regulating the conversion by a foreign-invested enterprise of foreign currency registered capital into RMB by restricting how the converted RMB may be used. SAFE Circular 142 provides that the RMB capital converted from the foreign currency registered capital of a foreign-invested enterprise may only be used for purposes within the business scope approved by the applicable governmental authority and may not be used for equity investments within the PRC. In addition, SAFE strengthened its oversight of the flow and use of the RMB capital converted from the foreign currency registered capital of a foreign-invested company. The use of such RMB capital may not be altered without SAFE approval, and such RMB capital may not in any case be used to repay RMB loans if the proceeds of such loans have not been used. Violations of SAFE Circular 142 could result in severe monetary or other penalties. Furthermore, SAFE promulgated a circular on November 19, 2010, known as Circular No. 59, which tightens the examination of the authenticity of settlement of net proceeds from this Offering and requires that the settlement of net proceeds shall be in accordance with the description in the Prospectus included in our registration statement on Form S-1 (Registration No. 333- ), which was filed with the U.S. Securities and Exchange Commission, or SEC, in connection with this Offering.

In light of the various requirements imposed by PRC regulations on loans to and direct investment in PRC entities by offshore holding companies, including SAFE Circular 142, we cannot assure you that we will be able to complete the necessary government registrations or obtain the necessary government approvals on a timely basis, if at all, with respect to future loans by us to our PRC subsidiaries or with respect to future capital contributions by us to our PRC subsidiaries. If we fail to complete such registrations or obtain such approvals, our ability to use the proceeds we received from this Offering and to capitalize or otherwise fund our PRC operations may be negatively affected, which could materially and adversely affect our liquidity and our ability to fund and expand our business.

Capital outflow policies in the PRC may hamper our ability to remit income to the United States.

The PRC has adopted currency and capital transfer regulations. These regulations may require that we comply with complex regulations for the movement of capital and as a result we may not be able to remit income earned and proceeds received in connection with our operations or from the sale of our operating subsidiary to the U.S. or to our shareholders.

Our operations and assets in the PRC are subject to significant political and economic uncertainties.

Government policies are subject to rapid change and the government of the PRC may adopt policies which have the effect of hindering private economic activity and greater economic decentralization. There is no assurance that the government of the PRC will not significantly alter its policies from time to time without notice in a manner which reduces or eliminates any benefits from its present policies of economic reform. In addition, a substantial portion of productive assets in the PRC remains government-owned. For instance, all lands are state or rural collective economic organizations owned and leased to business entities or individuals through governmental grants of the land use rights. The grant process is typically based on government policies at the time of the grant, which could be lengthy and complex. This process may adversely affect our business. The government of the PRC also exercises significant control over the PRC’s economic growth through the allocation of resources, controlling payment of foreign currency and providing preferential treatment to particular industries or companies. Uncertainties may arise as a result of changing governmental policies and measures. In addition, changes in laws and regulations, or their interpretation, or the imposition of confiscatory taxation, restrictions on currency conversion, imports and sources of supply, devaluations of currency, the nationalization or other expropriation of private enterprises, as well as adverse changes in the political, economic or social conditions in the PRC, could have a material adverse effect on our business, results of operations and financial condition.

Our use of the allocated land may be subject to challenges in the future.

All land use rights that we own are land use rights relating to allocated land. The local governmental authorities have granted such land use rights to us for free use or at a discounted levy rate given our contribution to the development of the local economy. However, pursuant to the Catalogue on Allocated Land issued by the Ministry of Land Resources of the PRC (the “Catalogue”), the land use rights for allocated land may only be granted to those specific projects which are in compliance with the Catalogue, subject to the approval of the competent governmental authorities. We, as a privately owned agricultural producer, may not be qualified to be granted such land use rights for allocated land according to the Catalogue. Consequently, our use of such land may be subject to challenge in the future, and the legal consequences could include the confiscation of such land by the governmental authorities or a demand that we pay a market price for purchasing the land use rights for such land and converting the allocated land use right to a granted land use right.

Because PRC law governs almost all of our material agreements, we may not be able to enforce our legal rights within the PRC or elsewhere, which could result in a significant loss of business, business opportunities, or capital.

PRC law governs almost all of our material agreements. We cannot assure you that we will be able to enforce any of our material agreements or that remedies will be available outside of the PRC. The system of laws and the enforcement of existing laws in the PRC may not be as certain in implementation and interpretation as in the United States. Our inability to enforce or obtain a remedy under any of our current or future agreements could result in a significant loss of business, business opportunities or capital. It will be extremely difficult to acquire jurisdiction and enforce liabilities against our officers, directors and assets based in the PRC.

All of our assets are located in the PRC and all of our directors and officers other than our chief financial officer reside outside of the United States. As a result, it may not be possible for United States investors to enforce their legal rights, to effect service of process upon our directors or officers or to enforce judgments of United States courts predicated upon civil liabilities and criminal penalties of our directors and officers under federal securities laws. Moreover, we have been advised that the PRC does not have treaties providing for the reciprocal recognition and enforcement of judgments of courts with the United States. Further, it is unclear if extradition treaties now in effect between the United States and the PRC would permit effective enforcement of criminal penalties of the federal securities laws.

Because our cash and cash equivalents are held in banks which do not provide capital guarantee insurance, the failure of any bank in which we deposit our funds could affect our ability to continue in business.

Banks and other financial institutions in the PRC do not provide insurance for funds held on deposit. A significant portion of our assets are in the form of cash deposited with banks in the PRC, and in the event of bank failure, we may not have access to, or may lose entirely, our funds on deposit. Depending upon the amount of cash we maintain in a bank that fails, our inability to have access to such cash deposits could impair our operations, and, if we are not able to access funds to pay our suppliers, employees and other creditors, we may be unable to continue in business.

We must comply with the Foreign Corrupt Practices Act.

We are required to comply with the United States Foreign Corrupt Practices Act, which prohibits U.S. companies from engaging in bribery or other prohibited payments to foreign officials for the purpose of obtaining or retaining business. Foreign companies, including some of our competitors, are not subject to these prohibitions. Corruption, extortion, bribery, pay-offs, theft and other fraudulent practices occur from time-to-time in mainland China. If our competitors engage in these practices, they may receive preferential treatment, giving our competitors an advantage in securing business or from government officials who might give them priority in obtaining new licenses, which would put us at a disadvantage. Although we inform our personnel that such practices are illegal, we cannot assure you that our employees or other agents will not engage in such conduct for which we might be held responsible. If our employees or other agents are found to have engaged in such practices, we could suffer severe penalties.

Labor laws in the PRC may adversely affect our results of operations.

On June 29, 2007, the PRC government promulgated a new labor law, namely, the Labor Contract Law of the PRC, or the New Labor Contract Law, which became effective on January 1, 2008. The New Labor Contract Law imposes greater liabilities on employers and significantly affects the cost of an employer’s decision to reduce its workforce. Further, it requires that certain terminations be based upon seniority and not merit. In the event we decide to significantly change or decrease our workforce, the New Labor Contract Law could adversely affect our ability to effect such changes in a manner that is most advantageous to our business or in a timely and cost-effective manner, thus materially and adversely affecting our financial condition and results of operations.

Dividends we receive from General Preservation, General Fruit and/or Hanxin Agriculture may be subject to PRC withholding tax.

The New EIT Law provides that an income tax rate of 20% may be applicable to dividends payable to non-PRC investors that are “non-resident enterprises” and that do not have an establishment or place of business in the PRC, or which have such establishment or place of business in the PRC but the relevant income is not effectively connected with the establishment or place of business, to the extent such dividends are derived from sources within the PRC. The income tax for non-resident enterprises shall be subject to withholding at the income source, with the payer acting as the obligatory withholder under the New EIT Law, and therefore such income taxes are generally called withholding tax in practice. The State Council of the PRC has reduced the withholding tax rate from 20% to 10% through the Implementation Rules of the New EIT Law. It is currently unclear in what circumstances a source will be considered as located within the PRC. We are an offshore holding company. Thus, if we are considered as a “non-resident enterprise” under the New EIT Law and the dividends paid to us by our subsidiary in the PRC are considered income sourced within the PRC, such dividends may be subject to a 10% withholding tax.

The new tax law provides only a framework of the enterprise tax provisions, leaving many details on the definitions of numerous terms as well as the interpretation and specific applications of various provisions unclear and unspecified. Any increase in our combined company’s tax rate in the future could have a material adverse effect on our financial conditions and results of operations.

Under PRC laws, General Preservation and General Fruit are obligated to withhold and pay individual income tax on behalf of our employees who are subject to PRC individual income tax. If the PRC Subsidiary fails to withhold and/or pay such individual income tax in accordance with PRC laws, it may be subject to certain sanctions and other penalties and may become subject to liability under PRC laws.

In addition, the State Administration of Taxation has issued several circulars concerning employee stock options. Under these circulars, our employees working in the PRC (which could include both PRC employees and expatriate employees subject to PRC individual income tax) who exercise stock options will be subject to PRC individual income tax. Our PRC subsidiaries have obligations to file documents related to employee stock options with relevant tax authorities and withhold and pay individual income taxes for those employees who exercise their stock options. While tax authorities may advise us that our policy is compliant, they may change their policy, and we could be subject to sanctions.

Your ability to bring an action against us or against our directors and officer, or to enforce a judgment against us or them, will be limited because we conduct all of our operations in the PRC and because all of our directors and the majority of our officers reside outside of the United States.

We are a Delaware holding company and all of our assets are located outside of the United States. All of our current operations are conducted in the PRC. In addition, all of our directors and officers are nationals and residents of countries other than the United States. A substantial portion of the assets of these persons are located outside the United States. As a result, it may be difficult for you to effect service of process within the United States upon these persons. It may also be difficult for you to enforce in U.S. courts’ judgments on the civil liability provisions of the U.S. federal securities laws against us and our officers and directors, none of whom are residents in the United States and the substantial majority of whose assets are located outside of the United States. In addition, there is uncertainty as to whether the courts of the PRC would recognize or enforce judgments of U.S. courts. Our counsel as to PRC law has advised us that the recognition and enforcement of foreign judgments are provided for under the PRC Civil Procedures Law. Courts in the PRC may recognize and enforce foreign judgments in accordance with the requirements of the PRC Civil Procedures Law based on treaties between the PRC and the country where the judgment is made or on reciprocity between jurisdictions. The PRC does not have any treaties or other arrangements that provide for the reciprocal recognition and enforcement of foreign judgments with the United States. In addition, according to the PRC Civil Procedures Law, courts in the PRC will not enforce a foreign judgment against us or our directors and officers if they decide that the judgment violates basic principles of PRC law or national sovereignty, security or the public interest. Therefore, it is uncertain whether a PRC court would enforce a judgment rendered by a court in the United States.

Risks Related to Ownership of Our Common Stock

You may find it difficult to sell our shares because there is no significant public market for our common stock and there is no assurance a public market will develop.

Although before this Offering, there has been a limited public market for our common stock on the OTCBB and we intend to apply to have our common stock listed on the NASDAQ Capital Market, an active, liquid trading market for our common stock may not develop or be sustained following the Offering. A public trading market having the desired characteristics of depth, liquidity and orderliness depends upon the presence in the marketplace and independent decisions of willing buyers and sellers of our common stock, over which we have no control. Without an active, liquid trading market for our common stock, shareholders may not be able to sell their shares at the volume, prices and times desired. Moreover, the lack of an established market could materially and adversely affect the value of our common stock. The offering price of our common stock will be determined by the negotiations between us and the representatives of the underwriters and may not be indicative of prices that will prevail in the open market following this Offering. Consequently, you may not be able to sell your common stock at or above the initial offering price or at any other price or at the time that you would like to sell. An inactive market may also impair our ability to raise capital by selling our common stock.

In addition, if we fail to meet the criteria set forth in the SEC regulations, by law, various requirements would be imposed on broker-dealers who sell our securities to persons other than established distributors and accredited investors. Consequently, such regulations may deter broker-dealers from recommending or selling our common stock, which may further affect the liquidity of our common stock.

Our directors and officers control a majority of our common stock and their interests may not align with the interests of our other shareholders.

Our executive officers and directors control our company and will both before and after this Offering beneficially own a majority of our issued and outstanding common stock. This significant concentration of share ownership may adversely affect the trading price of our common stock because investors often perceive a disadvantage in owning shares in a company with one or several controlling shareholders. Furthermore, our directors and officers, as a group, have the ability to significantly influence or control the outcome of all matters requiring shareholder approval, including the election of directors and approval of significant corporate transactions, such as mergers, consolidations or the sale of substantially all of our assets. This concentration of ownership may have the effect of delaying or preventing a change in control of our company which could deprive our shareholders of an opportunity to receive a premium for their shares as part of a sale of our company and might reduce the price of our common stock. In addition, without the consent of our directors and officers, we could be prevented from entering into transactions that could be beneficial to us and they may cause us to take actions that are opposed by other shareholders as their interests may differ from those of other shareholders.

We will be a “controlled company” within the meaning of the NASDAQ Marketplace rules and, as a result, will qualify for and may rely on certain exemptions from certain corporate governance requirements.

After the closing of this Offering, Hua Mei Investments Limited will continue to control a majority of the voting power of our outstanding common stock. As a result, we will be a “controlled company” pursuant to Rule 5615(c) of the corporate governance requirements of the NASDAQ Marketplace rules. Under such rules, a company of which more than 50% of the voting power for the election of directors is held by an individual, a group or another company is a “controlled company” and may elect not to comply with certain corporate governance requirements of the NASDAQ Marketplace rules, including the requirements that:

This controlled company exemption does not extend to the audit committee requirements under Rule 5605(c) or the requirement for executive sessions of Independent Directors under Rule 5605(b)(2).

We do not intend at this time to elect to be treated as a “controlled company” in the event that we list our shares on the NASDAQ Capital Market. However, we may change such election in the future. If we do elect to be treated as a controlled company in the future, you may not have the same protections afforded to shareholders of companies that are mandatorily subject to all of the corporate governance requirements of the NASDAQ Capital Market.

The Company may issue additional common stock or other equity securities in the future that could dilute the ownership interest of existing shareholders.

The Company is currently authorized to issue up to 200,000,000 shares of common stock of one class, of which 15,918,940 shares were issued and outstanding as of June 16, 2014. The Company’s board of directors may decide from time to time to issue additional shares, or securities convertible into, exchangeable for or representing rights to acquire our common stock. The sale of these securities may significantly dilute our shareholders’ ownership interest as a shareholder and the market price of our common stock. New investors in other equity securities issued by the Company in the future may also have rights, preferences and privileges senior to our current shareholders that may adversely impact its current shareholders.

The price of the Company’s common stock may fluctuate significantly, which could negatively affect the Company and holders of its common stock.

The market price of the Company’s common stock may fluctuate significantly from time to time as a result of many factors, including:

We do not expect to pay any cash dividends for the foreseeable future.

We currently expect to retain all available funds and future earnings, if any, for use in the operation and growth of our business and do not anticipate paying any cash dividends in the foreseeable future. Any future determination to pay dividends will be at the discretion of our Board, subject to compliance with applicable law, our organizational documents and any contractual provisions, including under agreements for indebtedness we may incur, that restrict or limit our ability to pay dividends, and will depend upon, among other factors, our results of operations, financial condition, earnings, capital requirements and other factors that our Board deems relevant. Accordingly, if you purchase shares in this Offering, realization of a gain on your investment will depend on the appreciation of the price of our common stock, which may never occur. Investors seeking cash dividends in the foreseeable future should not purchase our common stock.

If following the closing of the Offering, common stock remains subject to the U.S. “Penny Stock” Rules, investors who purchase our common stock in the Offering may have difficulty re-selling their common stock as the liquidity of the market for our shares may be adversely affected by the impact of the “Penny Stock” Rules.

Although we anticipate that at some point following this Offering, our common stock will trade on the NASDAQ Capital Market, in the event that our common stock does not become listed on the NASDAQ Capital Market or if our shares are in the future delisted from the NASDAQ Capital Market, it may be more difficult for investors in the Offering to sell our common stock. A “penny stock” is generally defined by regulations of the SEC as an equity security with a market price of less than $5.00 per share. However, an equity security with a market price under $5.00 will not be considered a penny stock if it fits within any of the following exceptions:

Although we believe our common stock is not a penny stock based upon the exception (ii) above, we cannot provide any assurance that in the future our common stock will not be classified as penny stock.

If an investor buys or sells a penny stock, SEC regulations require that the investor receive, prior to the transaction, a disclosure explaining the penny stock market and associated risks. Furthermore, trading in our common stock is currently subject to Rule 15g-9 of the Exchange Act, which relates to non-exchange listed securities. Under this rule, broker/dealers who recommend our securities to persons other than established distributors and accredited investors must make a special written suitability determination for the purchaser and receive the purchaser’s written agreement to a transaction prior to sale.

The low price of our common stock has a negative effect on the amount and percentage of transaction costs paid by individual shareholders. The low price of our common stock also limits our ability to raise additional capital by issuing additional shares. There are several reasons for these effects. First, the internal policies of certain institutional investors prohibit the purchase of low-priced stocks. Second, many brokerage houses do not permit low-priced stocks to be used as collateral for margin accounts or to be purchased on margin. Third, some brokerage house policies and practices tend to discourage individual brokers from dealing in low-priced stocks. Finally, broker’s commissions on low-priced stocks usually represent a higher percentage of the stock price than commissions on higher priced stocks. As a result, our shareholders may pay transaction costs that are a higher percentage of their total share value than they would if our share price were substantially higher.

As an issuer of “penny stock” the protection provided by the federal securities laws relating to a forward-looking statement does not apply to us and as a result we could be subject to legal action.

Although federal securities laws provide a safe harbor for forward-looking statements made by a public company that files reports under the federal securities laws, this safe harbor is not available to issuers of penny stocks. As a result, if we are a penny stock, we will not have the benefit of this safe harbor protection in the event of any legal action based upon a claim that the material provided by us contained a material misstatement of fact or was misleading in any material respect because of our failure to include any statements necessary to make the statements not misleading. Such an action could hurt our financial condition.

The issuance of any of our equity securities pursuant any equity compensation plan we may adopt may dilute the value of existing shareholders and may affect the market price of our stock.

In the future, we may issue to our officers, directors, employees and/or other persons equity based compensation under any equity compensation plan we may adopt to provide motivation and compensation to our officers, employees and key independent consultants. The award of any such incentives could result in an immediate and potentially substantial dilution to our existing shareholders and could result in a decline in the value of our stock price. The exercise of these options and the sale of the underlying common stock and the sale of shares issued pursuant to grants may have an adverse effect upon the price of our common stock.

Our common stock may be thinly traded, so you may be unable to sell at or near ask prices or at all.

We cannot predict the extent to which an active public market for our common stock will develop or be sustained. Our common stock is currently traded on the OTCBB where the shares have historically been thinly traded, meaning that the number of persons interested in purchasing our common stock at or near bid prices at any given time may be relatively small or non-existent.

This situation may be attributable to a number of factors, including the fact that we are a small company that is relatively unknown to stock analysts, stock brokers, institutional investors and others in the investment community who generate or influence sales volume, and that even if we came to the attention of such persons, they tend to be risk averse and would be reluctant to follow an unproven company such as ours or purchase or recommend the purchase of our shares until such time as we have become more seasoned and viable. As a consequence, there may be periods of several days, weeks or months when trading activity in our shares is minimal or non-existent, as compared to a seasoned issuer which has a large and steady volume of trading activity that will generally support continuous sales without an adverse effect on share price. Despite our application to list our common stock on Nasdaq, we cannot assure you that a broader or more active public trading market for our common stock will develop or be sustained, or that current trading levels will be sustained or not diminish.

We may become involved in securities class action litigation that could divert management’s attention and harm our business.

The capital markets in general, and the shares of early stage companies in particular, have experienced extreme price and volume fluctuations. These fluctuations have often been unrelated or disproportionate to the operating performance of the companies involved. If these fluctuations occur in the future, the market price of our shares could fall regardless of our operating performance. In the past, following periods of volatility in the market price of a particular company’s securities, securities class action litigation has often been brought against that company. If the market price or volume of our shares suffers extreme fluctuations, then we may become involved in this type of litigation, which would be expensive and divert management’s attention and resources from managing our business.

As a public company, we may also from time to time make forward-looking statements about future operating results and provide some financial guidance to the public markets. The management has limited experience as a management team in a public company and as a result projections may not be made timely or set at expected performance levels and could materially affect the price of our shares. Any failure to meet published forward-looking statements that adversely affect the stock price could result in losses to investors, shareholder lawsuits or other litigation, sanctions or restrictions issued by the SEC.

Securities analysts may elect not to report on our common stock or may issue negative reports that adversely affect the stock price.

At this time, no securities analysts provide research coverage of our common stock, and securities analysts may not elect not to provide such coverage in the future. It may remain difficult for our company, with its small market capitalization, to attract independent financial analysts that will cover our common stock. If securities analysts do not cover our common stock, the lack of research coverage may adversely affect the stock’s actual and potential market price. The trading market for our common stock may be affected in part by the research and reports that industry or financial analysts publish about our business. If one or more analysts elect to cover our company and then downgrade the stock, the stock price would likely decline rapidly. If one or more of these analysts cease coverage of our company, we could lose visibility in the market, which, in turn, could cause our stock price to decline. This could have a negative effect on the market price of our common stock.

If we become directly subject to the recent scrutiny involving PRC companies, we may have to expend significant resources to investigate and defend the matter, which could harm our business operations, stock price and reputation.

Recently, many U.S. public companies that have substantially all of their operations in the PRC have been the subject of intense scrutiny by investors, financial commentators and regulatory agencies. Much of the scrutiny has centered around financial and accounting irregularities and mistakes, a lack of effective internal controls over financial reporting and, in many cases, allegations of fraud. As a result of the scrutiny, the publicly traded stock of many U.S. listed China-based companies that have been the subject of such scrutiny has sharply decreased in value. Many of these companies are now subject to shareholder lawsuits and/or Securities and Exchange Commission (the “SEC”) enforcement actions and are conducting internal and/or external investigations into the allegations. If we become the subject of any such scrutiny, whether any allegations are true or not, we may have to expend significant resources to investigate such allegations and/or defend our company. Such investigations or allegations will be costly and time-consuming and distract our management from our business plan and could result in our reputation being harmed and our stock price could decline as a result of such allegations, regardless of the truthfulness of the allegations.

Risks Relating to U.S. Taxes

We might incur income tax liabilities even if we receive no distributions

We are a holding company that holds, directly or indirectly, 100% of the stock of non-U.S. corporations. Such non-U.S. corporations will be considered to be controlled foreign corporations (“CFCs”). A portion of the CFCs’ income, whether or not distributed, could be treated as imputed income to us. Because we do not anticipate receiving distributions from the CFCs, we will have to rely on other sources of cash to satisfy potential income tax liabilities that could arise from any imputed income.

Risks Relating to the Offering

You will experience immediate and substantial dilution in the net tangible book value per share of the common stock you purchase.

Since the price per share of our common stock being offered is substantially higher than the net tangible book value per share of our common stock, you will suffer immediate and substantial dilution in the net tangible book value of the common stock you purchase in this Offering. Based on the offering price of $       per share, if you purchase common stock in this Offering, you will suffer immediate and substantial dilution of approximately $      per share in the net tangible book value of the common stock. To the extent we raise additional capital by issuing equity securities, our shareholders will experience substantial additional dilution. See “Dilution” for a more detailed discussion of the dilution you will incur if you purchase common stock in this Offering.

USE OF PROCEEDS

Based on an assumed offering price of $        per share, if we raise the maximum offering amount of $10,000,000, then the net proceeds from this Offering, after payment of discounts and commission to the Underwriter in the amount of $           , will be $           .

The principal purpose of this Offering is to expand our business. We intend to use all of the net proceeds we receive from this Offering to lease additional land with already established and producing navel orange orchards. If any proceeds remain after leasing such orchards, we will use such proceeds for working capital and for general corporate purposes. Pending our use of the net proceeds from this Offering, we also intend to invest the net proceeds in short-term, investment-grade, interest bearing instruments.

We expect the Offering to be made on a best-efforts basis with no minimum number of shares required to be sold in order for the Offering to proceed. The offering price per share is $       . The following table sets forth the uses of proceeds assuming the sale of 25%, 50%, 75% and 100%, respectively, of the securities offered for sale by the Company. There is no assurance that we will raise the full $10,000,000. In addition, there is no guarantee that we will raise any funds in this Offering.

The above figures represent only estimated costs. We believe our income from operations is sufficient to fund our current operations for the next 12 months.

Our management will retain broad discretion in the allocation and use of our net proceeds from this Offering. The amounts and timing of these expenditures will vary depending on a number of factors, including the amount of cash generated by our operations, competitive and technological developments and the rate of growth, if any, of our business.

DIVIDEND POLICY

Since its incorporation, the Company has not declared any dividend on its common stock. The Company does not anticipate declaring or paying a dividend on its common stock for the foreseeable future. We plan to retain any future earnings for use in our business activities.

CAPITALIZATION

The following table shows our cash and cash equivalents, available-for-sale securities and capitalization as of March 31, 2014 on an actual basis and on an as adjusted basis to reflect the sale of                 shares of our common stock offered, after deducting the estimated offering expenses; and

This table should be read in conjunction with our financial statements and the accompanying notes and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained in this Prospectus.

DILUTION

Investors in the common stock offered in this Offering will experience an immediate dilution in the net tangible book value of their common stock from the public offering price of the common stock. The net tangible book value of our common stock as of                   , 2014 was approximately $      million, or approximately $      per share of common stock. Net tangible book value per share of our common stock is calculated by subtracting our total liabilities from our total tangible assets, which is equal to total assets less intangible assets, and dividing this amount by the number of common stock outstanding.

Dilution per share represents the difference between the public offering price per share of common stock and the adjusted net tangible book value per share of our common stock included in this Offering after giving effect to this Offering. After giving effect to the sale of all of the securities offered in this Offering at the offering price of $      per share of common stock, and after deducting the estimated offering expenses payable by us, our as adjusted net tangible book value as of                    , 2014 would have been approximately $           million, or approximately $               per share of common stock. This change represents an immediate increase in the net tangible book value of $               per share of common stock to our existing shareholders and an immediate and substantial dilution in net tangible book value of $       per share of common stock to new investors. The following table illustrates this per share dilution:

The number of shares of common stock to be outstanding after the Offering is based on 15,918,940 shares of common stock outstanding as of June 16, 2014. Except as otherwise indicated, the discussion and tables above assume no exercise of the Underwriter’s option to purchase additional shares. If the Underwriter’s option to purchase additional shares is exercised in full, the number of shares held by existing shareholders upon the completion of this Offering would be                         , or        %, and the number of shares held by new investors upon the completion of this Offering would be                          , or        %, of the total number of shares outstanding upon the completion of this Offering. Our net tangible book value, as adjusted, will be $          , or $          per share, and the dilution per share to new investors will be $          , if the Underwriter’s over-allotment option is exercised in full.

The dilution information discussed above is illustrative only and will change based on the actual offering price and other terms of this Offering determined at pricing.

PLAN OF DISTRIBUTION

Axiom Capital Management, Inc. is the underwriter of the Offering. We have entered into an underwriting agreement dated               , 2014 with the underwriter. Subject to the terms and conditions of the underwriting agreement, we have agreed to sell to the underwriter and the underwriter has agreed to purchase, at the public offering price less the underwriting discounts and commissions set forth on the cover page of this Prospectus,              shares of common stock.

The Offering will be made on a best-efforts basis such that the underwriter is required, subject to certain conditions, to take and pay for only such shares as it may sell to the public. The obligations of the underwriter may be terminated upon the occurrence of certain events specified in the underwriting agreement. Furthermore, pursuant to the underwriting agreement, the underwriter’s obligations are subject to customary conditions, representations and warranties contained in the underwriting agreement, such as receipt by the underwriter of officers’ certificates and legal opinions.

The underwriter proposes to offer the common stock directly to the public at the public offering price set forth on the cover page of this Prospectus and to certain dealers that are members of the Financial Industry Regulatory Authority, or FINRA, at that price less a concession not in excess of $       per share. Any such dealers may resell shares to certain other brokers or dealers at a discount of up to $        per share from the public offering price. After the public offering of the shares, the offering price and other selling terms may be changed by the underwriter.

Overallotment Option. We have granted the underwriter an over-allotment option. This option, which is exercisable for up to 45 days after the date of this Prospectus, permits the underwriter to purchase up to an additional                               shares (15% of the shares sold in this Offering) from us to cover over-allotments, if any. If the underwriter exercises all or part of this option, it will purchase shares covered by the option at the public offering price that appears on the cover page of this Prospectus, less the underwriting discount. If this option is exercised in full, the total price to the public will be $     and the total net proceeds to us, before expenses, will be $    .

Discounts, Commissions and Expense Reimbursement. The following table shows the per share and total public offering price, underwriting discounts and commissions to be paid to the underwriters by us, and proceeds to us, before expenses. The information assumes either no exercise or full exercise by the underwriter of its over-allotment option.

We have agreed to reimburse the underwriter for all reasonable fees and expenses of the underwriter’s legal counsel, not to exceed $145,000, and for all reasonable travel and out-of-pocket expenses incurred in connection. We have agreed to pay the underwriter’s other expenses relating to the Offering in an aggregate amount that fully complies with FINRA Rule 5110(f)(2)(B). We estimate that the total expenses of this Offering, excluding the underwriting discount, will be approximately $      .

Discretionary Accounts.  The underwriter has informed us that it does not intend to make sales to any accounts over which it has discretionary authority.

Warrants. We have agreed to issue to the underwriter and to register herein warrants to purchase up to a total of                   shares of common stock (equal to 7% of the gross proceeds of this Offering, including the over-allotment) and to also register herein such underlying shares. The warrants will be exercisable at any time, and from time to time, in whole or in part, commencing six months from the effective date of the Offering and expiring five years from the effective date of the Offering. The warrants are exercisable at a per share price equal to 100% of the public offering price per share in the Offering. The warrants are also exercisable on a cashless basis. The warrants have been deemed compensation by FINRA and are therefore subject to a 180-day lock-up pursuant to Rule 5110(g)(1) of FINRA. The underwriter (or permitted assignees under FINRA Rule 5110(g)(1)) will not sell, transfer, assign, pledge, or hypothecate these warrants or the securities underlying these warrants, nor will it engage in any hedging, short sale, derivative, put, or call transaction that would result in the effective economic disposition of the warrants or the underlying securities for a period of 180 days from the effective date of the Offering. In addition, the warrants provide for registration rights upon request, in certain cases. The piggyback registration right provided will not be greater than seven (7) years commencing 180 days from the effective date of the Offering in compliance with FINRA Rule 5110(f)(2)(G)(v). We will bear all fees and expenses attendant to registering the securities issuable on exercise of the warrants other than underwriting commissions incurred and payable by the holder. The exercise price and number of shares issuable upon exercise of the warrants may be adjusted in certain circumstances including in the event of a stock dividend, extraordinary cash dividend or our recapitalization, reorganization, merger or consolidation. However, the warrant exercise price or underlying shares will not be adjusted for issuances of shares of common stock at a price below the warrant exercise price.

Indemnification and Other Matters. We have agreed to indemnify the underwriter against specified liabilities, including liabilities under the Securities Act, and to contribute to payments the underwriter may be required to make in respect thereof. We have also granted the underwriter a right of first refusal to provide investment banking services to us in matters relating to our equity securities for which investment banking services are sought by us, in compliance with FINRA Rule 5110(f)(2)(E). The underwriter and its affiliates may also provide from time to time in the future certain financial advisory, investment banking and other services for us and our affiliates in the ordinary course of their business, for which they may receive customary fees and commissions. From time to time, the underwriter and its affiliates may effect transactions for their own account or the account of customers, and hold on behalf of themselves or their customers, long or short positions in our debt or equity securities or loans, and may do so in the future.

Lock-Up. Xingping Hou, Hua Mei Investments Limited, and Zhihao Sabio Zhang (with respect to 62.8% of the shares of the shares of common stock outstanding) have entered or will enter into lock-up agreements with the underwriter under which they have agreed or will agree, subject to certain exceptions, not to sell any shares of our common stock or any other securities convertible into or exercisable or exchangeable for our common stock during the period ending 12 months after the date of this Prospectus (subject to extension).

Stabilization. In connection with the Offering, the underwriter may purchase and sell shares of common stock in the open market. These transactions may include short sales, stabilizing transactions and purchases to cover positions created by short sales. Short sales involve the sale by the underwriter of a greater number of shares than it is required to purchase in the Offering. Short sales may be “covered” shorts or may be “naked” shorts. The underwriter may close out any covered short position by purchasing shares in the open market. A naked short position is more likely to be created if the underwriter is concerned that there may be downward pressure on the price of the common stock in the open market that could adversely affect investors who purchase in this Offering. To the extent that the underwriter creates a naked short position, it will purchase shares in the open market to cover the position. Stabilizing transactions consist of various bids for or purchases of common stock made by the underwriter in the open market prior to the consummation of the Offering.

Purchases to cover a short position and stabilizing transactions, as well as other purchases by the underwriter for its own accounts, may have the effect of preventing or retarding a decline in the market price of our common stock, and together with the imposition of the penalty bid, may stabilize, maintain or otherwise affect the market price of our common stock. As a result, the price of our common stock may be higher than the price that otherwise might exist in the open market. If these activities are commenced, they may be discontinued at any time. These transactions may be effected on The NASDAQ Capital Market, in the over-the-counter market or otherwise.

Our common stock has been quoted on the OTCBB under the symbol "GELT." On June 16, 2014, the last reported sales price per share of common stock as reported on the OTCBB was $5.10. Prior to this Offering, there has only been a limited market for our common stock. We intend to apply to have our common stock listed on the NASDAQ Capital Market under the symbol “GELT.” Because there has not been an effective trading market of substance for our common stock to date, however, the offering price for shares offered hereby, which was negotiated by us and the underwriter, may not necessarily reflect the last reported sale price for our common stock or the market price of our common stock following the Offering. In addition to recent sale prices for our common stock, the following factors were considered in determining the offering price:

We cannot offer any assurance that the offering price corresponds to the price at which the common stock will trade in the public market subsequent to the Offering or that an active trading market for the common stock will develop and continue after the Offering.

Passive Market Making. In connection with this Offering, the underwriter may engage in passive market making transactions in our common stock on the The Nasdaq Capital Market or the OTCBB in accordance with Rule 103 of Regulation M under the Exchange Act, during a period before commencement of offers or sales of the shares and extending through completion of the distribution. A passive market maker must display its bid at a price not in excess of the highest independent bid of that security. However, if all independent bids are lowered below the passive market maker’s bid, then that bid must then be lowered when specified purchase limits are exceeded.

Electronic Offer, Sale and Distribution of Securities. A prospectus in electronic format may be delivered to potential investors by the underwriter. The prospectus in electronic format will be identical to the paper version of such prospectus. Other than the prospectus in electronic format, the information on the underwriter’s website and any information contained in any other website maintained by the underwriter is not part of the prospectus or the registration statement of which this Prospectus forms a part.

Sales Outside the U.S. No action has been taken in any jurisdiction (except in the United States) that would permit a public offering of the common stock, or the possession, circulation or distribution of this Prospectus or any other material relating to us or the common stock in any jurisdiction where action for that purpose is required. Accordingly, the common stock may not be offered or sold, directly or indirectly, and none of this Prospectus or any other offering material or advertisements in connection with the common stock may be distributed or published, in or from any country or jurisdiction, except in compliance with any applicable rules and regulations of any such country or jurisdiction.

The underwriter may arrange to sell common stock offered hereby in certain jurisdictions outside the United States, either directly or indirectly or through affiliates, where they are permitted to do so.

European Economic Area

In relation to each Member State of the European Economic Area which has implemented the Prospectus Directive, with effect from and including the date on which the Prospectus Directive is implemented in that Member State, an offer of securities may not be made to the public in that Member State, other than:

For the purposes of the above, the expression an “offer of securities to the public” in relation to any securities in any Member State means the communication in any form and by any means of sufficient information on the terms of the offer and the securities to be offered so as to enable an investor to decide to purchase or subscribe for the securities, as the same may be varied in that Member State by any measure implementing the Prospectus Directive in that Member State (and amendments thereto, including the 2010 PD Amending Directive, to the extent implemented in that Member State), and the expression “Prospectus Directive” means Directive 2003/71/EC and includes any relevant implementing measure in that Member State, and the expression “2010 PD Amending Directive” means Directive 2010/73/EU.

United Kingdom

This Prospectus and any other material in relation to the shares described herein is only being distributed to, and is only directed at, persons in the United Kingdom that are qualified investors within the meaning of Article 2(1)(e) of the Prospective Directive (“qualified investors”) that also (i) have professional experience in matters relating to investments falling within Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005, as amended, or the Order, (ii) who fall within Article 49(2)(a) to (d) of the Order or (iii) to whom it may otherwise lawfully be communicated (all such persons together being referred to as “relevant persons”). The shares are only available to, and any invitation, offer or agreement to purchase or otherwise acquire such shares will be engaged in only with, relevant persons. This Prospectus and its contents are confidential and should not be distributed, published or reproduced (in whole or in part) or disclosed by recipients to any other person in the United Kingdom. Any person in the United Kingdom that is not a relevant person should not act or rely on this Prospectus or any of its contents.

Hong Kong

The shares may not be offered or sold by means of any document other than (i) in circumstances which do not constitute an offer to the public within the meaning of the Companies Ordinance (Cap.32, Laws of Hong Kong), or (ii) to “professional investors” within the meaning of the Securities and Futures Ordinance (Cap.571, Laws of Hong Kong) and any rules made thereunder, or (iii) in other circumstances which do not result in the document being a “prospectus” within the meaning of the Companies Ordinance (Cap.32, Laws of Hong Kong), and no advertisement, invitation or document relating to the shares may be issued or may be in the possession of any person for the purpose of issue (in each case whether in Hong Kong or elsewhere), which is directed at, or the contents of which are likely to be accessed or read by, the public in Hong Kong (except if permitted to do so under the laws of Hong Kong) other than with respect to shares which are or are intended to be disposed of only to persons outside Hong Kong or only to “professional investors” within the meaning of the Securities and Futures Ordinance (Cap.571 Laws of Hong Kong) and any rules made thereunder.

People’s Republic of China

This Prospectus has not been and will not be circulated or distributed in the PRC, and shares may not be offered or sold, and will not be offered or sold to any person for re-offering or resale, directly or indirectly, to any resident of the PRC except pursuant to applicable laws and regulations of the PRC. For the purpose of this paragraph, PRC does not include Taiwan, and the special administrative regions of Hong Kong and Macau.

Singapore

This Prospectus has not been registered as a prospectus with the Monetary Authority of Singapore. Accordingly, this Prospectus and any other document or material in connection with the offer or sale, or invitation for subscription or purchase, of the shares may not be circulated or distributed, nor may the shares be offered or sold, or be made the subject of an invitation for subscription or purchase, whether directly or indirectly, to persons in Singapore other than (i) to an institutional investor under Section 274 of the Securities and Futures Act, Chapter 289 of Singapore (SFA), (ii) to a relevant person, or any person pursuant to Section 275(1A), and in accordance with the conditions, specified in Section 275 of the SFA or (iii) otherwise pursuant to, and in accordance with the conditions of, any other applicable provision of the SFA.

Where the shares are subscribed or purchased under Section 275 by a relevant person which is: (a) a corporation (which is not an accredited investor) the sole business of which is to hold investments and the entire share capital of which is owned by one or more individuals, each of whom is an accredited investor; or (b) a trust (where the trustee is not an accredited investor) whose sole purpose is to hold investments and each beneficiary is an accredited investor, shares, debentures and units of shares and debentures of that corporation or the beneficiaries’ rights and interest in that trust shall not be transferable for six months after that corporation or that trust has acquired the shares under Section 275 except: (1) to an institutional investor under Section 274 of the SFA or to a relevant person, or any person pursuant to Section 275(1A), and in accordance with the conditions, specified in Section 275 of the SFA; (2) where no consideration is given for the transfer; or (3) by operation of law.

Japan

The securities have not been and will not be registered under the Financial Instruments and Exchange Law of Japan (the Financial Instruments and Exchange Law) and may not be offered or sold, directly or indirectly, in Japan or to, or for the benefit of, any resident of Japan (which term as used herein means any person resident in Japan, including any corporation or other entity organized under the laws of Japan), or to others for re-offering or resale, directly or indirectly, in Japan or to a resident of Japan, except pursuant to an exemption from the registration requirements of, and otherwise in compliance with, the Financial Instruments and Exchange Law and any other applicable laws, regulations and ministerial guidelines of Japan.

Notice to Prospective Investors in Switzerland

The shares may not be publicly offered in Switzerland and will not be listed on the SIX Swiss Exchange (SIX) or on any other stock exchange or regulated trading facility in Switzerland. This document has been prepared without regard to the disclosure standards for issuance prospectuses under art. 652a or art. 1156 of the Swiss Code of Obligations or the disclosure standards for listing prospectuses under art. 27 ff. of the SIX Listing Rules or the listing rules of any other stock exchange or regulated trading facility in Switzerland. Neither this document nor any other offering or marketing material relating to the shares or the Offering may be publicly distributed or otherwise made publicly available in Switzerland.

Neither this document nor any other offering or marketing material relating to the Offering, the Company, or the shares have been or will be filed with or approved by any Swiss regulatory authority. In particular, this document will not be filed with, and the offer of shares will not be supervised by, the Swiss Financial Market Supervisory Authority FINMA (FINMA), and the offer of shares has not been and will not be authorized under the Swiss Federal Act on Collective Investment Schemes (CISA). The investor protection afforded to acquirers of interests in collective investment schemes under the CISA does not extend to acquirers of the shares.

Notice to Prospective Investors in the Dubai International Financial Centre

This Prospectus relates to an Exempt Offer in accordance with the Offered Securities Rules of the Dubai Financial Services Authority (DFSA). This Prospectus is intended for distribution only to persons of a type specified in the Offered Securities Rules of the DFSA. It must not be delivered to, or relied on by, any other person. The DFSA has no responsibility for reviewing or verifying any documents in connection with Exempt Offers. The DFSA has not approved this Prospectus nor taken steps to verify the information set forth herein and has no responsibility for the Prospectus. The shares to which this Prospectus relates may be illiquid and/or subject to restrictions on their resale. Prospective purchasers of the shares offered should conduct their own due diligence on the shares. If you do not understand the contents of this Prospectus you should consult an authorized financial advisor.

SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA

The following tables set forth our selected consolidated financial and other data. You should read the following selected consolidated financial and other data in conjunction with “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes included elsewhere in this Prospectus. Historical results are not necessarily indicative of the results that may be expected in the future. Our financial statements have been prepared in accordance with U.S. GAAP.

The selected consolidated statements of operations data for the years ended September 30, 2013 and 2012 and six months ended March 31, 2014 and 2013, and consolidated balance data as of September 30, 2013 and 2012 and March 31, 2014 are derived from our audited consolidated financial statements for the years ended September 30, 2013 and 2012 and the unaudited consolidated financial statements for the three and six months ended March 31, 2014 and 2013 appearing elsewhere in this Prospectus.

Balance Sheet Data (at end of Period)

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

The following discussion and analysis should be read in conjunction with our audited consolidated financial statements and accompanying notes thereto, for the fiscal years ended September 30, 2013 and 2012 and the unaudited consolidated financial statements for the three and six months ended March 31, 2014 and 2103, included elsewhere herein.

This Management’s Discussion and Analysis of Financial Condition and Results of Operations contains forward-looking statements. See “Special Note Regarding Forward-Looking Statements” and “Risk Factors” for a discussion of the uncertainties, risks and assumptions associated with these statements. Actual results may differ materially from those contained in any forward-looking statements.

Our financial statements are prepared in U.S. Dollars and in accordance with accounting principles generally accepted in the United States. See “Critical Accounting Policies and Estimates - Foreign currency translation” below for information concerning the exchanges rates at which Renminbi and Hong Kong Dollar were translated into U.S. Dollars at various pertinent dates and for pertinent periods.

COMPANY OVERVIEW

General Agriculture Corporation (“GELT”), formerly Geltology, Inc., was incorporated under the laws of the State of Delaware on March 24, 2010. On July 12, 2013, GELT filed with the Secretary of State Delaware a Certificate of Amendment to change its name to General Agriculture Corporation. The Company, through its direct operating subsidiaries General Fruit and General Preservation, is primarily engaged in planting, preserving, packaging and marketing premium navel oranges for distribution and sale throughout the People’s Republic of China (“PRC”).

On July 11, 2012, GELT completed a reverse acquisition of General Red Holding, Inc. (“GRH”), which was established under the laws of the State of Delaware on January 18, 2011, entered into a share exchange agreement (the “Exchange Agreement”) with GRH and acquired all of the outstanding capital stock of GRH. Pursuant to the Exchange Agreement, GELT issued to GRH an aggregate of 125,112,803 shares of the common stock of GELT, at par value of $0.0001 per share (“Common Stock”) (such transaction is hereinafter referred to as the “Share Exchange”).

Immediately prior to the Share Exchange, GELT had 6,750,000 shares of Common Stock issued and outstanding. Simultaneously with the transaction, the two principal shareholders of GELT surrendered for cancellation an aggregate of 4,513,252 shares of Common Stock beneficially owned by them. The transaction was regarded as a reverse merger whereby GRH was considered to be the accounting acquirer. GELT was delivered with zero assets and zero liabilities at the time of closing. Although the Company is the legal parent company, the share exchange was treated as a recapitalization of GRH. Thus, GRH is the continuing entity for financial reporting purposes. The financial statements have been prepared as if GRH had always been the reporting company and then on the share exchange date, had reorganized its capital stock.

Upon completion of the Share Exchange, the shareholders of GELT owned approximately 98.24% of the fully diluted outstanding shares of the Company. Accordingly, GRH became the wholly owned subsidiary of GELT.

On September 30, 2011, GRH entered into a Share Transfer and Issuance Agreement with Han Glory International Investment Limited (“Han Glory International”), a company incorporated on April 28, 2011 under the laws of British Virgin Islands and Hua Mei Investments Limited (“Hua Mei”), a company incorporated on April 26, 2011 under the laws of the British Virgin Islands. Under the agreement, GRH issued 74,814,862 shares to Hua Mei, the sole stockholder of Han Glory International, in exchange for all shares and beneficial interest of Han Glory International. This transaction is treated as a reverse merger, and therefore, after the share exchange, Han Glory International became the wholly owned subsidiary of GRH.

On May 18, 2011, Han Glory International purchased all shares of Greater China International Investment Limited (“Greater China International”), a company incorporated on December 4, 2009 under the laws of Hong Kong, from Zhihao Zhang, the sole stockholder of Greater China International, for $1,290 (HK$10,000). As a result, Greater China International became the wholly owned subsidiary of Han Glory International.

On January 13, 2010, Greater China International formed Nanchang Hanxin Agriculture Technology Co., Ltd (“WFOE”) in the city of Nanchang, Jiangxi Province, the PRC.

On February 5, 2010, WFOE purchased all shares of Xingguo General Fruit Industry Development Co., Ltd (“General Fruit”) from Jiangjun Hong Group Co., Ltd., Xingping Hou and Jiefeng Ren for $293,400. As a result, WFOE acquired 100% interest in General Fruit. This transaction was a capital transaction in substance. That is, the transaction was a reverse recapitalization, equivalent to the issuance of stock by General Fruit for the net monetary assets of WFOE accompanied by a recapitalization.

General Fruit was formed in Xingguo County, Jiangxi Province, under the corporate laws of the PRC. On March 5, 2003. The primary business of General Fruit is to grow and sell navel oranges. On July 14, 2008, after a series of equity transfer agreements, General Fruit acquired 90% interest in Xingguo General Red Navel Orange Preservation Company, Ltd. (“General Preservation”). On July 25, 2010, General Fruit purchased the remaining 10% interest in General Preservation from Xingping Hou, the minority stockholder, for $295,000 (RMB 2,000,000) and owns 100% of General Preservation thereafter.

General Preservation, a citrus fruits company primarily engaged in preserving, packaging and marketing premium navel oranges, was formed as a limited liability company in Xingguo County, Jiangxi Province under PRC laws on November 22, 2005. General Preservation provides wholesale, retail, and institutional customers in China and several other countries with premium navel orange fruits under the trademark of “General Red”.

On September 26, 2011, GRH purchased all shares of Sheng Da Holding Limited (“Sheng Da BVI”), a company incorporated on May 18, 2011 under the laws of the British Virgin Islands, from General Red Company, Ltd (“General Red BVI”), a limited liability company incorporated on August 28, 2008 under the laws of British Virgin Islands, for $23,000. As a result, Sheng Da BVI became the wholly owned subsidiary of GRH. On September 29, 2011, Sheng Da BVI entered into a series of new agreements to terminate the old agreements with General Preservation, which were originally signed between General Red BVI and General Preservation on November 17, 2008, amended on June 10, 2011, and transferred to Sheng Da BVI by General Red BVI on June 30, 2011. The old agreements included a Consultation Agreement, an Operating Agreement, a Share Pledge Agreement, a Proxy Agreement and an Option Agreement. Upon the entry of these new agreements, General Preservation is no longer the Variable Interest Entity of Sheng Da BVI.

On June 28, 2013, at the Annual Meeting of stockholders the stockholders of the Company approved an amendment to the Company’s Certificate of Incorporation. On June 28, 2013, the Company filed with the Secretary of State of Delaware a Certificate of Amendment to the Certificate of Incorporation (the “Charter Amendment”). Pursuant to the Charter Amendment, the Company’s Certificate of Amendment was amended, effective as of July 12, 2013, to affect a reverse stock split of the Company’s shares of common stock. On July 12, 2013, the Company effected the 1 for 8 reverse split of the Company’s issued and outstanding common stock, decreasing the number of outstanding shares from 127,349,551 to 15,918,940. These statements in this report have been retroactively adjusted to reflect this reverse split.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

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

While our significant accounting policies are fully described in Note 2 to our audited consolidated financial statements for the years ended September 30, 2013 and 2012 and our unaudited consolidated financial statements for the three and six months ended March 31, 2014 and 2013, we believe that the following accounting policies are the most critical to aid you in fully understanding and evaluating this management’s discussion and analysis.

Seasonal nature of operations

The Company’s operations are seasonal based on the maturity stage of its products. Sales are concentrated during the months from October through December and from January through March, corresponding to the Company’s product maturity cycle which begins in the month of October when the products mature and are ready for sale.

Accounts receivable

Accounts receivable are recorded net of allowance for doubtful accounts. The Company provides an allowance for doubtful accounts equal to the estimated uncollectible amounts. Periodically, management assesses customer credit history and relationships as well as performs accounts receivable aging analysis. Based on the results, management determines whether certain balances are deemed uncollectible at the end of each period. Using its past collection experience, the Company reserves 0.3% of accounts receivable balances outstanding between six months and twelve months, 3% of accounts receivable outstanding for more than one year but less than two years, and 100% of accounts receivable balances outstanding for more than two years.

Inventories

Inventory is stated at the lower of cost or market. Cost is determined using the weighted-average cost method. Provisions are made for excess, slow moving and obsolete inventory as well as inventory whose carrying value is in excess of net realizable values, if any. Management continually evaluates the recoverability based on assumptions about customer demand and market conditions. If actual market conditions are less favorable than those projected by management, additional inventory reserves or write-downs may be required that could negatively impact our gross margin and operating results.

Property and equipment

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

Revenue recognition

The Company recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the purchase price is fixed or determinable and collectability is reasonably assured. The Company recognizes revenues from the sale of navel oranges upon shipment and transfer of title.

Impairment of Long-Lived Assets

Long-lived assets, including property, plant and equipment, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset exceeds the fair value of the asset.

Intangible Assets

Intangible assets are amortized using the straight-line method over their estimated period of benefit. Evaluation of the recoverability of intangible assets is made to take into account events or circumstances that warrant revised estimates of useful lives or that indicate that impairment exists. All of our intangible assets are subject to amortization. No impairments of intangible assets have been identified during any of the periods presented. Land use rights with a finite useful life are amortized on a straight-line basis over its estimated useful life of 50 years.

Foreign Currency Translation and Transactions

The accompanying unaudited consolidated financial statements are presented in U.S. Dollars (“$”). Great China International’s functional currency is Hong Kong Dollar (“HKD”) and Nanchang Hanxin Agriculture Technology Co., Ltd, General Fruit and General Preservation’s functional currency is Chinese Yuan Renminbi (“RMB”). All assets and liabilities were translated at the current exchange rate, at respective balance sheet dates, stockholders’ equity is translated at the historical rates and income statement items are translated at the average exchange rate for the reporting periods. The resulting translation adjustments are reported as other comprehensive income and accumulated other comprehensive income in stockholders’ equity in Accordance with the Codification ASC 220, Comprehensive Income.

Cash flow from the Company’s operations included in the statement of cash flows is calculated based upon the functional currency using the average translation rate. As a result, amounts related to assets and liabilities reported on the statement of cash flows will not necessarily agree with arithmetical changes in the corresponding balances on the consolidated balance sheets. No presentation is made that the RMB amounts could have been, or could be, converted into $ at the rates used in translation.

Transaction gains and losses that arise from exchange rate fluctuations from transactions denominated in a currency other than the functional currency are included in the results of operations as incurred. There were no material transaction gains or losses in the periods presented.

The exchange rates used to translate amounts in RMB into $ for the purposes of preparing the consolidated financial statements were as follows:

Results of Operations for the Year Ended September 30, 2013 Compared to the Year Ended September 30, 2012

Revenues

For the year ended September 30, 2013, we had revenues of $17,490,837, as compared to $16,834,304 for the year ended September 30, 2012, an increase of approximately $656,533 or 3.90%. The increase in revenues was primarily attributable to (1) an increase in the unit price of our products due to increased domestic market demand; (2) the quantity of navel orange exported overseas decreased from 1.5 million KG in 2012 to 0.3 million KG in 2013. During these periods, the average unit price of our products sold in domestic market was higher than that sold overseas.

Our sales volume decreased by approximately 1.40% for the year ended September 30, 2013, while the average unit sales price increased by approximately 5.20%, as shown below:

Cost of sales

Cost of sales decreased by $510,430, or 6.32%, from $8,076,376 for the year ended September 30, 2012 to $7,565,946 for the year ended September 30, 2013. The decrease was primarily attributable to (1)an increase in the product output of 2.5 kg of oranges per tree due to better maintenance and cultivation in the past two years; (2) an extra tax levied on navel oranges sold overseas, which increased the cost of sale in fiscal 2012; (3) the quantity of navel oranges outsourced decreased by 5%. The cost of navel oranges cultivated from our orchards is lower than that outsourced.

Gross profit and gross margin

Our gross profit was $9,924,891 for the year ended September 30, 2013 as compared to $8,757,928 for the year ended September 30, 2012, representing a gross margin of 56.7% and 52.0%, respectively. The increase in our gross profit margin for the year ended September 30, 2013 was mainly attributable to the reasons discussed above. The higher gross margin was primarily due to (1) the synergy between the complete chain of the production process from planting, preserving to packaging; (2) lower amortization of the land use rights due to low acquisition cost.

Selling expenses

Selling expenses were $886,595 and $1,116,455 for the year ended September 30, 2013 and 2012, respectively, decreased by $229,860 or 20.6%, mainly due to reduction in advertising and other expenses.

Selling expenses consisted of the following:

Shipping and handling expenses increased by $12,675 or 1.6%, as a result of the increase in gas price.

Compensation and related benefits increased by $13,061, or 71.9%, in the year ended September 30, 2013 compared to the year ended September 30, 2012, due to the implementation of automated planting starting in October 2012.

Advertising and promotion expense decreased by $220,270 or 87.7%, as a result of the down-sizing of our marketing campaign in the year ended September 30, 2013.

Other expense mainly includes customer entertainment, vehicle maintenance and miscellaneous office expenses.

General and administrative expenses

General and administrative expenses amounted to $891,893 for the year ended September 30, 2013, as compared to $914,214 for the same period in 2012, an increase of $22,321 or 2.4%. General and administrative expenses consisted of the following:

Compensation and related benefits decreased by $8,605 or 3.7%, mainly because in October 2012, we laid off certain staff in our purchasing department and certain related supporting staff.

Depreciation expense increased by $47,978, or 68.6%, in the year ended September 30, 2013, as compared to the same period in 2012. The increase was primarily due to the adjustment in depreciation expenses in 2012 and the addition of certain equipment in December 2011, for which we started to record depreciation of workshop and equipment in 2012.

Professional service fees decreased by $34,245 due to more audit and legal fees incurred for the reverse merger transaction in the prior fiscal year.

Office expense decreased by $12,257, or 42.3%, in the year ended September 30, 2013, as compared to the same period in 2012. The decrease is primarily due to the cut down office expense in its subsidiaries since October 2012.

Meal and entertainment decreased by 12,445, or 23.4%, in the year ended September 30, 2013, as compared to the same period in 2012. The decrease is primarily because the Company reduced its marketing expenses in 2013 as the company built its brand name through the marketing campaigns during fiscal 2012 and the Company decided to cut back marketing expenses in 2013.

Other general and administrative expenses mainly include utilities, repairs, telecommunication, insurance and certain low-value miscellaneous items. Their amounts varied period over period due to different circumstances.

Income from operations

For the year ended September 30, 2013, income from operations was $8,146,403, as compared to $6,727,259 for the year ended September 30, 2012, an increase of $1,419,144 or 21.1%, mainly due to increase in the unit price of our products and decrease in our cost of sales during year ended September 2013 compared the same period in 2012.

Other income (expenses)

For the year ended September 30, 2013, other income amounted to $26,055 as compared to other expense of $180,379 for the same period in 2012. For the years ended September 30, 2013 and 2012, other income (expense) mainly included: (i) interest expense, which decreased by $7,067 or 2.3% period over period due to a decrease in the average balance and the interest rate of our bank loans, the interest rate decreased to 6% from 6.56%, and (ii) certain government subsidies, which increased by $165,041 or 148.1% compared the same period in fiscal 2012. In the year ended September 30, 2013, we received government subsidies of approximately $276,442, as compared to $111,401 for the year ended September 30, 2012.

Income tax expense

For the years ended September 30, 2013, income tax amounted to $0. We began enjoying an income tax exemption for year 2013 and 2012 for processing agricultural commodities. General Fruit has been approved for tax exemption since its formation.

Net income

As a result of the factors described above, our net income for the year ended September 30, 2013 was $8,172, 458. For the year ended September 30, 2012, we had net income of $6,546, 880.

Foreign currency translation gain

The functional currency of our subsidiaries operating in the PRC is the Chinese Yuan or Renminbi (“RMB”). The financial statements of our subsidiaries are translated to U.S. Dollars using period end rates of exchange for assets and liabilities, and average rates of exchange (for the period) for revenues, costs, and expenses. Net gains and losses resulting from foreign exchange transactions are included in the consolidated statements of operations. As a result of these translations, which are a non-cash adjustment, we reported a foreign currency translation gain of $932,630 for the year ended September 30, 2013 as compared to $271,853 for the same period in 2012. This non-cash gain had the effect of increasing our reported comprehensive income.

Comprehensive income

For the years ended September 30, 2013 and 2012, comprehensive income of $9,105,088 and $6,818.733 were derived from the sum of our net income of $8,172,458 and 6,546,880 plus foreign currency translation gain of $932,630 and $271,853, respectively.

Results of Operations for the Three and Six Months Ended March 31, 2014 Compared to the Three and Six Months Ended March 31, 2013

Sales

For the three months ended March 31, 2014, we had sales of $12,408,641, as compared to $8,377,564 for the three months ended March 31, 2013, an increase of approximately $4,031,077 or 48.1%. For the six months ended March 31, 2014, we had sales of $19,535,516, as compared to $15,818,241 for the six months ended March 31, 2013, an increase of approximately $3,717,275 or 23.5%. The navel orange from Gannan gradually built its reputation in the market due to its taste and high quality. As a result we believe the demand for the orange is growing. The Chinese Lunar Year also attributed to the significant increase in our sales volume because the Lunar New Year celebration is an important holiday in China during which people purchase food and fruits, including oranges, to serve during celebrations.

Our sales volume increased by approximately 48.1% for the three months ended March 31, 2014, while the average unit sales price decreased by approximately 1.2%, as shown below:

Our sales volume increased by approximately 25.3% for the six months ended March 31, 2014, while the average unit sales price decreased by approximately 1.3%, as shown below:

Cost of sales

Cost of sales increased by $1,237,238, or 32.9%, from $3,756,622 for the three months ended March 31, 2013 to $4,993,860 for the three months ended March 31, 2014. Cost of sales increased by $1,109,894, or 15.5%, from $7,157,230 for the six months ended March 31, 2013 to $8,267,124 for the six months ended March 31, 2014. The rate of cost of sales increase is lower than the rate in our sales increase. The reasons are (1) an increase in the product output of 2.5 kg of oranges per tree due to better maintenance and cultivation in the past two years; (2) an extra tax levied on navel oranges sold overseas, which increased the cost of sale in the fiscal year ended September 30, 2013; (3) the cost of navel oranges cultivated from our orchards being lower than that outsourced; and (4) a decrease in process fee (waxing and ripening fruit) since the Company postponed the pickup season during the fiscal year ending September 30, 2014.

Gross profit and gross margin

Our gross profit was $7,414,781 for the three months ended March 31, 2014 as compared to $4,620,942 for the three months ended March 31, 2013, representing a gross margin of 59.8% and 55.2%, respectively. Our gross profit was $11,268,392 for the six months ended March 31, 2014 as compared to $8,661,011 for the six months ended March 31, 2013, representing a gross margin of 57.7% and 54.8%, respectively. The increase in our gross profit margin for the three and six months ended March 31, 2014 was mainly attributable to the reasons discussed above. The higher gross margin was primarily due to (1) the synergy between the complete chains of the production process from planting, preserving to packaging; and (2) lower amortization of the land use right due to low acquisition cost.

Selling expenses

Selling expenses were $32,638 and $389,885 for the three months ended March 31, 2014 and 2013, respectively, a decrease of $357,247 or 91.6%. Selling expenses were $91,772 and $786,288 for the six months ended March 31, 2014 and 2013, respectively, a decrease of $694,516, or 88.3%, mainly due to a reduction in shipping and handling, advertising and other expenses. 

Selling expenses for the three months ended March 31, 2014 and 2013 consisted of the following:

Shipping and handling expense decreased by $358,632 or 98.8%, since the Company does not bear the shipping cost in domestic sales during the fiscal year ended September 30, 2014.

Compensation and related benefits decreased by $4,954, or 30.9%, in the three months ended March 31, 2014 compared to the three months ended March 31, 2013, due to the implementation of automated planting starting in October 2012.

Advertising and promotion expense decreased by $5,612 or 51.5%, as a result of the down-sizing of our marketing campaign during the three months ended March 31, 2014.

Other expense mainly includes customer entertainment, travel expenses, vehicle maintenance and miscellaneous office expenses.

Selling expenses for the six months ended March 31, 2014 and 2013 consisted of the following:

Shipping and handling expenses decreased by $701,731 or 96.5%, since the Company does not bear the shipping cost in domestic sales during the fiscal year ending September 30, 2014.

Compensation and related benefits decreased by $4,909, or 18.2%, in the six months ended March 31, 2014 compared to the six months ended March 31, 2013, due to the implementation of automated planting starting in October 2012.

Advertising and promotion expense decreased by $20,902 or 74.5%, as a result of the down-sizing of our marketing campaign during the six months ended March 31, 2014.

Other expense mainly includes customer entertainment, travel expenses, vehicle maintenance and miscellaneous office expenses.

General and administrative expenses

General and administrative expenses amounted to $166,147 for the three months ended March 31, 2014, as compared to $113,065 for the same period in 2013, an increase of $53,082 or 46.9%. General and administrative expenses consisted of the following:

Professional service fees increased by 64,161 due to increased audit and legal fees incurred during 2014.

General and administrative expenses amounted to $627,326 for the six months ended March 31, 2014, as compared to $325,068 for the same period in 2013, an increase of $302,258 or 93.0%. General and administrative expenses consisted of the following:

Compensation and related benefits increased by $21,230 or 14.4%, mainly because we elected independent directors and hired a chief financial officer during 2013.

Professional service fees increased by $287,302 due to increased audit and legal fees incurred during 2014.

Income from operations

For the three and six months ended March 31, 2014, income from operations was $7,215,996 and $10,549,294, as compared to $4,117,992 and $7,549,655 for the three and six months ended March 31, 2013, an increase of $3,098,004 and $2,999,639 or 75.2% and 39.7%, mainly due to an increase in sales and a decrease in operating expenses.

Other income (expenses)

For the three months ended March 31, 2014, other income amounted to 373,533 as compared to other income of $79,762 for the same period in 2013. For the three months ended March 31, 2014 and 2013, other income (expense) mainly included: (i) interest expense, which increased by $2,196 or 2.7%, and (ii) certain government subsidies which for the three months ended March 31, 2014 and 2013, we received approximately $492,191 and $144,943, respectively.

For the six months ended March 31, 2014, other income amounted to $322,779 as compared to other income of $151,379 for the same period in 2013. For the six months ended March 31, 2014 and 2013, other income (expense) mainly included: (i) interest expense, which increased by $11,100 or 8.3%, and (ii) certain government subsidies which for the six months ended March 31, 2014 and 2013, we received approximately $492,191 and $256,264, respectively.

Income tax expense

For the three and six months ended March 31, 2014 and 2013, income tax amounted to $0. We have an income tax exemption for the years 2014 and 2013 for processing agricultural commodities. General Fruit has been approved for a tax exemption since its formation.

Net income

As a result of the factors described above, our net income for the three and six months ended March 31, 2014 was $7,589,529 and $10,872,073, respectively. For the three and six months ended March 31, 2013, we had net income of $4,197,754 and $7,701,034, respectively.

Foreign currency translation gain

The functional currency of our subsidiaries operating in the PRC is the Chinese Yuan or Renminbi (“RMB”). The financial statements of our subsidiaries are translated to U.S. Dollars using period end rates of exchange for assets and liabilities, and average rates of exchange (for the period) for revenues, costs, and expenses. Net gains and losses resulting from foreign exchange transactions are included in the consolidated statements of operations. As a result of these translations, which are a non-cash adjustment, we reported foreign currency translation loss of $376,232 and $233,789 for the three and six months ended March 31, 2014, respectively, as compared to foreign currency translation gain of $180,884 and $241,375 for the three and six months ended March 31, 2013, respectively. This non-cash gain had the effect of increasing our reported comprehensive income.

Comprehensive income

For the three and six months ended March 31, 2014, comprehensive income of $7,213,297 and $10,638,284 were derived from the sum of our net income of $7,589,529 and $10,872,073 plus foreign currency translation loss of $376,232 and $233,789, respectively.

For the three and six months ended March 31, 2013, comprehensive income of $4,378,638 and $7,942,409 were derived from the sum of our net income of $4,197,154 and $7,701,034 plus foreign currency translation gain of $180,884 and $241,375, respectively.

LIQUIDITY AND CAPITAL RESOURCES

We have historically funded our operation primarily through paid-in capital, sales of goods, loan from stockholders and short term loans from financial institutions in China.  The Company currently generates its cash flow through operations, which it believes will be sufficient to sustain current level operations for at least the next twelve months.

For the years ended September 30, 2013 and 2012

As of September 30, 2013, our balance of cash and cash equivalents was $2,408,520. As of September 30, 2012, our balance of cash and cash equivalents was $ 351,045, an increase of 2,057,475 or 586.1%, mainly due to net cash provided by financing activities.

The following summarizes the key components of the Company’s cash flows for the years ended September 30, 2013 and 2012:

In summary, our cash flows were:

Net cash provided by operating activities increased in the year ended September 30, 2013 by $2,464,179 to $110,240, from net cash used in operating activities of $2,353,939 for the year ended September 30, 2012. These changes were mainly brought about by the following changes: an increase in net income of $1,625,578, a decrease in cash used in prepaid leases of $3,547,677, a decrease in cash provided by customer deposits of $2,804,560 and a decrease in cash tied in inventory of $471,291.

Net cash used in investing activity decreased by $260,955, from $360,307 to $99,352, in the year ended September 30, 2013 compared to the same period ended in 2012, which is mainly due to less cash expenditures on property and equipment.

Net cash provided by financing activities decreased by $209,077 to $2,079,292 in the year ended September 30, 2013 compared to $2,288,368 provided by financing activities at the same period ended in 2012. This was due to the repayment of short-term bank loans of $4,220,361.

Working capital increased by $2, 987,976 to $2, 380,778 as of September 30, 2013 from working capital deficit of $607,198 as of September 30, 2012. In order to stay cost competitive in the long-run, we leased 165,278 additional orange trees within fiscal 2013. Based on the lease rate of approximately $55.96(RMB350) per tree in 2013, the total spending is estimated to be no more than $9,248,956 (RMB47,004,857).

As we are listed by the lending bank as a good credit customer, we believe that our short-term bank loans will be renewed at their maturity dates. On November 30 and December 21, 2012, as a replacement of an existing short-term bank loan that matured in November 16, 2012, the Company obtained a new bank loan of approximately $5,542,000 (RMB34, 0000, 000) from Agricultural Development Bank of China, which was paid off during October and November 2013.

Although we will continue to invest in our business, with expected positive operating cash flow fueled by our profit, we believe our operating cash and short-term bank loans are sufficient to sustain current level operations for at least the next twelve months.

For the six months ended March 31, 2014 and 2013

As of March 31, 2014, our cash and cash equivalents was $1,605,641. As of September 30, 2013, our cash and cash equivalents was $2,408,520, a decrease of $802,879 or 33.3%, mainly due to net cash used in operating activities.

The following summarizes the key components of the Company’s cash flows:

In summary, our cash flows were:

Net cash used in operating activities increased during the six months ended March 31, 2014 by $676,688 to $1,083,005, from net cash used in operating activities of $406,377 for the six months ended March 31, 2013. These changes were mainly brought about by the following changes: a change in net income of $3,171,039, a change in cash used in accounts receivable of $5,196,434, a change in cash provided by customer deposits of $1,398,814, and a change in cash tied in inventory of $807,920.

Net cash used in investing activity decreased by $76,829, from $86,715 to $9,886, in the six months ended March 31, 2014 compared to the same period ended in 2013, which is mainly due to less cash expenditures on property and equipment.

Net cash provided by financing activities decreased by $1,279,151 to $316,251 in the six months ended March 31, 2014 as compared to $1,595,402 provided by financing activities at the same period ended in 2013. This was due to the repayment of short-term bank loans.

Working capital increased by $5,402,862 to $7,783,640 as of March 31, 2014 from working capital of $2,380,778 as of March 31, 2013.  In order to stay cost competitive in the long-run, we leased 145,000 orange trees in six months ended March 31, 2014. Based on the lease rate of approximately $58.83 (RMB360) per tree in 2014, the total spending was $8,530,002 (RMB24,840,000).

As we are listed by our lending bank as a good credit customer, we believe that our short-term bank loans will be renewed at their maturity dates. On November 30 and December 21, 2012, as a replacement of an existing short-term bank loan that matured in November 16, 2012, the Company obtained a new bank loan of approximately $5,555,940 (RMB34, 000, 000) from Agricultural Development Bank of China, which was paid off during October and November 2013.

On November 28 and December 4, 2013, the Company entered into two short-term bank loan agreements with Agricultural Development Bank of China for $2,617,600 (RMB16,000,000) and $2,944,800 (RMB18,000,000). Pursuant to these Loan Agreements, the principle will be repaid on September 27, 2014 and October 3, 2014. The interest is calculated using an annual fixed interest rate of 6.00% and paid monthly. The loans are secured by the Company’s real property, navel orange orchards and equipment, and guaranteed by Xingping Hou, CEO of the Company.  The loans are also guaranteed by Ganzhou Guoruitai Guarantee Co., Ltd., an unrelated party, with a maximum exposure limit of $1,963,200 (RMB12,000,000). On November 20 and December 4, 2013, Xingping Hou, CEO of the Company and Jiangjunhong Industrial Group Co., Ltd., a Chinese corporation owned by Xingping Hou, jointly entered into a cross-guarantee agreement with Ganzhou Guoruitai Guarantee Co, Ltd. Pursuant to the cross-guarantee agreements, the Company paid $49,080 (RMB300,000) to the guarantor as a guarantee fee for the above bank loans.  The terms of these guarantees are for two years. On the date of each loan expiration, should the Company fail to make its debt payment, Jiangjunhong Industrial Group Co., Ltd. and Xingping Hou will be obligated to perform under the cross guarantees by primarily making the required payments, including late fees and penalties. In addition, on December 3, 2013, the Company paid Ganzhou Guoruitai Guarantee Co, Ltd $392,640 (RMB2,400,000) as a security deposit for the guarantee.  The purpose of such bank loans is for working capital.

As of March 31, 2014 and September 30, 2013, the Company had outstanding debts from a related party, Hua Mei Investments Limited (“Hua Mei”), of $1,033,980 and $718,261, respectively. Xingping Hou is the sole director of Hua Mei, and Zhihao Sabio Zhang owns all of the outstanding shares of Hua Mei. Pursuant to a call option agreement dated July 1, 2012, Mr. Hou has the right to purchase all of the shares in Hua Mei held by Mr. Zhang. Such option vests in three annual installments over a period of three years, of which 34% became exercisable on July 1, 2013, 33% becomes exercisable on July 1, 2014, and the remaining 33% becomes exercisable on July 1, 2015. The option expires on July 1, 2017. These debts are non-interest bearing and payable on demand. The proceeds of these debts were utilized as working capital.

Although we will continue to invest in our business, with expected positive operating cash flow fueled by our profits, we believe our operating cash is sufficient to sustain our current level of operations for at least the next twelve months.

OFF-BALANCE SHEET FINANCING ARRANGEMENTS

We have no obligations, assets or liabilities which would be considered off-balance sheet arrangements. We do not participate in transactions that create relationships with unconsolidated entities or financial partnerships, often referred to as variable interest entities, which would have been established for the purpose of facilitating off-balance sheet arrangements. We have not entered into any off-balance sheet financing arrangements, established any special purpose entities, guaranteed any debt or commitments of other entities, or entered into any non-financial assets.

BUSINESS

Company Overview

We are one of the leading producers of “Gannan” navel oranges in China, with operations that include the planting, growing, harvesting, post-harvest processing and temperature controlled preservation and storage of our navel oranges. Through our vertically integrated model, we exercise strict and direct control over the quality of our oranges, which we believe gives us a distinct competitive advantage.

We operate through a flexible procurement model by entering into contractual agreements with local farmers for the planting and harvesting work in our orchards on one hand, while also relying on third party farmers and cooperatives that do not use our land by purchasing some of their production on the other hand. We believe that this model provides us a stable and safe source of supply. Once the navel oranges are harvested or purchased, we commercially process and preserve them according to the standards of organic navel oranges, store and subsequently sell them throughout many regions in the PRC.

Led by a management team with extensive experience in the industry, we have put in place several investment programs that have allowed us to achieve our current strong position in the domestic market, with our scale and scope evidenced by the following:

Our goal is to become the largest integrated grower, packager and distributor of navel oranges in China. We plan to pursue continued growth and margin expansion through a strategy focused on the increase of our orchard and navel orange trees.

Competitive Strengths

Vertically Integrated Operations. As one of the largest growers of “Gannan” navel oranges in China and a fully integrated company, we are able to exercise strict and direct control over the source and quality of our navel oranges. We believe our scale and scope of vertically-integrated operations provide us with a unique and advantageous position.

Geographical Advantage. The location of our planting area affords us numerous advantages, including ideal climate and soil conditions for cultivating navel oranges. The subtropical monsoon climate provides us with abundant rainfall, sunshine and four distinct seasons. The average annual temperature is 18.9°C with a low of -3°C and relative humidity of 70-80%. There is an average annual sunshine exposure of 1,992.3 hours and approximately 1,600 mm of annual rainfall making it very suitable for growing oranges. The soil at our planting area is rich in organic matter with soil pH levels of 6-6.3 (optimal for orange cultivation). Soil sample tests are conducted by experts to comply with the provisions of the Chinese government’s NY5016-2001 standard. In July 2007, Jiangxi Province Academy of Agricultural Sciences Green Food Environment Test Center conducted tests on the soil, irrigation water and air quality of the Company’s navel orange planting base located in Chongxian Township, Xingguo County, Jiangxi Province and concluded that the planting base was suitable for the production of organic products.

Infrastructure and Transportation, Our facilities proximity to China’s vast transportation network is another key advantage. Our planting area is close to the Beijing-Kowloon railroad, state road 105 and 319, national highway 323, Kunsha Highway, and Quannan Highway. Using these roads, Jinggangshan airport is approximately one hour drive while the port cities of Shenzhen, Guangzhou and Xiamen are all within five hours by car.

Quality of Oranges and Brand Name . We are committed to distributing oranges that our management believes meet high quality standards. Our agreements with the farmers and suppliers provide that each orange must have a solid shape, even stem and a smooth surface, and be free of any black spots, fertilizer spots, cracks or worms. For the farmers we contract with, our agreements further provide that oranges may not be picked when it is raining, or within three days of rain, when it is foggy or before the dew on the orange tree has dried. Pursuant to the terms of our supply contracts, we will not buy navel oranges if the quality standards are not met. For the orchards that we farm with our own employees, we apply the same quality standards described above. The Company has received more than 20 honors related to navel oranges and the Company’s preservation facility. Among the honors the Company has received are the titles of “Chinese Famous Brand” by the Fruits Logistics Association of China, “Famous Agricultural Brand of Jiangxi” by the Jiangxi provincial government and “Key Leading Enterprise of Ganzhou in Agricultural Industrialization by the Ganzhou municipal government.

Storage & Preservation Technology Advantage. Our controlled atmosphere storage and preservation technology allows us to maintain a storage period of up to 6-8 months, improve orange appearance and color, and retain a fresh flavor. The sale of oranges is typically affected by the seasonal nature of orange production, as most navel oranges mature in October through November and are distributed during the months of October through January. Due to our preservation capabilities, we are able to extend our oranges’ life cycle to June of the year following harvest, which enables us to sell navel oranges at a higher price during the off-season when other producers may not have sufficient supply. Accordingly, we have historically experienced greater net sales in the first three quarters of each fiscal year.

Management and Expert Team. We have established a specialized fruit forest management and expert team, who work with the contract farmers to optimize cultivation, irrigation, fertilization, water and soil conservation, administration of pesticides for weed and pest control, and to  educate about protection against frost and rain. Our team has developed extensive expertise through various lectures and training programs on farming techniques from reputable Chinese higher education institutions such as Huazhong Agricultural University. We have also been able to developed good practices guidelines and built robust in-house know-how in fruit forest management though several years of experience in the navel orange industry.

Industry Overview

The navel orange cultivation and harvesting process can be divided into three categories: production, post-harvest processing and preservation.

Navel Orange Production

The navel orange industry has been growing rapidly in China due to governmental support and an increase in demand for navel oranges, with the domestic production growing from 270,000 metric tons in 2000 to 3,140,000 metric tons in 2013, with the compound annual growth rate of 21%. The Ministry of Agriculture and the Municipal Government of Ganzhou, Jiangxi Province, have provided incentives to encourage the production of navel oranges, including tax reduction, subsidies, free education, seedling promotion, and production standardization. As a result, the domestic production is forecasted to further grow at 15% annual rate within the next three years, according to Beijing Huqing Zongheng Information and Statistics Center.

Source: Beijing Huajing Zongheng Information and Statistics Center

We anticipate that the demand for navel oranges in China will continue to increase. According to the Ministry of Agriculture of China, the per capita consumption of fresh oranges is 12.7 kg in China, compared to 17.2 kg worldwide. Approximately 98% of navel oranges produced in China are sold in the domestic market, with only 2% exported to other countries. More than 95% of citrus fresh fruit is sold domestically in China, with less than 5% of such fruit exported. A large portion of raw materials for orange juice is imported from Brazil and the US. We believe that such data indicates there is a significant room for growth in this industry in China.

In addition, navel orange production requires stringent climate conditions; therefore, there are limited areas in the world where navel oranges can be produced. As a result, production is primarily concentrated in warmer climates, such as California, Spain, South Africa, Australia, and “Gannan – Southern Hunan – Northern Guangxi” in China. The Chinese government has identified the Gannan area as "the hometown of the navel orange in China", and has been supportive of local producers. The Ministry of Agriculture named Gannan navel oranges as one of the nine competitive agricultural products in the country, and listed Gannan as one of the key developing areas.

As one of the leading enterprises in Gannan, we play a decisive role in the navel orange industry. Furthermore, even though “Gannan Navel Orange” is the common brand shared by all producers in Gannan area, we believe that “General Red” brand stands out among all of the other Gannan brands because of the measures we take to ensure the highest quality standards and our consistent branding strategy.  

Post-harvest processing

We believe the post-harvest processing of harvested fruits also has broad prospects in China. Post-harvest processing includes selecting, grading, cleaning, pre-cooling, waxing and packaging. Proper processing can minimize post-harvest loss, maintain the high nutritional content and freshness, slow down the metabolic process of fruit in its natural state, enhance the appearance of the fruit and extend the life of the fruit. Currently, 10% of fresh fruits are processed in the post-harvesting period in China, lower than the average level of 35% worldwide.

Preservation and Storage

The storage and preservation technology in China lags behind that of developed countries in the citrus exports sector due to grossly inadequate storage and preservation facilities. According to data published in the “Agricultural Product Cold-Chain Logistics Development Plan” formulated by China National Development and Reform Commission, the rate of cold chain distribution of fruits and vegetables is only 5%, and the rate of refrigerated transportation hardly reaches 15%, which is much lower than in developed countries. Cold chain distribution is a temperature controlled distribution supply chain, resulting in an uninterrupted series of storage and distribution activities by maintaining a given temperature. It is used to help extend and ensure the shelf life of products, including agricultural products. According to China National Development and Reform Commission, the loss rate in distribution of oranges in China is 20-30%, compared with less than 5% in developed countries. The National Development and Reform Commission of China developed a "cold chain logistics development plan" in 2010, to improve the cold chain distribution rate to 20% and refrigerated transportation rate to 30%, and reduce loss rate in distribution to 15%.

Growth Strategy

As one of the leading vertically integrated producers of navel oranges in Gannan, we believe that we are in a unique position to take full advantage of the vast opportunities in our domestic market. We plan to leverage our strengths in order to achieve continued growth and increased margin by:

Increasing Navel Orange Orchards in Gannan: within the next two years, we will continue to build, acquire and lease navel orange orchards in the Gannan region, because of the geographic advantages of Gannan presented earlier. Our strategy will focus primarily on increasing the size of our orchards by entering into lease agreements with other land owners. During the year ending September 30, 2013, we leased 165,278 additional orange trees in Gannan. We aim to increase the amount of land we lease with established and producing navel orange orchards to increase the number of our producing trees by 150,000 trees within the next 2 years. We plan to spend approximately $8.3 million (about RMB50 million) to implement this strategy, financed through cash flow of existing operations or outside financing.

Establishing Temperature Controlled Warehouses and Distribution Centers in Key Sales Regions: to further strengthen our preservation and storage infrastructure, we plan to purchase or construct modern, temperature-controlled preservation warehouses in major fruit and vegetable consumer markets, including the Yangtze River Delta, Pearl River Delta, Beijing-Tianjin region, and the provincial capital cities. We also plan to build fruit and vegetable distribution centers with cold-storage services.

Promoting General Red Brand Name: as part of our continuous efforts in the next few years, we plan to promote and enhance the “General Red” brand by placing General Red trademark signs and advertisements in member stores and in the target markets, employing consistent product management system and high standards for product quality, conducting customer feedback surveys, and bringing added convenience to end-customers.

Competition

Even though we are one of the largest integrated navel orange companies with both growing areas and post-harvest processing and preservation facilities in China, the whole industry is still very fragmented and we believe the industry will consolidate and present good opportunities for growth through acquisitions. Our competitors are pure navel orange growers, pure post-harvest processors, or both. The largest competitor in navel orange growing is Jiangxi Wangpin Agricultural Science and Technology Development Co. Ltd. with 6,880 mu (1,133 acres) of navel orange groves. The largest competitors in post-harvest processing and preservation are Anyuan Shengda Fruit Industrial Co. Ltd with 20,000 metric ton of preservation capacity, and Xinfeng Yuhe Agricultural Development Co. Ltd. with 7,000 metric tons of preservation capacity.

The following table lists our competitors in China and their profiles, based upon information accessible to us: