Edgar Filing: ENERGROUP HOLDINGS CORP

Unassociated Document

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2008

o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ______________ to _______________

Commission File Number 0-28806

ENERGROUP HOLDINGS CORPORATION

(Exact name of registrant as specified in its charter)

Nevada		87-0420774
(State of Incorporation)		(I.R.S. Employer Identification No.)

No. 9, Xin Yi Street, Ganjingzi District Dalian City, Liaoning Province, PRC 116039		N/A
(Address of principal executive offices)		(Zip Code)

+86 411 867 166 96

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No o

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

Large Accelerated filer o Accelerated Filer o Non-Accelerated Filer o Smaller Reporting Company x

Indicate by check mark whether the registrant is a shell company (as determined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

As of June 30, 2008, the Registrant had 21,136,391 shares of Common Stock outstanding.

ENERGROUP HOLDINGS CORPORATION

INDEX

		Page Number
PART I. Financial Statements

Item 1.	Financial Information

	Consolidated Balance Sheets as of June 30, 2008 and December 31, 2007	1

	Consolidated Statements of Income for the Three and Six Months Ended June 30, 2008 and 2007.	3

	Consolidated Statements of Shareholders' Equity for the Six Months Ended June 30, 2008 and the Year Ended December 31, 2007	4

	Consolidated Statements of Cash Flows for the Three months and Six Months Ended June 30, 2008 and June 30, 2007	5

	Notes to Consolidated Financial Statements - June 30, 2008	6-26

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	27

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	43

Item 4.	Controls and Procedures	43

PART II. Other Information

Item 1.	Legal Proceedings	45

Item 1A.	Risk Factors	45

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	60

Item 3.	Defaults Upon Senior Securities	60

Item 4.	Submission of Matters to a Vote of Security Holders	60

Item 5.	Other Information	61

Item 6.	Exhibits	61

Signatures		64

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Energroup Holdings Corporation

Consolidated Balance Sheets

As of June 30, 2008 and December 31, 2007

(Stated in US Dollars)

	Note
			June 30, 2008		December 31, 2007
ASSETS

Cash			$	11,270,730	$	14,031,851
Restricted Cash		3		2,230,667		4,250,000
Accounts Receivable		4		19,120,753		622,433
Other Receivable				3,953,573		1,068,939
Related Party Receivable				-		3,964,357
Inventory		5		5,110,172		2,916,016
Purchase Deposit				795,418		267,807
Prepaid Expenses				141,767		46,401
Prepaid Taxes				199,893		-
Deferred Tax Asset				653,354		613,844
Total current assets				43,476,326		27,781,648

Property, Plant & Equipment, net		6		25,934,159		24,836,496
Land Use Rights, net		7		13,539,743		12,855,980
Construction in Progress				1,016,693		927,866
Other Assets				92,928		32,619

TOTAL ASSETS			$	84,059,848	$	66,434,609

LIABILITIES

Bank Loans & Notes		8		6,402,980		7,383,095
Accounts Payable				5,142,723		3,779,274
Related Party Payable		9		1,835,881		-
Accrued Liabilities				3,500,487		3,347,013
Taxes Payable				2,018,967		1,491,876
Other Payable				3,208,336		1,471,381
Customer Deposits				1,694,300		24,161
Total current liabilities				23,803,675		17,496,800

TOTAL LIABILITIES			$	23,803,675	$	17,496,800

See Accompanying Notes to the Financial Statements

Energroup Holdings Corporation

Consolidated Balance Sheets

As of June 30, 2008 and December 31, 2007

(Stated in US Dollars)

	Note		June 30, 2008		December 31, 2007
STOCKHOLDERS' EQUITY

Preferred Stock - $0.001 par value 10,000,000 shares authorized; 0 shares issued & outstanding at June 30, 2008 and December 31, 2007, respectively.				-		-
Common Stock $0.001 par value 21,739,130 shares authorized; 21,136,392 shares issued & outstanding at June 30, 2008 and December 31, 2007, respectively.			$	21,136	$	21,136
Additional Paid in Capital		10		15,440,043		15,440,043
Statutory Reserve		11		1,729,863		751,444
Retained Earnings				38,642,002		29,764,236

Accumulated Other Comprehensive Income				4,423,129		2,960,951

TOTAL STOCKHOLDERS' EQUITY				60,256,173		48,937,810

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY			$	84,059,848	$	66,434,610

See Accompanying Notes to the Financial Statements

Energroup Holdings Corporation

Consolidated Statements of Income

for the three and six months ended June 30, 2008 and 2007

(Stated in US Dollars)

	Note		3 months			3 months			6 months			6 months
			ended			ended			ended			ended
			June 30, 2008			June 30, 2007			June 30, 2008			June 30, 2007
Sales			$	43,076,524		$	31,370,321		$	86,583,622		$	54,558,315
Cost of Sales				36,600,428			26,510,666			73,074,852			45,536,298
Gross Profit				6,476,097			4,859,655			13,508,771			9,022,017

Selling Expenses		12		759,778			1,570,001			2,585,055			1,799,420
General & Administrative Expenses				653,187			382,377			1,146,161			687,513

Operating Income				5,063,132			2,907,277			9,777,555			6,535,084

Other Income				358,850			4,276			383,119			7,004
Interest Income				631,707			-			635,692			-
Other Expenses				(72,085	)		(9,657	)		(100,735	)		(37,830	)
Interest Expense				(300,613	)		(117,663	)		(607,078	)		(710,641	)

Earnings before Tax				5,680,991			2,784,233			10,088,553			5,793,617

Income Tax		13		66,023			-			232,368			-

Net Income			$	5,614,968		$	2,784,233		$	9,856,185		$	5,793,617

Earnings Per Share		16
Basic			$	0.33		$	0.21		$	0.57		$	0.43
Diluted			$	0.27		$	0.16		$	0.47		$	0.34

Weighted Average Shares Outstanding
Basic				17,272,756			13,409,120			17,272,756			13,409,120
Diluted				21,182,756			17,272,756			21,182,756			17,272,756

	Note	3 months			3 months		6 months		6 months
		ended			ended		ended		ended
		June 30, 2008			June 30, 2007		June 30, 2008		June 30, 2007
Comprehensive Income
Net Income		$	5,614,968		$	2,784,233	$	9,856,185	$	5,793,617
Other Comprehensive Income
Foreign Currency Translation Adjustment			(2,220,130	)		16,252		1,462,155		247,509
Total Comprehensive Income		$	3,394,838		$	2,800,485	$	11,318,340	$	6,041,126

See Accompanying Notes to the Financial Statements

Energroup Holdings Corporation

Consolidated Statements of Changes in Stockholders’ Equity

for the six months ended June 30, 2008 and the year ended December 31, 2007

(Stated in US Dollars)

					Common
					Stock							Accumulated
	Common Stock				Additional							Other
	Shares				Paid in		Statutory		Retained			Comprehensive
	Outstanding		Amount		Capital		Reserve		Earnings			Income		Total

Balance, January 1, 2007		17,272,756		17,273		2,396,079		751,444		18,112,089			896,679		22,173,563
Issuance of Common Stock & Warrants		3,863,636		3,863		13,043,964		-		-			-		13,047,828
Net Income		-		-		-		-		11,652,147			-		11,652,147
Appropriations of Retained Earnings		-		-		-		-		-			-		-
Foreign Currency Translation Adjustment		-		-		-		-		-			2,064,272		2,064,272
Balance, December 31, 2007		21,136,392		21,136		15,440,043		751,444		29,764,236			2,960,951		48,937,810

Balance, January 1, 2008		21,136,392		21,136		15,440,043		751,444		29,764,236			2,960,951		48,937,810
Issuance of Common Stock & Warrants		-		-		-		-		-			-		-
Net Income		-		-		-		-		9,856,185			-		9,856,185
Appropriations of Retained Earnings		-		-		-		978,419		(978,419	)		-		-
Foreign Currency Translation Adjustment		-		-		-		-		-			1,462,178		1,462,178
Balance, June 30, 2008		21,136,392		21,136		15,440,043		1,729,863		38,642,002			4,423,129		60,256,173

See Accompanying Notes to the Financial Statements

Energroup Holdings Corporation

Consolidated Statements of Cash Flows

for the three and six months ended June 30, 2008 and 2007

(Stated in US Dollars)

	3 months			3 months			6 months			6 months
	ended			ended			ended			ended
	June 30, 2008			June 30, 2007			June 30, 2008			June 30, 2007
Cash Flow from Operating Activities
Net Income	$	5,614,968		$	2,784,233		$	9,856,185		$	5,793,617
Amortization		92,630			21,101			185,260			64,530
Depreciation		739,953			485,594			1,407,774			920,223
(Increase) in Accounts & Other Receivables		(2,925,264	)		(14,469,947	)		(17,418,597	)		(13,121,242	)
(Increase) in Inventory & Purchase Deposits		6,384,900			(564,783	)		(2,721,767	)		941,313
(Increase) in Prepaid Taxes & Expenses		(64,415	)		(27,236	)		(149,450	)		(79,079	)
Increase Accounts, Taxes & Other Payables		4,989,385			9,649,369			5,278,059			9,848,676
Increase in Accrued Liabilities		(105,365	)		1,351,665			153,474			313,361
Increase in Customer Deposits		1,612,260			(20,187	)		1,670,140			(20,187	)
Cash Sourced/(Used) in Operating Activities		16,339,051			(790,191	)		(1,738,923	)		4,661,212

Cash Flows from Investing Activities
Funds deposited/released from Escrow Account		(72,836	)		-			2,019,333			-
Purchases of Plant & Equipment		(291,927	)		(572,469	)		(646,814	)		(698,710	)
Purchase of Land Use Rights		-			(3,976,894	)		-			(3,333,506	)
Payments for Deposits		(58,952	)		-			(60,308	)		-
Cash Sourced/(Used) in Investing Activities		(423,715	)		(4,549,363	)		1,312,211			(4,032,216	)

Cash Flows from Financing Activities
Proceeds from Bank Borrowings		-			-			7,605,795			-
Repayment of Bank Loans		(8,585,910	)		-			(8,585,910	)		(1,293,663	)
Cash Sourced/(Used) in Financing Activities		(8,585,910	)		-			(980,115	)		(1,293,663	)

Net Increase/(Decrease) in Cash & Cash Equivalents		7,329,427			(5,339,554	)		(1,406,826	)		(664,667	)

Effect of Currency Translation		(3,097,786	)		1,307,671			(1,354,295	)		119,065

Cash & Cash Equivalents at Beginning of Period		7,039,089			6,511,568			14,031,851			3,025,287

Cash & Cash Equivalents at End of Period	$	11,270,730		$	2,479,685		$	11,270,730		$	2,479,685

Supplementary information:
Interest Received		631,707			317			635,692			655
Interest Paid		86,435			76,419			557,582			76,419
Income Tax Paid		-			-			-			-

See Accompanying Notes to the Financial Statements

Energroup Holdings Corporation

Notes to Consolidated Financial Statements

1.	The Company and Principal Business Activities

Energroup Holdings Corporation (the “Company”) (OTCBB: ENHD) is a holding company incorporated in the state of Nevada in the United States of America whose primary business operations are conducted through its three operating subsidiaries: (1) Dalian Chuming Processed Foods Company Ltd., (the “Foods Company”) (2) Dalian Chuming Slaughter and Packaging Pork Company Ltd. (the “Meat Company”), and (3) Dalian Chuming Sales Company Ltd. (the “Sales Company”), which are incorporated in the People’s Republic of China (the “PRC”). The Company is headquartered in the City of Dalian, Liaoning Province of China.

The three operating subsidiaries were spun-off constituents of former parent company, Dalian Chuming Group Co. Ltd. The Company indirectly holds the three operating subsidiary companies through its wholly owned intermediary subsidiaries: (A) Precious Sheen Investments Limited (“PSI”), a British Virgin Islands corporation, and (B) Dalian Chuming Precious Sheen Investments Consulting Co., Ltd., (“Chuming”), a wholly foreign owned enterprise incorporated in the PRC.

Dalian Precious Sheen Investments Consulting Co., Ltd. (“Chuming”) is an intermediary holding company established in the People’s Republic of China (the “PRC” or “China”) formed for the purpose of providing a group structure to enhance the viable capacity of its three PRC operating subsidiaries.

The Company’s primary business activities are the production and packing of fresh pork and also production of processed meat products for distribution and sale to clients throughout the PRC and Russia.

Corporate Reorganization

PRC law currently has limits on foreign ownership of certain companies. To enable Chuming to raise equity capital from investors outside of China, it established an offshore holding company by incorporating Precious Sheen Investments Limited in the British Virgin Islands (“PSI”) in May 2007. On September 26, 2007, Chuming entered into share transfer agreements with Dalian Chuming Group Co., Ltd., under which Dalian Chuming Group Co., Ltd. agreed to transfer ownership of three operating subsidiaries (collectively known as “Chuming Operating Subsidiaries”) to Chuming. On October 23, 2007, Chuming completed all required registrations to complete the share transfer, and became the 100% owner of the Chuming Operating Subsidiaries. On November 14, 2007 the Dalian Commerce Bureau approved the transfer of Dalian Chuming Group Co., Ltd.’s 68% interest in Chuming to PSI, and upon this transfer, Chuming became a wholly foreign owned enterprise, with PSI as the 100% owner of Chuming (including its subsidiaries). On December 13, 2007, the PRC government authorities issued Chuming a business license formally recognizing it as a wholly foreign owned enterprise, of which PSI is the sole shareholder.

Energroup Holdings Corporation

Notes to Consolidated Financial Statements

The following is a description of the Chuming Operating Subsidiaries: -

A. Dalian Chuming Slaughter and Packaging Pork Company Ltd., whose primary business activity is acquiring, slaughtering, and packaging of pork and cattle;

B. Dalian Chuming Processed Foods Company Ltd., whose primary business activity is the processing of raw and cooked meat products; and

C. Dalian Chuming Sales Company Ltd., which is responsible for Chuming’s sales, marketing, and distribution operations.

Share Exchange Transaction

On December 31, 2007, the Company acquired all of the outstanding shares of PSI in exchange for the issuance of 16,850,000 restricted shares of our common stock to the shareholders of PSI, which represented approximately 97.55% of the then-issued and outstanding common stock of the Company (excluding the shares issued in the Financing). As a result of that transaction, PSI became our wholly owned subsidiary and we acquired the business and operations of the three operation subsidiaries.

The share exchange transaction has been accounted for as a recapitalization of PSI where the Company (the legal acquirer) is considered the accounting acquiree and PSI (the legal acquiree) is considered the accounting acquirer. As a result of this transaction, the Company is deemed to be a continuation of the business of PSI.

Accordingly, the financial data included in the accompanying consolidated financial statements for all periods prior to December 31, 2007 is that of the accounting acquirer (PSI). The historical stockholders’ equity of the accounting acquirer prior to the share exchange has been retroactively restated as if the share exchange transaction occurred as of the beginning of the first period presented.

2.	Summary of Significant Accounting Policies

(A)

Method of Accounting

The Company maintains its general ledger and journals with the accrual method accounting for financial reporting purposes. The financial statements and notes are representations of management. Accounting policies adopted by the Company conform to generally accepted accounting principles in the United States of America and have been consistently applied in the presentation of financial statements, which are compiled on the accrual basis of accounting.

Energroup Holdings Corporation

Notes to Consolidated Financial Statements

(B)

Principles of Consolidation

The consolidated financial statements, which include the Company and its subsidiaries, are compiled in accordance with generally accepted accounting principles in the United States of America. All significant inter-company accounts and transactions have been eliminated. The consolidated financial statements include 100% of assets, liabilities, and net income or loss of those wholly-owned subsidiaries.

The Company owned the three operating subsidiaries since its inception. The Company also owns two intermediary holdings companies. As of June 30, 2008, the detailed identities of the consolidating subsidiaries are as follows: -

Name of Company	Place of Incorporation		Attributable Equity Interest			Registered Capital
Precious Sheen Investments Limited		BVI		100	%		USD 10,000
Dalian Chuming Precious Sheen Investment Consulting Co., Ltd.		PRC		100	%		RMB 29,400,682
Dalian Chuming Slaughtering & Pork Packaging Co. Ltd.		PRC		100	%		RMB 10,000,000
Dalian Chuming Processed Foods Co. Ltd.		PRC		100	%		RMB 5,000,000
Dalian Chuming Sales Co. Ltd.		PRC		100	%		RMB 5,000,000

The consolidation of these operating subsidiaries into a newly formed holding company i.e. “the Company” is permitted by United States GAAP: ARB51 paragraph 22 and 23.

(C)

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Management makes these estimates using the best information available at the time the estimates are made; however, actual results could differ materially from these estimates.

(D)

Cash Equivalents

For purposes of the statement of cash flows, the Company considers all highly liquid equity or debt instruments purchased with a maturity of three months or less to be cash equivalents.

Energroup Holdings Corporation

Notes to Consolidated Financial Statements

(E)

Accounts Receivable

The Company extends unsecured, non-interest bearing credit to its customers; accordingly, the Company carries an allowance for doubtful accounts, which is an estimate, made by management. Management makes its estimate based on prior experience rates and assessment of specific outstanding customer balances. Management may extend credit to new customers who have met the criteria of the Company’s credit policy.

(F)

Inventory Carrying Value

Inventory, consisting of raw materials in the form of livestock, work in progress, and finished products, is stated at the lower of cost or market value. Finished products are comprised of direct materials, direct labor and an appropriate proportion of overhead. Periodic evaluation is made by management to identify if inventory needs to be written down because of damage, or spoilage. Cost is computed using the weighted average method.

(G)

Purchase Deposit

Purchase deposit represents the cash paid in advance for purchasing raw materials. The purchase deposit is interest free and unsecured.

(H)

Property, Plant, and Equipment

Property, Plant, and Equipment are stated at cost. Repairs and maintenance to these assets are charged to expense as incurred; major improvements enhancing the function and/or useful life are capitalized. When items are sold or retired, the related cost and accumulated depreciation are removed from the accounts and any gains or losses arising from such transactions are recognized.

Construction in progress represents the direct costs of design, acquisition, and construction of buildings, building improvements and land improvements. Capitalization of these costs ceases when substantially all activities necessary to prepare the assets for their intended use are completed. At such point, construction in progress is transferred to its respective asset classification. No depreciation is provided until it is completed and ready for intended use.

Energroup Holdings Corporation

Notes to Consolidated Financial Statements

Property and equipment are depreciated using the straight-line method over their estimated useful life with a 5% salvage value. Their useful lives are as follows: -

Fixed Asset Classification		Useful Life
Land Improvements		10 years
Buildings		20 years
Building Improvements		10 years
Manufacturing Machinery & Equipment		10 years
Office Equipment		5 years
Furniture & Fixtures		5 years
Vehicles		5 years

(I)

Land Use Rights

Land Use Rights are stated at cost less accumulated amortization. Amortization is provided over its useful life, using the straight-line method. The useful life of the land use right is 50 years.

(J)

Construction in Progress

Construction in progress represents the direct costs of design, acquisition, and construction of: buildings, building improvements, and land improvements. These costs are capitalized in the Construction-in-Progress account until substantially all activities necessary to prepare the assets for their intended use are completed. At such point, the Construction-in-Progress account is closed and the capitalized costs are transferred to their appropriate asset classification. No depreciation is provided until the assets are completed and ready for their intended use.

(J)

Accounting for Impairment of Assets

The Company reviews the recoverability of its long-lived assets, such as property and equipment, when events or changes in circumstances occur that indicate the carrying value of the asset group may not be recoverable. The assessment of possible impairment is based on the Company’s ability to recover the carrying value of the asset from the expected future cash flows, undiscounted and without interest charges, of the related operations. If these cash flows are less than the carrying value of such assets, an impairment loss is recognized for the difference between estimated fair value and carrying value. The measurement of impairment requires management to estimate future cash flows and the fair value of long-lived assets.

(K)

Customer Deposits

Customer Deposits represents money the Company has received in advance for purchases of pork and pork products. The Company considers customer deposits as a liability until products have been shipped and revenue is earned.

Energroup Holdings Corporation

Notes to Consolidated Financial Statements

(L)

Statutory Reserve

Statutory reserve refer to the amount appropriated from the net income in accordance with laws or regulations, which can be used to recover losses and increase capital, as approved, and, are to be used to expand production or operations. PRC laws prescribe that an enterprise operating at a profit, must appropriate, on an annual basis, from its earnings, an amount to the statutory reserve to be used for future company development. Such an appropriation is made until the reserve reaches a maximum equalling 50% of the enterprise’s capital.

(M)

Other Comprehensive Income

Comprehensive income is defined to include all changes in equity except those resulting from investments by owners and distributions to owners. Among other disclosures, all items that are required to be recognized under current accounting standards as components of comprehensive income are required to be reported in a financial statement that is presented with the same prominence as other financial statements. The Company’s current component of other comprehensive income is the foreign currency translation adjustment.

(N)

Recognition of Revenue

Revenue from the sale of pork products, etc., is recognized on the transfer of risks and rewards of ownership, which generally coincides with the time when the goods are delivered to customers and the title has passed.

(O)

Cost of Sales

The Company’s cost of sales is comprised of raw materials, factory worker salaries and related benefits, machinery supplies, maintenance supplies, depreciation, utilities, inbound freight, purchasing and receiving costs, inspection and warehousing costs

(P)

Selling Expense

Selling expenses are comprised of outbound freight, salary for the sales force, client entertainment, commissions, depreciation, advertising, and travel and lodging expenses.

(Q)

General & Administrative

General and administrative costs include executive compensation, quality control, and general overhead such as the finance department, administrative staff, and depreciation and amortization expense.

Energroup Holdings Corporation

Notes to Consolidated Financial Statements

(R)

Shipping and handling

All shipping and handling are expensed as incurred and are included as a component of cost of sales.

(S)

Advertising Expense

Costs related to advertising and promotion expenditures are expensed as incurred during the year. Advertising costs are charged to selling expense

(T)

Retirement Benefits

Retirement benefits in the form of contributions under defined contribution retirement plans to the relevant authorities are charged to the statement of operations as incurred.

(U)

Income Taxes

The Company accounts for income tax using an asset and liability approach and allows for recognition of deferred tax benefits in future years. Under the asset and liability approach, deferred taxes are provided for the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. A valuation allowance is provided for deferred tax assets if it is more likely than not these items will either expire before the Company is able to realize their benefits, or that future realization is uncertain.

(V)

Economic and Political Risks

The Company’s operations are conducted in the PRC. Accordingly, the Company’s business, financial condition and results of operations may be influenced by the political, economic and legal environment in the PRC, and by the general state of the PRC economy.

(W)

Foreign Currency Translation

The Company maintains its financial statements in the functional currency. The functional currency of the Company is the Renminbi (RMB). Monetary assets and liabilities denominated in currencies other than the functional currency are translated into the functional currency at rates of exchange prevailing at the balance sheet dates. Transactions denominated in currencies other than the functional currency are translated into the functional currency at the exchanges rates prevailing at the dates of the transaction. Exchange gains or losses arising from foreign currency transactions are included in the determination of net income for the respective periods.

Energroup Holdings Corporation

Notes to Consolidated Financial Statements

For financial reporting purposes, the financial statements of the Company which are prepared using the functional currency have been translated into United States dollars. Assets and liabilities are translated at the exchange rates at the balance sheet dates and revenue and expenses are translated at the average exchange rates and stockholders’ equity is translated at historical exchange rates. Any translation adjustments resulting are not included in determining net income but are included in foreign exchange adjustment to other comprehensive income, a component of stockholders’ equity.

*Exchange Rates*	*6/30/2008*		*12/31/2007*		*6/30/2007*
Period end RMB : US$ exchange rate		6.871800		7.314100		7.624800
Average period RMB : US$ exchange rate		7.072630		7.617200		7.729990

RMB is not freely convertible into foreign currency and all foreign exchange transactions must take place through authorized institutions. No representation is made that the RMB amounts could have been, or could be, converted into US$ at the rates used in translation.

(X)

Earnings Per Share

The Company computes earnings per share (“EPS”) in accordance with Statement of Financial Accounting Standards No. 128, “Earnings per share” (“SFAS No. 128”), and SEC Staff Accounting Bulletin No. 98 (“SAB 98”). SFAS No. 128 requires companies with complex capital structures to present basic and diluted EPS. Basic EPS is measured as the income or loss available to common shareholders divided by the weighted average common shares outstanding for the period. Diluted EPS is similar to basic EPS but presents the dilutive effect on a per share basis of potential common shares (e.g., contingent shares, convertible securities, options, and warrants) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential common shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS.

(Y)

Recent Accounting Pronouncements

In March 2008, the FASB issued SFAS No. 161, "Disclosures about Derivative Instruments and Hedging Activities, an amendment of FASB Statement No. 133" ("SFAS 161"). SFAS 161 applies to all derivative instruments and related hedged items accounted for under SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities" ("SFAS 133"). SFAS 161 requires entities to provide greater transparency about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under SFAS 133 and its related interpretations, and (c) how derivative instruments and related hedged items affect an entity's financial position, results of operations and cash flows. SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008.

Energroup Holdings Corporation

Notes to Consolidated Financial Statements

In May 2008, the FASB issued SFAS No. 162, "The Hierarchy of Generally Accepted Accounting Principles" ("SFAS 162"). SFAS 162 identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles (the GAAP hierarchy). Statement 162 will become effective 60 days following the SEC's approval of the Public Company Accounting Oversight Board amendments to AU Section 411, "The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles."

In May 2008, the FASB issued FSP Accounting Principles Board ("APB") 14-1 "Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)" ("FSP APB 14-1"). FSP APB 14-1 requires the issuer of certain convertible debt instruments that may be settled in cash (or other assets) on conversion to separately account for the liability (debt) and equity (conversion option) components of the instrument in a manner that reflects the issuer's non-convertible debt borrowing rate. FSP APB 14-1 is effective for fiscal years beginning after December 15, 2008 on a retroactive basis.

The Company is currently evaluating the potential impact, if any, of the adoption of the above recent accounting pronouncements on its consolidated results of operations and financial condition.

Energroup Holdings Corporation

Notes to Consolidated Financial Statements

3. Restricted Cash

The restricted cash reflects funds received from the financing transaction described in Note 16 that is held in an escrow with US Bank in the United States. These funds are restricted until the Company has fulfilled the following criteria: (1) the hiring of a Chief Financial Officer (“CFO”) that meets the approval of the investors, at such point the Company will release $1.5 million from restriction, the Company must satisfy this requirement within 90 days of the closing of the financing transaction, (2) the Company appoints a Board of Directors that has majority of independent members, at such point $2.0 million will be released from restriction, and (3) appoint a successor auditor, at which point $500,000 will be released from restriction. There is $250,000 in the escrow account that has already been earmarked for investor relations purposes.

At June 30, 2008, the Company has yet to fulfill requirement (1) and (3). The Company is still in the process of recruitment of a CFO in order to meet requirement (1). The Company has also requested bids for consideration from auditing firms that were on an approved list submitted by, Pinnacle Fund, whom was the lead investor in the Company’s financing transaction in December 2007, detailed in Note 18.

4. Accounts Receivable

Accounts Receivable at June 30, 2008 and December 31, 2007 consisted of the following:

	June 30, 2008			December 31, 2007
Accounts Receivable – Trade	$	19,210,929		$	707,156
Less: Allowance for Doubtful Accounts		(90,176	)		(84,723	)
Net Accounts Receivable	$	19,120,753		$	622,433

Allowance for Bad Debts	June 30, 2008		December 31, 2007
Beginning Balance	$	84,723	$	79,267
Allowance Provided		5,453		5,456
Charged Against Allowance				-
Ending Balance	$	90,176	$	84,723

During the second quarter, management revised the Company’s credit policy. Based on management’s review, the Company began extending more favorable credit terms to its top tier customers. Those customers that qualified as top tier were extended approximately one month of credit. The Company previously extended one to two days of credit.

5. Inventory

	June 30, 2008		December 31, 2007
Raw Materials	$	1,090,498	$	1,039,440
Work in Progress		515,763		547,889
Finished Goods		3,503,911		1,328,688
	$	5,110,172	$	2,916,016

Energroup Holdings Corporation

Notes to Consolidated Financial Statements

6. Property, Plant & Equipment

At June 30, 2008			Accumulated
	Cost		Depreciation		Net
Buildings	$	20,699,601	$	3,100,214	$	17,599,386
Manufacturing Equipment		9,981,336		2,634,788		7,346,548
Office Equipment		191,241		116,939		74,302
Vehicles		911,476		408,094		503,382
Furniture & Fixture		522,678		112,138		410,540
	$	32,306,332	$	6,372,173	$	25,934,159

At December 31, 2007			Accumulated
	Cost		Depreciation		Net
Buildings	$	19,910,391	$	2,522,257	$	17,388,134
Manufacturing Equipment		9,066,948		2,041,694		7,025,254
Office Equipment		122,124		60,298		61,826
Vehicles		652,231		321,138		331,093
Furniture & Fixture		49,204		19,015		30,189
	$	29,800,898	$	4,964,402	$	24,836,496

7. Land Use Right

The Company had the following intangible assets outstanding at June 30, 2008 and December 31, 2007:

	June 30, 2008			December 31, 2007

Land Use Rights, at Cost	$	14,370,602		$	13,501,580
less: Accumulated Amortization		(830,859	)		(645,600	)
	$	13,539,743		$	12,855,980

Energroup Holdings Corporation

Notes to Consolidated Financial Statements

8. Bank Loans

(A)

Short Term Bank Loans

At June 30, 2008, the Company had the following short term loans outstanding:

Borrower: Operating Subsidiary	Bank	Interest Rate			Due Date		Amount
Meat Company	Bank of China		8.217	%		12/18/2008	$	4,365,668
Food Company	Bank of China		8.217	%		11/17/2008		2,037,312
							$	6,402,980

The loans provided by the Bank of have been secured by the Company’s land use rights and guaranteed by the Dalian Chuming Group Co., Ltd.

9. Related Party Payable

In the normal course of business which includes the purchases of hogs and other raw materials, sale of pork and pork products, the Company conducts transactions with the following related parties: Dalian Chuming Group Co., Ltd (“Group”) and the Group subsidiaries, that are not consolidated into Energroup Holdings or Energroup’s subsidiary, Dalian Chuming Precious Sheen Investments Consulting Co. Ltd. (Chuming): (1) Dalian Chuming Industrial Development Co., Ltd., (2) Dalian Chuming Trading Co., Ltd, (3) Dalian Mingxing Livestock Product Co. Ltd., (4) Dalian Chuming Stockbreeding Combo Development Co., Ltd., (5) Dalian Chuming Fodder Co., Ltd., and (6) Dalian Chuming Biological Technology Co., Ltd., and (7) Dalian Huayu Seafood Food Co., Ltd. The Company and the aforementioned related parties share common beneficial ownership. All related party transactions are conducted between Chuming, the WOFE, and the Group. All transactions with related parties are generally performed at arm’s length, and in 2008, all such transactions were conducted at arm’s length.

In the event that the Company has both receivables from, and payables to the Group it will, in accordance with FIN 39, setoff the balances in order to arrive at a single balance that is either due from, or due to the Group. The following table shows how the Company arrived at a setoff balance that can be found on the Company’s Balance Sheet at June 30, 2008.

Operating Subsidiary	Type of Balance	Description	Amount
Meat Company	Receivable	Meet paid for feed on behalf of Group	5,434,331
Food Company	Receivable	Food sold products to Huayu	13,780
Food Company	Receivable	Food Sold products to Group upon receipt of Bank Drafts	8,440,292
			13,888,403

Energroup Holdings Corporation

Notes to Consolidated Financial Statements

Operating Subsidiary	Type of Balance	Description	Amount
Meat Company	Payable	Industrial paid for Equipment on behalf of Meat Company	6,461
Meat Company	Payable	Combo paid for Equipment on behalf of Meat Company	116,326
Food Company	Payable	Mingxing paid for Equipment on behalf of Food Company	4,366
Food Company	Payable	Packaging paid on Behalf of Food Company by Group	106,955
Food Company	Payable	Advance from Huayu for the purchases of products from Food Company	3,634,962
WOFE	Payable	Group loaned funds to Chuming WOFE	11,855,213
			15,724,283

		Net Related Party Payable	1,835,880

The related party payable balance detailed above, and the related transactions that comprise that balance are integral and material to the Company’s operations. The Company is reliant on transactions with the above related parties in order to conduct its business normally. The Company acknowledges that it has the responsibility to comply with paragraph c of SFAS 57 which calls for the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period. The Company’s accounting system in the past was manual and accordingly is not able to, from a cost benefit perspective, summarize and provide further detail on the related party transactions. Also, the Company’s current accounting department does not have enough staff in order to perform an exercise to further detail the Related Party Receivable beyond what has been provided above; however the Company is taking remedial action to rectify this deficiency for future financial reports. The Company does represent that the balances disclosed above are both accurate and reliable within acceptable thresholds of materiality.

The Company believes that related party transactions have a significant bearing on the Company’s financial statements. The procurement of hogs is almost entirely transacted through related parties. The Company’s cost of sales is significantly correlated with the transactions with related parties. The hogs that were purchased from the Group comprised 51.56% and 41.89% of the Company’s total cost of sales for the years 2007, and 2006, respectively. The remaining portions of hogs were purchased directly from breeders whom the Group has trained and indirectly oversees to insure quality. The current related party receivable from the Group represents the fact that Group significantly needed the aid of the Company in the form of working capital in order to meet the hog requirement by the Company for future sales and growth. The Company and the Group acknowledge the recoverability of the receivable and points out that this balance plays a role in the Company’s plans; however, the Company and the Group have stated that the receivable will be repaid.

Energroup Holdings Corporation

Notes to Consolidated Financial Statements

10. Capitalization

As a result of the reverse-takeover on December 31, 2007 including an exchange of shares and issuance of common stock to private investors pursuant to the equity financing plan, the total capitalization as of June 30, 2008 is showed in the following table.

Name of Shareholder	Number of Shares		Common Stock Capital		Additional Paid in Capital		Equity %
Operating Companies Founders		14,688,948	$	14,689	$	2,396,079		69.50	%
Shareholders Prior to reverse takeover		422,756		423		-		2.00	%
Advisors & Consultants		2,161,052		2,161		-		10.22	%
Private Investors		3,863,636		3,863		13,043,964		18.28	%
		21,136,392	$	21,136	$	15,440,043		100.00	%

11 Commitments of Statutory Reserve

In compliance with PRC laws, the Company is required to appropriate a portion of its net income to its statutory reserve up to a maximum of 50% of an enterprise’s registered capital in the PRC. The Company had future unfunded commitments, as provided below.

	June 30, 2008		December 31, 2007

PRC Registered Capital	$	3,642,866	$	3,642,866

- Statutory Reserve Ceiling
based on 50% of
Registered Capital		1,821,433		1,821,433

Less: - Retained Earnings
appropriated to
Statutory Reserve		1,729,863		751,444

Reserve Commitment
Outstanding		91,570	$	1,069,989

12. Advertising Costs

Advertising expenses were $1,413,901 and $50,313 for the six months ended June 30, 2008 and 2007 respectively.

Energroup Holdings Corporation

Notes to Consolidated Financial Statements

13.	Income Taxes

The Company’s different operating subsidiaries are subject to different income tax regulations under PRC law.

The operating subsidiary, Meat, has been given special tax-free status by the PRC government because of the Company standing as leader in its industry in Dalian; therefore, no provision for income tax in the PRC was made for the six months ended June 30, 2008 and 2007.

The Company’s operating subsidiary, Food, has provided provisions for income taxes for the six months ended June 30, 2008 and 2007 of $232,368 and $967,539 respectively.

The Company’s operating subsidiary, Sale, has not provided provisions for income taxes for the six months ended June 30, 2008 and 2007

After adjusting for special tax-free status and net operating loss, the consolidated taxable earnings were determined, and the results were as follows: -

i.		June 30, 2008			Tax expense			$	232,368
ii.		June 30, 2007			Tax expense			$	0

Beginning December 31, 2007, the Company’s foreign subsidiaries became subject to U.S. income tax liability; however, the tax is deferred until foreign source income is repatriated to the Company. Accordingly, the company has not made any provisions for U.S. income tax liability.

On March 16, 2007, the PRC government passed new tax legislation that repealed preferential tax treatment for foreign investment enterprises in the PRC and enacted new tax regulations. Under such regulations, with certain exceptions, both domestic and foreign enterprises will be taxed at a standard enterprise income tax rate of 25%. The Company’s two operating subsidiaries, Food, and Sales are subject to the 25% income tax rate beginning January 1, 2008. Based on current PRC legislation, Meat should be expected to continue benefiting from a tax holiday.

Energroup Holdings Corporation

Notes to Consolidated Financial Statements

14.	Commitments

(A) Hog Purchase Agreement

It is company policy to develop plant facilities based on availability of cash resources without incurring capital commitments. Therefore, the Company did not have any capital commitments existing at June 30, 2008.

There were no severance packages to any key management personnel that have resigned their positions. The Company has the right to terminate employment for cause at any time.

On December 19, 2007, the Company entered into a hog purchase agreement whereby the Dalian Chuming Group Co., Ltd will provide at fair market price a minimum number of hogs to the Company. At June 30, 2008, the Company expects minimum quantities of hogs detailed in the following table:

Year	Hogs		Price Per Hog		Amount
2008		270,000	$	211.01		56,972,700
2009		800,000	$	232.21		185,768,000
2010		800,000	$	255.44		204,352,000
					$	447,092,700

The Company believes that the fair market price of the hogs will increase by 10% each year. The assumption of 10% reflects that Company expectations in regards to inflation, and the rising costs of inputs in breeding livestock.

(B) Pledged Assets

Prior to the financing transaction described in Note 18 undertaken by the Company at December 31, 2007, the Company owed Dalian Chuming Group Co. Ltd (“Group”) approximately $20,000,000 (RMB 160,000,000). The Group, in turn, borrowed these funds from the China National Development Bank. These funds were guaranteed by a bond issued by China Export and Credit Insurance Corporation (“Bond Issuer”). The Company pledged land use rights and real property to the Bond Issuer in order to secure the bond.

As per the terms of the agreement under the financing transaction detailed in Note 18, the funds owed to the Group by the Company were set off against receivables owed by the Group to the Company. Although the Company no longer owes funds to the Group regarding this loan, the Group still has an outstanding balance with the China National Development Bank. Accordingly, the pledged collateral of land use rights and buildings made to the Bond Issuer still underlie the loan currently owed by the Group, and as such, the Company’s assets, namely the buildings and land use rights are at risk if the Group were to default on this loan.

Energroup Holdings Corporation

Notes to Consolidated Financial Statements

15.	Operating Segments

The Company individually tracks the performance of its three operating subsidiaries Meat Company, Food Company, Sales Company, and the ultimately holding parent company. Meat Company is primarily engaged in the slaughter and processing of pork livestock for wholesale and retail distribution. Food Company is primarily engaged in the production of pork-based food products, such as sausages and cured meats, for retail distribution. Sales Company is primarily engaged in the sale and distribution of products produced by Food Company and Meat Company.

Below is a presentation of the Company’s Statement of Income and Balance Sheet for its operating subsidiaries at, and for the six months ended June 30, 2008. The Company has also provided reconciling adjustments with the Company and its intermediate holding companies Dalian Chuming Precious Sheen Investments Consulting Ltd. (“Chuming”) and Precious Sheen Investments Ltd (PSI).

Results of Operations for the six months ended June 30, 2008	Meat Company		Food Company			Sales Company			Chuming WOFE, PSI, & Eliminations			Total
Sales	$	86,094,320	$	10,710,188		$	32,809,947		$	(43,030,832	)	$	86,583,622
Cost of Sales		75,193,539		8,612,897			32,299,248			(43,030,832	)		73,074,852
Gross Profit		10,900,781		2,097,291			510,699			-			13,508,771

Operating expense		1,561,818		809,103			1,243,301			116,994			3,731,216

Operating (Loss)/Profit		9,338,963		1,288,188			(732,602	)		(116,994	)		9,777,555

Other Income (Expenses)		601,323		(494,618	)		124,143			80,150			310,998

Earnings before Tax		9,940,286		793,570			-608,460			-36,843			10,088,553

Tax		-		232,368			-			-			232,368

Net Income	$	9,940,286	$	561,202		$	(608,460	)	$	(36,843	)	$	9,856,185

Eliminated Intercompany Sales of Products Sold
Sold From:	Sold To:	Amount
Food Company	Sales Company	$	7,133,567
Meat Company	Sales Company		28,633,827
Meat Company	Food Company		7,263,438
		$	43,030,832

Energroup Holdings Corporation

Notes to Consolidated Financial Statements

Balance Sheet Data at June 30, 2008	Meat Company		Food Company		Sales Company			Chuming WOFE, PSI, & Eliminations			Total
Current Assets	$	51,509,695	$	22,594,172	$	13,613,137		$	(44,240,677	)	$	43,476,326
Non Current Assets		23,201,799		16,949,116		374,398			58,209			40,583,522
Total Assets		74,711,494		39,543,288		13,987,535			(44,182,469	)		84,059,848

Current Liabilities		27,931,964		34,533,349		15,673,719			(54,335,357	)		23,803,676

Total Liabilities		27,931,964		34,533,349		15,673,719			(54,335,357	)		23,803,676

Net Assets		46,779,530		5,009,939		(1,686,185	)		10,152,888			60,256,172

Total Liabilities & Net Assets	$	74,711,494	$	39,543,288	$	13,987,535		$	(44,182,469	)	$	84,059,848

Energroup Holdings Corporation

Notes to Consolidated Financial Statements

16. Earnings Per Share

Components of basic and diluted earnings per share were as follows:

	3 months		3 months		6 months		6 months
	ended		ended		ended		ended
	June 30, 2008		June 30, 2007		June 30, 2008		June 30, 2007
Net Income	$	5,614,968	$	2,784,233	$	9,856,185	$	5,793,617

Original Shares		13,409,120		13,409,120		13,409,120		13,409,120
Addition to Common Stock from Offering on December 31, 2007		3,863,636		-		3,863,636		-
Basic Weighted Average Shares Outstanding		17,272,756		13,409,120		17,272,756		13,409,120

Addition to Common Stock if Contingent Shares Held in Escrow Were Released		3,863,636		3,863,636		3,863,636		3,863,636
Addition to Common Stock if Warrants Were Exercised		46,364		-		46,364		-
Diluted Weighted Average Shares Outstanding		21,182,756		17,272,756		21,182,756		17,272,756

Earnings Per Share
Basic	$	0.33	$	0.21	$	0.57	$	0.43
Diluted	$	0.27	$	0.16	$	0.47	$	0.34

Weighted Average Shares Outstanding
Basic		17,272,756		13,409,120		17,272,756		13,409,120
Diluted		21,182,756		17,272,756		21,182,756		17,272,756

17	Concentration of Risk

(A) Demand Risk

The Company had concentrations of risk in demand for its products because its sales were made to a small number of customers.

(B) Supply risk

The Company is subject to concentration of supply shortage risk because it purchases its materials for resale from a few select vendors. The Company’s availability of supply is correlated with the few select vendors’ ability to meet the market demand. In 2007, the entire industry in the PRC faced a shortage in the supply of hogs.

Energroup Holdings Corporation

Notes to Consolidated Financial Statements

18.	Financing Transaction

On December 31, 2007, the Company, a Nevada corporation (“Energroup” or the “Company”), acquired Precious Sheen Investments Ltd. (“PSI”) in a reverse take-over transaction, by executing a Share Exchange Agreement (“Exchange Agreement”) by and among Energroup, PSI, and all of the shareholders of PSI’s issued and outstanding share capital (the “PSI Shareholders”). PSI owned 100% of the equity in Dalian Precious Sheen Investments Consulting Co., Ltd., a wholly foreign owned enterprise in the People’s Republic of China (“Chuming”). Chuming is a holding company for the following three operating subsidiaries: (i) Dalian Chuming Slaughter and Packaging Pork Company Ltd., (ii) Dalian Chuming Processed Foods Company Ltd., and (iii) Dalian Chuming Sales Company Ltd., each of which is a limited liability company headquartered in, and organized under the laws of, China (collectively, the “Chuming Operating Subsidiaries”).

As a result of the reverse take-over transaction, PSI’s Shareholders became Energroup’s controlling shareholders and PSI became Energroup’s wholly-owned subsidiary. As a result of PSI becoming Energroup’s wholly-owned subsidiary, Energroup acquired the business and operations of Chuming and the Chuming Operating Subsidiaries.

Under the Exchange Agreement, Energroup completed the acquisition of all of the issued and outstanding shares of PSI through the issuance of 16,850,000 restricted shares of common stock of Energroup to PSI’s Shareholders. Immediately prior to the Exchange Agreement transaction, the Company had 422,756 shares of common stock issued and outstanding. Immediately after the issuance of the shares to PSI’s Shareholders, the Company had 17,272,756 shares of common stock issued and outstanding. The 422,756 shares of PSI were cancelled and 17,272,756 shares of Energroup were issued to reflect this reverse take-over transaction.

Concurrently with the Exchange Agreement, Energroup also entered into a Securities Purchase Agreement (the “Purchase Agreement”) pursuant to which Energroup agreed to issue and sell 3,863,635 shares of its common stock to ten accredited investors for an aggregate purchase price of $17,000,000 or $4.40 per share (the “Financing”). The closing of the Financing coincided with the Closing of the reverse take-over transaction.

In connection with the sales of securities to accredited investors under the securities purchase agreement, Hunter Wise Financial Group, LLC (the “Placement Agent”), was compensated with a commission of $1,190,000 which is equal to 7.00% of the aggregate purchase price and a warrant to purchase the 386,364 shares of the Company’s common stock at an exercise price of $4.40 per share. At December 31, 2007, the Company had adequate authorized capital to issue common shares upon the exercise of the warrant.

At June 30, 2007, the total number of shares outstanding, on a fully diluted basis, is shown in the following table:

Energroup Holdings Corporation

Notes to Consolidated Financial Statements

i.	Common shares outstanding prior to offering of securities	17,272,756
ii.	Common shares issued under securities purchase agreement	3,863,635
iii.	Common shares issuable upon exercise of placement agent warrants	386,364
		21,522,755

Concurrent with the Company’s financing transaction, the Company agreed to register for resale the common shares that were sold under the securities purchase agreement. Pursuant to filing a Form S-1 registration statement with the U.S. Securities and Exchange Commission, the Company entered into a Registration Rights Agreement with the Investors. The agreement calls for liquidated damages to be paid by the Company, if in the event the registration statement is not declared effective within 135 days of the closing of the financing transaction. The liquidated damages will be 1% of the total financing amount in cash per month for each month after the 135 period. The agreement states a maximum penalty of $1.70 million or 10% of the financing amount. At December 31, 2007, the Company accounted for the liability under the registration rights agreement in accordance with FASB Staff Position No. EITF 00-19-2 Accounting for Registration Payment Arrangements. Under such accounting treatment, the liquidated damages are accounted for as a reduction of the proceeds. In asserting the most conservative position, the Company has accrued the maximum liability of $1.7 million and is carrying that balance in the accrued liabilities account. In the event that the registration becomes effective in a timeframe that is earlier than February 15, 2009, the portion that is not legally owed, or in the event that investors waive any liquidating damages, the accrual will be reversed and the funds will be added to the Company’s additional paid in capital.

In connection with a make good agreement related to the financing transaction on December 31, 2007, the Company’s Chairman and CEO, Mr. Shi Huashan placed in escrow 3,863,636 shares, which were beneficially owned by him,. These shares are to be released back to him if the Company meets the following earnings targets of $15.9 million, and $20.9 million in after-tax net income for the years ended December 31, 2008, and 2009 respectively. In the event that the Company does not meet the aforementioned financial targets, the escrowed shares will be released, on a pro-rata basis, to the investors in the financing transaction. In accordance with SFAS 128, Earnings per Share, for the sake of calculating the Company’s earnings per share, the Company has accounted for the 3,863,636 escrowed shares as contingently issuable shares as such they are not included in the weighted average basic shares outstanding but are included in the weighted average diluted shares outstanding. Please refer to Note 16.

In accordance with Topic 5:T of the Staff Accounting Bulletins (SAB 79), the Company expects to record a compensatory expense for the shares upon their release from escrow. Whether the shares are released to the accredited investors or released to Mr. Shi the Company will record an expense with a corresponding credit to the Company’s contributed paid in capital.

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS

Note Regarding Forward-Looking Statements

This quarterly report on Form 10-Q and other reports filed by Registrant from time to time with the Securities and Exchange Commission (collectively the “Filings”) contain or may contain forward-looking statements and information that are based upon beliefs of, and information currently available to, Registrant’s management as well as estimates and assumptions made by Registrant’s management. Readers are cautioned not to place undue reliance on these forward-looking statements, which are only predictions and speak only as of the date hereof. When used in the filings, the words “anticipate”, “believe”, “estimate”, “expect”, “future”, “intend”, “plan”, or the negative of these terms and similar expressions as they relate to Registrant or Registrant’s management identify forward-looking statements. Such statements reflect the current view of Registrant with respect to future events and are subject to risks, uncertainties, assumptions, and other factors (including the risks contained in the section of this report entitled “Risk Factors”) relating to Registrant’s industry, Registrant’s operations and results of operations, and any businesses that Registrant may acquire. Should one or more of these risks or uncertainties materialize, or should the underlying assumptions prove incorrect, actual results may differ significantly from those anticipated, believed, estimated, expected, intended, or planned.

Although Registrant believes that the expectations reflected in the forward-looking statements are reasonable, Registrant cannot guarantee future results, levels of activity, performance, or achievements. Except as required by applicable law, including the securities laws of the United States, the Registrant does not intend to update any of the forward-looking statements to conform these statements to actual results. Readers are urged to carefully review and consider the various disclosures made throughout the entirety of this quarterly report, which attempt to advise interested parties of the risks and factors that may affect our business, financial condition, results of operations, and prospects.

In this Form 10-Q, references to “we”, “our”, “us”, “our company”, “Energroup” or the “Registrant” refer to Energroup Holdings Corporation, a Nevada corporation.

OVERVIEW

We are a meat processing company with a primary focus on pork and pork products. We have a unique wholesale and retail distribution model and sell directly to over 7,600 retail outlets, including supermarkets and hypermarkets, across Northeast China.

Dalian Precious Sheen Investments Consulting Co., Ltd., or Chuming WFOE, is our holding company established in the People’s Republic of China (the “PRC” or “China”) for our three PRC operating subsidiaries, collectively referred to elsewhere in this report as the “Chuming Operating Subsidiaries”:

	1.	Dalian Chuming Slaughter and Packaging Pork Company Ltd. ( “Meat Company”), whose primary business activity is acquiring, slaughtering and packaging of pork and cattle;

	2.	Dalian Chuming Processed Foods Company Ltd. ( “Food Company”), whose primary business activity is the processing of raw and cooked meat products; and

	3.	Dalian Chuming Sales Company Ltd. (“Sales Company”), which is responsible for our sales, marketing and distribution operations.

The Chuming Operating Subsidiaries are spin-off constituents of a former parent company, Dalian Chuming Group Co., Ltd., or the “Group.” Our primary business activities is the production and packing of fresh pork and production of processed meat products for distribution and sale to clients throughout the PRC. Chuming WFOE was incorporated in China as wholly foreign owned enterprise on in December 2007. Chuming WFOE’s parent company is Precious Sheen Investments Limited (“PSI”), a holding company established in the British Virgin Islands in May 2007. We are headquartered in the City of Dalian, Liaoning Province of China.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Our management’s discussion and analysis of our financial condition and results of operations are based on our combined financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements as well as the reported net sales and expenses during the reporting periods. On an ongoing basis, we evaluate our estimates and assumptions. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

While our significant accounting policies are more fully described in Note 2 to our combined financial statements included in this report, we believe that the following accounting policies are the most critical to aid you in fully understanding and evaluating this management discussion and analysis:

Method of Accounting

We maintain our general ledger and journals with the accrual method accounting for financial reporting purposes. The financial statements and notes are representations of management. Accounting policies adopted by us conform to generally accepted accounting principles in the United States of America and have been consistently applied in the presentation of financial statements, which are compiled on the accrual basis of accounting.

Principles of Consolidation

Our founders have directly or indirectly owned the three operating subsidiaries since their inception. We also own two intermediary holding companies. As of June 30, 2008, the detailed identities of the consolidating subsidiaries are as follows:

Name of Company	Place of Incorporation		Attributable Equity Interest			Registered Capital

Precious Sheen Investments Limited		BVI		100	%		USD 10,000

Dalian Chuming Precious Sheen Investment Consulting Co., Ltd.		PRC		100	%		RMB 29,400,682

Dalian Chuming Slaughtering & Pork Packaging Co. Ltd.		PRC		100	%		RMB 10,000,000

Dalian Chuming Processed Foods Co. Ltd.		PRC		100	%		RMB 5,000,000

Dalian Chuming Sales Co. Ltd.		PRC		100	%		RMB 5,000,000

The consolidation of these operating subsidiaries into a newly formed holding company i.e. “the Company” is permitted by United States GAAP: ARB51 paragraph 22 and 23.

Use of Estimates

Accounts Receivable

We extend unsecured, non-interest bearing credit to our customers; accordingly, we carry an allowance for doubtful accounts, which is an estimate, made by management. Management makes its estimate based on prior experience rates and assessment of specific outstanding customer balances. In the second quarter of 2008, we revised our customer credit policy and began offering extended payment terms to some of our quality long term customers. In accordance with this revised policy, qualified customers were offered up to a two-month grace period for payment, whereas previously payment was required within 1-2 days of delivery of goods. See “Liquidity and Capital Resources – Cash Flows – Six Months Ended June 30, 2008”. Management may extend credit to new customers who have met the criteria of our revised credit policy.

Inventory Carrying Value

Property, Plant, and Equipment

Property and equipment are depreciated using the straight-line method over their estimated useful life with a 5% salvage value. Their useful lives are as follows:

Fixed Asset Classification		Useful Life
Land Improvements		10 years
Buildings		20 years
Building Improvements		10 years
Manufacturing Machinery & Equipment		10 years
Office Equipment		5 years
Furniture & Fixtures		5 years
Vehicles		5 years

Land Use Rights

Land Use Rights are stated at cost less accumulated amortization. Amortization is provided over its useful life, using the straight-line method. The useful life of the land use right is 50 years.

Customer Deposits

Customer Deposits represents money we have received in advance for purchases of pork and pork products. We consider customer deposits as a liability until products have been shipped and revenue is earned.

Statutory Reserve

Statutory reserve refers to the amount appropriated from the net income in accordance with laws or regulations, which can be used to recover losses and increase capital, as approved, and, are to be used to expand production or operations. PRC laws prescribe that an enterprise operating at a profit, must appropriate, on an annual basis, from its earnings, an amount to the statutory reserve to be used for future company development. Such an appropriation is made until the reserve reaches a maximum equalling 50% of the enterprise’s capital.

Earnings Per Share

We compute earnings per share (“EPS”) in accordance with Statement of Financial Accounting Standards No. 128, “Earnings per share” (“SFAS No. 128”), and SEC Staff Accounting Bulletin No. 98 (“SAB 98”). SFAS No. 128 requires companies with complex capital structures to present basic and diluted EPS. Basic EPS is measured as the income or loss available to common shareholders divided by the weighted average common shares outstanding for the period. Diluted EPS is similar to basic EPS but presents the dilutive effect on a per share basis of potential common shares (e.g., contingent shares, convertible securities, options, and warrants) as if they had been converted at the beginning of the periods presented, or issuance date, if later. Potential common shares that have an anti-dilutive effect (i.e., those that increase income per share or decrease loss per share) are excluded from the calculation of diluted EPS.

Recent Accounting Pronouncements

We are currently evaluating the potential impact, if any, of the adoption of the above recent accounting pronouncements on our consolidated results of operations and financial condition.

RESULTS OF OPERATIONS

Comparison of Three Months Ended June 30, 2008 and June 30, 2007.

The following table sets forth the results of our operations for the periods indicated as a percentage of net sales:

	Quarter Ended						Quarter Ended
	June 30,			% of			June 30,			% of
	2008			Sales			2007			Sales
Sales	$	43,076,524			100.00	%	$	31,370,321			100.00	%
Cost of Sales		36,600,428			84.97	%		26,510,666			84.51	%
Gross Profit		6,476,097			15.03	%		4,859,655			15.49	%
Selling Expenses		759,778			1.76	%		1,570,001			5.00	%
General & Administrative Expenses		653,187			1.52	%		382,377			1.22	%
Total Operating Expense		1,412,965			3.28	%		1,952,378			6.22	%
Operating Income / (Loss)		5,063,132			11.75	%		2,907,277			9.27	%
Other Income (Expense)		617,859			1.43	%		(123,044	)		0.39	%
Earnings Before Tax		5,680,991			13.19	%		2,784,233			8.88	%
(Income Tax Expense) / Deferred Tax Benefit		(66,023	)		0.15	%		-			0.00	%
Net Income	$	5,614,968			13.03	%	$	2,784,233			8.88	%
Earnings Per Share
Basic		0.33						0.21
Diluted		0.27						0.16
Weighted Average Shares Outstanding
Basic		17,272,756						13,409,120
Diluted		21,182,756						17,272,756

Sales. Our sales include revenues from sales of our fresh pork, frozen pork, and processed food products. During the quarter ended June 30, 2008, we had sales of $43,076,524 as compared to sales of $31,370,321 for the quarter ended June 30, 2007, an increase of approximately 37%. Our sales for our various product categories in the second quarter of 2008 are summarized as follows:

Sales by product category	Second Quarter 2008 (amount in dollars)		% of Total Sales			Second Quarter 2007 (amount in dollars)		% of Total Sales			% of increase from 2007 to 2008
Fresh Pork	$	35,361,296		82.09	%	$	24,139,141		76.95	%		46.49	%
Frozen Pork		2,334,238		5.42	%		1,939,900		6.18	%		20.33	%
Processed Food Products		5,380,990		12.49	%		5,291,280		16.87	%		1.70	%

Total Sales	$	43,076,524		100	%	$	31,370,321		100	%		37.32	%

Sales by product category, by weight of product	Second Quarter 2008 (Weight in tons)		% of Total Sales			Second Quarter 2007 (Weight in tons)		% of Total Sales			% of change from 2007 to 2008
Fresh Pork		15,445		81.10	%		12,368		74.15	%		24.88	%
Frozen Pork		1,173		6.20	%		1,054		6.32	%		11.29	%
Processed Food Products		2,426		12.70	%		3,257		19.53	%		-25.51	%

Total Sales		19,044		100.00	%	$	16,679		100.00	%		14.18	%

In the second quarter of 2008, we raised our average per-kilogram sale prices to our customers, as we did during 2007, which coincided with an increase in the cost of live pigs and other production costs. In addition, despite these consumer price increases, in the second quarter of 2008 our sales volume of fresh pork and frozen pork (by weight) increased by 24.9% and 11.29% respectively, with the fresh pork category experiencing the highest growth in sales volume both by weight and in terms of sales revenue. We also increased our sales of frozen pork, both by weight and by sales revenue, in the second quarter of 2008 as compared with the same period in the prior year. For processed food products, our sales by weight decreased by 25.51%, but because of higher per-kilogram prices, our sales revenue for this product category increased by 1.70%. Management attributes the increases in sales revenue in all our product categories to the continuing strength in consumer demand for our products in the periods presented.

The following table shows the change in the average price per kilogram for our product to consumers in the quarter ending June 30, 2008, as compared to the same quarter last year:

	Average Per-Kilogram Price to Customers (in $US)
	Second Quarter of 2008		Second Quarter of 2007		% change			Change in Price
Fresh Pork	$	2.29	$	1.95		17.44	%	$	0.34
Frozen Pork	$	1.99	$	1.84		8.15	%	$	0.15
Processed Food Products	$	2.22	$	1.62		37.04	%	$	0.60

In the second quarter of 2008, we raised our prices for fresh pork significantly, while we made more modest increases in the prices of our processed food products and frozen pork. We raised our prices for frozen pork by only 8.15% because we use grade-3 and grade-4 pigs for such products, which are lower in price than the grade-1 and grade-2 pigs, which we use to produce fresh pork products. We raised our prices for processed food products by 37.04% because the price of live pigs increased rapidly starting from the third quarter of 2007. The price increase for processed food products was also partially due to rapid price increases for packaging material and food additives during the second quarter of 2008.

Although we also sell our products through sales agents, our principal sales channels consist of Chuming-branded franchise stores, supermarkets and restaurants and canteens. The following table summarizes the changes in the number of participants within these sales channels:

	Sales Channels
As of June 30,	Franchise Stores		Supermarkets		Restaurants and Canteens
2007		501		95		2,608
2008		682		140		3,172

As shown in the table above, as of June 30, 2008, as compared to June 30, 2007, we significantly increased the number of participants in all three of these sales channels. The increase in the number of these participants has resulted in increased sales.

The following table shows the total increase in our sales, from the second quarter of 2008 as compared to the second quarter of 2007, by product category and by sales channel.

	Increase in Sales from Second Quarter of 2007 to Second Quarter of 2008
	By Product Group and Sales Channel ($)
Product Category	Franchise Operators			Sales Agents		Super Markets			Restaurants and Canteens			Total Increase ($)
Fresh Pork		2,562,492			1,213,684		4,271,990			N/A	_²		8,048,166
Frozen Pork		N/A	¹		61,707		N/A	¹		924,997			986,704
Processed Food Products		1,426,844			110,899		1,042,511			91,098			2,671,352

Total Increase in Sales		3,989,336			1,386,290		5,314,501			1,016,075			11,706,203

_____________________________

¹ In the periods presented, we did not sell frozen pork through franchise operators and supermarkets.

²In the periods presented, we did not sell fresh pork through restaurants and canteens.

In the second quarter of 2008, as compared to the same quarter in 2007, we achieved significantly higher sales revenue from the sale of fresh pork, which was a result of higher sales volume of this product category by weight, combined with increases in our per-kilogram prices to our customers. Management believes this is due to continued strong consumer demand for fresh pork.

In the second quarter of 2008, as compared to the same quarter in 2007, the majority of our increase in sales came through supermarkets, sales agent and franchise operators, respectively. The $5.3 million sales increase through supermarkets is due to our efforts in expanding the supermarket sales channel, which provides us with the largest profit margins, combined with increases in our per-kilogram prices of fresh pork.

Overall, management believes that our increase in sales, despite higher consumer prices, resulted from increased consumer demand, the expansion of our sales channels and sales network, and increased consumer awareness of our brand and availability of our products.

Cost of Sales. Cost of sales for the second quarter of 2008 increased by $10,089,762 or approximately 38%, from $26,510,666 for the three months ended June 30, 2007 to $36,600,428 for the three months ended June 30, 2008. The increase was attributable to the increase in sales for the second quarter of 2008 as compared to the same period in the prior year. Our cost of sales for our various product categories in the second quarter of 2008 is summarized as follows:

Cost of Sales by Product Category	Second Quarter 2008 (in $ US)		% of Overall Cost of Sales			Second Quarter 2007 (in $ US)		% of Overall Cost of Sales			% increase from 2007 to 2008
Fresh Pork	$	30,442,496		83.18	%	$	21,078,486		79.51	%		44.42	%
Frozen Pork		1,960,760		5.36	%		1,648,915		6.22	%		18.91	%
Processed Food Products		4,197,172		11.47	%		3,783,265		14.27	%		10.94	%

Total Cost of Sales	$	36,600,428		100.00	%	$	26,510,666		100.0	%		38.06	%

The following table shows the estimated average per-kilogram price we paid for live pigs in 2007 and 2008:

	Average Unit Price Per Kilogram in 2008 (in $US)		Average Unit Price Per Kilogram in 2007 (in $US)		Price Increase (in $US)		% Increase from 2007 to 2008
First Quarter		2.2936		1.0579		1.1357		107.35	%
Second Quarter		2.2578		1.3535		0.9043		66.81	%
Third Quarter		N/A		1.8104		N/A		N/A	%
Fourth Quarter		N/A		1.8656		N/A		N/A	%

Average for Year to Date		2.2757		1.5219		0.7538		49.53	%

The most rapid increase in live pig prices occurred in the third and fourth quarters of 2007, for the highest grades of live pigs. However, the live pig prices slightly dropped during the second quarter of 2008. Management believes that while higher live pig prices may persist, management does not expect further rapid escalation in live pig prices of the scale seen during 2007. Management currently projects a 10% per year increase in the average price per kilogram for live pigs during the next several years.

The following table shows our cost of sales in the second quarter of 2008 as compared with the same period in 2007, and also indicates cost of sales by product group, as a percentage of sales within each product group.

Cost of Sales by Product Category	Second Quarter of 2008		% of Product Group Sales			Second Quarter of 2007		% of Product Group Sales in the Second Quarter 2008
Fresh Pork	$	30,442,496		86.09	%	$	21,078,486		87.32	%
Frozen Pork		1,960,760		84.00	%		1,648,915		85.00	%
Processed Food Products		4,197,172		78.00	%		3,783,265		71.50	%
Total Cost of Sales	$	36,600,428		84.97	%	$	26,510,666		84.51	%

Our cost of sales as a percentage of sales of fresh pork decreased slightly in the second quarter of 2008, as compared to the same period in 2007, primarily because of a deceleration of the price increases for live pigs during the second quarter of 2008. The cost of sales as a percentage of sales of frozen pork also fell slightly, which was due to the use of grade-3 and grade-4 pigs for such products, which are lower in price than the grade-1 and grade-2 pigs, which we use to produce fresh pork products. The cost increases in live pigs primarily affected the grade-1 and grade-2 categories. The cost of sales as a percentage of sales of processed food products, however, increased by approximately 6.50% due to a rapid price increase in packaging material and food additives during the second quarter of 2008.

Gross Profit. Gross profit was $6,476,097 for the three months ended June 30, 2008 as compared to $4,859,655 for the same period in 2007, representing an increase of $1,616,442, or approximately 33.26%. Management attributes the increase in gross profit to strong increases in sales, driven by strong demand for our products, especially our fresh pork products. Our gross profit as a percentage of sales was 15.03% in the second quarter of 2008 as compared to 15.49% for the same period in 2007. The slight decrease in gross profit as a percentage of sales was attributable to these commodity and input price increases, not all of which we passed on to our customers in the form of higher product prices.

The following table presents our gross profit for the three months ended June 30, 2008 and 2007. The table below also shows the percentage of gross profit for each of our product groups, as a percentage of sales for that product group.

Gross Profit by Product Category	Second Quarter of 2008		% of Product Group Sales			Second Quarter of 2007		% of Product Group Sales			% of increase from Second Quarter of 2007 to Second Quarter of 2008
Fresh Pork	$	4,918,800		16.15	%	$	3,060,655		14.52	%		60.71	%
Frozen Pork		373,478		19.04	%		290,985		17.64	%		28.35	%
Processed Food Products		1,183,818		28.21	%		1,508,015		39.86	%		-21.50	%
Total Gross Profit	$	6,476,097		15.03	%	$	4,859,655		15.49	%		33.26	%

As shown in the table above, the fresh pork as a product category delivered the highest increase in gross profit from the second quarter of 2008 as compared with the same period in 2007. This is due to the strong demand of our fresh pork products.

However, in both periods, our processed food product category yielded the highest gross profit as a percentage of sales within the product category. Management attributes this to the use of grade-3 and grade-4 pigs and unsold portions of grade-1 and grade-2 pigs in producing our processed food products. Grade-3 and grade-4 pigs are generally lower in price than grade-1 and grade-2 pigs. Because of our superior processing and storage techniques and the strength of our brand-name, we were able to sell our processed food products at the highest going market price for this category of products. However, because the price of the packaging material and food additives increased substantially during the second quarter of 2008, the gross profit of our processed food products declined from 39.86% to 28.21%.

Selling Expenses. Selling expenses totaled $759,778 for the three months ended June 30, 2008, as compared to $1,570,001 for the same period in 2007, a decrease of $810,223 or 52%. This decrease is due to a decrease in advertising expense. During the three months ended June 30, 2007, we spent $800,000 in advertising in a special marketing campaign in an effort to promote our brand.

General and Administrative Expenses. General and administrative expenses totaled $653,187 for the three months ended June 30, 2008 as compared to $382,377 for the same period in 2007, an increase of $270,810 or 71%. This increase is primarily attributable to an increase in salary expense. We continued to hire new staff to meet the needs of our expanding operations. Also, consistent with the recent escalation in the rate of inflation in China, the salaries and the cost of benefits for our staff increased by approximately 40% in the second quarter of 2008 as compared to the same period in 2007. These increases in salaries were made in order to maintain compensation levels that were sufficient to attract and retain qualified employees.

Other Income (Expense). Our other income (expense) consisted of interest income, other expenses, and interest expense. We had total other income of $617,859 for the three months ended June 30, 2008 as compared to total expense of $123,044 for the same period in 2007, a decrease of $740,903 or 602%. The decrease in other expenses in the second quarter of 2008 is primarily attributable to several factors. First, the Dalian City government gave us a one time subsidy in the amount of $240,000. This subsidy is due to efforts by the local government to keep the price of pork stable in local markets. Second, this is also attributable to a decrease in interest expenses of approximately $220,000 as we reduced our bank loan principal amount during the three months ended June 30, 2008 as compared to the same period in 2007.

Net Income. Our net income for the three months ended June 30, 2008 was $5,614,968 as compared to $2,784,233 for the same period in 2007, an increase of $2,830,735 or 102%. This increase in net income is primarily attributable to the factors described above, but primarily from the increase in sales, and our efforts to manage our costs in order to achieve a gross profit margin of 15.03%, which is only slightly less than the gross profit margin achieved in the second quarter of 2007 of 15.49%.

Comparison of Six Months Ended June 30, 2008 and June 30, 2007.

The following table sets forth the results of our operations for the periods indicated as a percentage of net sales:

	Six Months Ended						Six Months Ended
	June 30,			% of			June 30,		% of
	2008			Sales			2007		Sales
Sales	$	86,583,622			100.00	%	$	54,558,315		100.00	%
Cost of Sales		73,074,852			84.80	%		45,536,298		83.46	%
Gross Profit		13,508,771			15.60	%		9,022,017		16.54	%
Selling Expenses		2,585,055			2.99	%		1,799,420		3.30	%
General & Administrative Expenses		1,146,161			1.32	%		687,513		1.26	%
Total Operating Expense		3,731,216			4.31	%		2,486,933		4.56	%
Operating Income / (Loss)		9,777,555			11.29	%		6,535,084		11.98	%
Other Income (Expense)		310,998			0.36	%		741,467		1.36	%
Earnings Before Tax		10,088,553			11.65	%		5,793,617		10.62	%
(Income Tax Expense) / Deferred Tax Benefit		(232,368	)		0.27	%		-		0.00	%
Net Income	$	9,856,185			11.38	%	$	5,793,617		10.62	%
Earnings Per Share
Basic		0.57						0.43
Diluted		0.47						0.34
Weighted Average Shares Outstanding
Basic		17,272,756						13,409,120
Diluted		21,182,756						17,272,756

Sales. Our sales include revenues from sales of our fresh pork, frozen pork, and processed food products. During the six months ended June 30, 2008, we had sales of $86,583,622 as compared to sales of $54,558,315 for the same period of 2007, an increase of approximately 59%. Our sales for our various product categories for the six month period ended June 30, 2008 are summarized as follows:

Sales by product category	Six Months Ended June 30, 2008 (amount in $US)		% of Total Sales			Six Months Ended June 30, 2007 (amount in $US)		% of Total Sales			% of increase from 2007 to 2008
Fresh Pork	$	65,635,910		75.81	%	$	42,795,035		78.44	%		53.37	%
Frozen Pork		6,425,032		7.42	%		3,843,316		7.04	%		67.17	%
Processed Food Products		14,522,680		16.77	%		7,919,964		14.52	%		83.36	%

Total Sales	$	86,583,622		100	%	$	54,558,315		100	%		58.70	%

Sales by product category, by weight of product (metric tons):	Six Months Ended June 30, 2008 (Weight in tons)		% of Total Sales			Six Months Ended June 30, 2007 (Weight in tons)		% of Total Sales			% of change from 2007 to 2008
Fresh Pork		29,442		80.54	%		22,674		73.97	%		29.85	%
Frozen Pork		2,259		6.18	%		1,932		6.30	%		16.93	%
Processed Food Products		4,856		13.28	%		6,048		19.73	%		-19.71	%

Total Sales		36,557		100	%	$	30,654		100	%		19.26	%

In the six months ended June 30, 2008, we raised our average per-kilogram sale prices to our customers, as we did during 2007, which coincided with an increase in the cost of live pigs and other production costs. In addition, despite these consumer price increases, in the first six months of 2008 our sales volume of fresh pork and frozen pork (by weight) increased, with the fresh pork category experiencing the highest growth in sales volume both by weight and in terms of sales revenue. We also increased our sales of frozen pork, both by weight and by sales revenue, in the first six months of 2008 as compared with the same period in the prior year. For processed food products, our sales by weight decreased by 19.17%, but because of higher per-kilogram prices, our sales revenue for this product category increased by 83.36%. Management attributes the increases in sales revenue in all our product categories to the continuing strength in consumer demand for our products in the periods presented.

The following table shows the change in the average price per kilogram for our product to consumers in the six months ended June 30, 2008, as compared to the same quarter last year:

	Average Per-Kilogram Price to Customers (in $US)
	Six Months Ended June 30, 2008		Six Months Ended June 30, 2007		% change			Change in Price
Fresh Pork	$	2.23	$	1.89		17.99	%	$	0.34
Frozen Pork	$	2.84	$	1.99		42.71	%	$	0.85
Processed Food Products	$	2.99	$	1.31		128.4	%	$	1.68

In the six months ended June 30, 2008, we raised our prices for processed food products significantly, while we made relatively smaller increases in the prices of our fresh pork and frozen pork. We raised our prices for processed food products due to several factors. First, we experienced a surge in customer demand for our pig viscera products, which is a subcategory within the processed food category. In response to this surge in demand, and due to limited supply, we raised our prices to customers for that subcategory of the processed food products. Second, the cost to us for packaging material and food additives increased substantially during the first half of 2008, and we passed much of these cost increases on to customers in the form of higher product prices. These input cost increases affected processed food products more than other categories. We raised our prices for fresh pork by only 17.99% because we were not able to pass on the entire amount of the live pig price increases to our customers. In management’s view, more aggressive price increases in the fresh pork category would have discouraged customers from consuming fresh pork, and would have been out of line with our competitors.

Although we also sell our products through sales agents, our principal sales channels consist of Chuming-branded franchise stores, supermarkets and restaurants and canteens.

The following table shows the total increase in our sales, from the first six months ending on June 30, 2008 as compared to same period of 2007, by product category and by sales channel.

	Increase in Sales from First Six Months Ended on June 30, 2007 to the same period of 2008
	By Product Group and Sales Channel ($)
Product Category	Franchise Operators		Sales Agents		Super Markets		Restaurants and Canteens		Total Increase ($)
Fresh Pork		5,805,463		6,604,820		10,430,592		N/A²		22,840,875
Frozen Pork		N/A¹		335,809		N/A¹		2,245,907		2,581,716
Processed Food Products		3,232,591		603,509		2,545,421		221,193		6,602,714

Total Increase in Sales		9,038,054		7,544,138		12,976,013		2,467,100		32,025,305

_____________________________

¹ In the periods presented, we did not sell frozen pork through franchise operators and supermarkets.

²In the periods presented, we did not sell fresh pork through restaurants and canteens.

In the first six months of 2008, as compared to the same period in 2007, we achieved significantly higher sales revenue from the sale of fresh pork, which was a result of higher sales volume of this product category by weight, combined with increases in our per-kilogram prices to our customers. Management believes this is due to continued strong consumer demand for fresh pork.

In the first six months of 2008, as compared to the same period in 2007, the majority of our increase in sales came through supermarkets, sales agent and franchise operators, respectively. The $12.98 million sales increase through supermarkets is due to our efforts to expand the supermarket sales channel, which provides us with the largest profit margins, combined with increases in our per-kilogram prices of fresh pork.

Cost of Sales. Cost of sales for the first six months of 2008 increased by $27,538,554 or approximately 60%, from $45,536,298 for the six months ended June 30, 2007 to $73,074,852 for the six months ended June 30, 2008. The increase was attributable to increase in sales for the six months ended June 30, 2008 as compared to the same period in the prior year. Our cost of sales for our various product categories in the six months end 2008 is summarized as follows:

Cost of Sales by Production Category:	Six Months Ended June 30, 2008		% of Overall Cost of Sales			Six Months Ended June 30, 2007		% of Overall Cost of Sales			% of increase from 2007 to 2008
Fresh Pork	$	56,350,135		77.1	%	$	36,606,705		80.4	%		53.93	%
Frozen Pork		5,397,027		7.4	%		3,266,819		7.2	%		65.21	%
Processed Food Products		11,327,690		15.5	%		5, 662,774		12.4	%		100.04	%

Total Cost of Sales	$	73,074,852		84.80	%	$	45,536,298		83.46	%		60.48	%

The following table shows our cost of sales in the six months ended June 30, 2008 as compared with the same period in 2007, and also indicates cost of sales by product group, as a percentage of sales within each product group.

Cost of Sales by Product Category:	Six Months Ended June 30, 2008		% of Product Group Sales			Six Months Ended June 30, 2007		% of Product Group Sales
Fresh Pork	$	56,350,135		85.85	%	$	36,606,705		85.53	%
Frozen Pork		5,397,027		84.00	%		3,266,819		85.00	%
Processed Food Products		11,327,690		78.00	%		5,662,774		71.49	%
Total Cost of Sales	$	73,074,852		84.80	%	$	45,536,298		83.46	%

Our cost of sales as a percentage of sales of fresh pork increased slightly in the first half of 2008, as compared to the same period in 2007, primarily because of the increase in the cost of inputs (primarily live pigs), which were not completely offset by higher prices to our customers. The cost of sales as a percentage of sales of frozen pork fell slightly, however, which was due to the use of grade-3 and grade-4 pigs for such products, which are lower in price than the grade-1 and grade-2 pigs, which we use to produce fresh pork products. Most of the cost increase in live pigs occurred in the grade-1 and grade-2 categories. The cost of sales as a percentage of sales of processed food products increased around 6%. This is primarily because of the price increase of live pigs and the price increase of packaging material and food additives.

Gross Profit. Gross profit was $13,508,771 for the six months ended June 30, 2008 as compared to $9,022,017 for the same period in 2007, representing an increase of $4,486,754, or approximately 50%. Management attributes the increase in gross profit to strong increases in sales, driven by strong demand for our products, especially our fresh pork products. Our gross profit as a percentage of sales was 15.60% in the six months ended June 30, 2008 as compared to 16.54% for the same period in 2007. The slight decrease in gross profit as a percentage of sales was attributable to these commodity and input price increases, not all of which we passed on to our customers in the form of higher product prices.

The following table presents our gross profit for the six months ended June 30, 2008 and 2007. The table below also shows the percentage of gross profit for each of our product groups, as a percentage of sales for that product group.

Gross Profit by Production Category	Six Months Ended June 30, 2008		% of Product Group Sales			Six Months Ended June 30, 2007		% of Product Group Sales			% of increase from First Six Months of 2007 to First Six Months of 2008
Fresh Pork	$	9,285,775		14.15	%	$	6,188,330		14.46	%		50.05	%
Frozen Pork		1,028,005		16.00	%		576,497		15.00	%		78.32	%
Processed Food Products		3,194,991		22	%		2,257,190		28.50	%		41.55	%
Total Gross Profit	$	13,508,771		15.60	%	$	9,022,017		16.54	%		49.73	%

As shown in the table above, the fresh pork as a product category delivered the highest increase in gross profit from the first half of 2008 as compared with the same period in 2007. This is due to the strong demand for our fresh pork products.

However, in both periods, our processed food product category yielded the highest gross profit as a percentage of sales within the product category. Management attributes this to the use of grade-3 and grade-4 pigs and unsold portions of grade-1 and grade-2 pigs in producing our processed food products. Grade-3 and grade-4 pigs are generally lower in price than grade-1 and grade-2 pigs. Because of our superior processing and storage techniques and the strength of our brand-name, however, we are able to sell our processed food products at prices comparable to other processed products that use higher quality pork. However, because the price of live pigs, packaging material and food additives increased substantially during the second quarter of 2008, the gross profit of our processed food products decreased from 28.50% to 22.00%.

Selling Expenses. Selling expenses totaled $2,585,055 for the six months ended June 30, 2008, as compared to $1,799,420 for the same period in 2007, an increase of $785,635 or 44%. This increase is primarily due to marketing expenses of approximately $490,000 related to our efforts to place our pork products in new supermarkets. In addition, the salary of sales employees increased by approximately $80,000 in the first half of 2008 as compared to the same period in 2007.

General and Administrative Expenses. General and administrative expenses totaled $1,146,161 for the six months ended June 30, 2008 as compared to $687,513 for the same period in 2007, an increase of $458,648 or 67%. This increase is primarily attributable to increases in salary expense. We continued to hire new staff to meet the needs of our expanding operations. Also, consistent with the recent escalation in the rate of inflation in China, the salaries for our staff were increased overall by approximately 40% in the six months ended June 30, 2008 as compared to the same period in 2007. These increases in salaries were made in order to maintain compensation levels that were sufficient to attract and retain qualified employees.

Other Income (Expense). Our other income (expense) consisted of interest income, other expenses, and interest expense. We had a total other income of $310,998 for the six months ended June 30, 2008 as compared to other expense $741,467 for the same period in 2007, an increase of $1,052,465 or 142%. The increase in other income in the first half of 2008 is primarily attributable to a price subsidy in the amount of $240,000 received from the Dalian metropolitan government and loan interest reimbursement in the amount of approximately $550,000 for building a new frozen pork processing facility, which has been classified by Dalian metropolitan government as a technology reformation project. This is a policy adopted by Dalian metropolitan government to accelerate the introduction of new technology into the city. The Company does not need to fulfill any obligations because of this status.

Net Income. Our net income for the six months ended June 30, 2008 was $9,856,185 as compared to $5,793,617 for the same period in 2007, an increase of $4,062,568 or 70%. This increase in net income is attributable to the factors described above, but primarily from the increase in sales for the six months ended June 30, 2008, as compared to the same period in 2007.

LIQUIDITY AND CAPITAL RESOURCES

Cash Flows

Six Months Ended June 30, 2008

As of June 30, 2008, we had cash and cash equivalents of $11,270,730, other current assets of $32,205,596 and current liabilities of $23,803,675. At June 30, 2007, we had $2.5 million in cash and cash equivalents. We presently finance our operations primarily with cash flows from our operations, and we anticipate that this will continue to be our primary source of funds to finance our short-term cash needs. If we require additional capital to expand or enhance our existing facilities, we will consider debt or equity offerings or institutional borrowings as potential means of financing.

Net cash used in operating activities was $1,738,923 for the six months ended on June 30, 2008, while net cash flow sourced from operating activities was $4,661,212 in the same period in 2007. This is primarily attributable to the fact that, in order to expand our sales, we began offering payment terms to accommodate our best customers. Beginning in the first quarter of 2008 and continuing into the second quarter of 2008, we revised our customer credit policy and began offering extended payment terms to some of our quality long term clients with good credit (up to two months), where previously we required payment within 1-2 days of delivery of goods. This practice caused a decrease in, and some delay in collection of, our incoming cash.

Net cash sourced from investing activities was $1,312,211 for the six months ended June 30, 2008, compared to cash used in investing activities of $4,032,216 in the same period in 2007. This is primarily due to the following two factors: first, we paid $3,333,506 to purchase land use rights in the six months ended June 30, 2007. Second, we received additional funds in the amount of $2,019,333 released from our escrow account in the six months ended June 30, 2008, related to the 2007 private placement.

Net cash used in financing activities was $980,115 for the six months ended on June 30, 2008, as compared to net cash used in financing activities of $1,293,663 in the same period in 2007. The cash was used as payment of bank loan interest in both periods. The decrease of $313,548 was mainly interest savings due to the repayment of principal to Shanghai Pudong Development Bank.

Capital Commitments

In the first quarter of 2008, as discussed above, we relaxed our credit policy for certain of our major customers, permitting them up to a two-month grace period for payment for goods, where previously no such grace period was provided. Management expects that in the short term, this revised credit policy will result in an increase in accounts receivable, and a corresponding reduction in our cash position. Management does not anticipate that this change in our credit policy will result in any deficiency of working capital.

Uses of Liquidity

Our cash requirements through the end of fiscal 2008 will be primarily to fund daily operations for the growth of our business. Management will consider acquiring additional manufacturing capacity for processed foods in the future to strengthen and stabilize our manufacturing base.

Sources of Liquidity

Our primary sources of liquidity for our short-term cash needs are expected to be from cash flows generated from operations and cash and cash equivalents currently on hand. We believe that we will be able to borrow additional funds if needed.

We believe our cash flow from operations together with our cash and cash equivalents currently on hand will be sufficient to meet our needs for working capital, capital expenditure and other commitments through the end of 2008. For our long-term cash needs, we may consider a number of alternative financing opportunities, which may include debt and equity financing. No assurance can be made that such financing will be available to us, and adequate funds may not be available on terms acceptable to us. If additional funds are raised through the issuance of equity securities, dilution to existing shareholders may result. If funding is insufficient at any time in the future, we will develop or enhance our products or services and expand our business through our own cash flows from operations.

As of June 30, 2008, we had outstanding borrowings under a loan from Bank of China $6,402,908, on which we pay interest at a rate of 8.24% per annum. As of June 30, 2008, we did not have any standby letters of credit or standby repurchase obligations.

Foreign Currency Translation Risk

Our operations are, for the most part, located in the PRC, and we earn our revenue in Chinese RMB. However, we report our financial results in U.S. Dollars using the closing rate method. As a result, fluctuations in the exchange rates between Chinese RMB and the U.S. Dollar will affect our reported financial results. The balance sheet items are translated into U.S. dollars using the exchange rates at the respective balance sheet dates. The capital and various reserves are translated at historical exchange rates prevailing at the time of the transactions while income and expenses items are translated at the average exchange rate for the period. All exchange differences are recorded within equity. The foreign currency translation adjustment for the six months ended June 30, 2008 and 2007, which was in each instance a gain, was $1,462,155 and $247,509, respectively.

During 2003 and 2004 the exchange rate of RMB to the dollar remained constant at 8.26 RMB to the dollar. On July 21, 2005, the Chinese government adjusted the exchange rate from 8.26 to 8.09 RMB to the dollar. In 2008, the RMB continued to appreciate against the U.S. dollar. As of June 30, 2008, the market foreign exchanges rate was increased to 6.85 RMB to one U.S. dollar. As a result, the ongoing appreciation of RMB to U.S. dollar negatively impacted our gross margins for the six months and three months ended June 30, 2008.

Contractual Obligations and Off-Balance Sheet Arrangements

Contractual Obligations

We have certain fixed contractual obligations and commitments that include future estimated payments. Changes in our business needs, cancellation provisions, changing interest rates, and other factors may result in actual payments differing from the estimates. We cannot provide certainty regarding the timing and amounts of payments. We have presented below a summary of the most significant assumptions used in our determination of amounts presented in the tables in order to assist in the review of this information within the context of our consolidated financial position, results of operations, and cash flows.

The following tables summarize our contractual obligations as of June 30, 2008, and the effect these obligations are expected to have on our liquidity and cash flows in future periods.

	Payments Due by Period
	Total		Less than 1 year		1-3 Years		3-5 Years		5 Years +

Contractual Obligations :
Bank Indebtedness	$	6,402,908	$	6,402,908	$	—	$	—	$	—
Other Indebtedness	$	—	$	—	$	—	$	—	$	—
Capital Lease Obligations	$	—	$	—	$	—	$	—	$	—
Operating Leases	$	—	$	—	$	—	$	—	$	—
Purchase Obligations	$	447,092,700	$	56,972,700	$	390,120,000	$	—	$	—
Total Contractual Obligations:	$	453,495,608	$	63,375,608	$	390,120,000	$	—		—

As indicated in the table, as of June 30, 2008 we had $447,092,700 in purchase obligations, which relates to our agreement for the purchase and sale of hogs. On December 19, 2007, we entered into a hog purchase agreement whereby the Group will provide, at fair market prices, a minimum number of hogs to us.

At June 30, 2008, management projected minimum quantities of hogs as detailed in the following table:

Year	Hogs		Price Per Hog		Amount
2008		270,000	$	211.01	$	56,972,700
2009		800,000	$	232.21	$	185,768,000
2010		800,000	$	255.44	$	204,352,000
					$	447,092,700

For purposes of estimating future payments, we project that the fair market price of the hogs will increase by 10% each year. The assumption of 10% reflects our expectations with regard to inflation and the rising costs of inputs in breeding livestock.

Off-balance Sheet Arrangements

We have not entered into any other financial guarantees or other commitments to guarantee the payment obligations of any third parties. We have not entered into any derivative contracts that are indexed to our shares and classified as shareholder’s equity or that are not reflected in our consolidated financial statements. Furthermore, we do not have any retained or contingent interest in assets transferred to an unconsolidated entity that serves as credit, liquidity or market risk support to such entity. We do not have any variable interest in any unconsolidated entity that provides financing, liquidity, market risk or credit support to us or engages in leasing, hedging or research and development services with us.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We do not use derivative financial instruments in our investment portfolio and have no foreign exchange contracts. Our financial instruments consist of cash and cash equivalents, trade accounts receivable, accounts payable and long-term obligations. We consider investments in highly liquid instruments purchased with a remaining maturity of 90 days or less at the date of purchase to be cash equivalents. However, in order to manage the foreign exchange risks, we may engage in hedging activities to manage our financial exposure related to currency exchange fluctuation. In these hedging activities, we might use fixed-price, forward, futures, financial swaps and option contracts traded in the over-the-counter markets or on exchanges, as well as long-term structured transactions when feasible.

Interest Rates. Our exposure to market risk for changes in interest rates relates primarily to our short-term investments and short-term obligations; thus, fluctuations in interest rates would not have a material impact on the fair value of these securities. At June 30, 2008, we had approximately $11,270,730 in cash and cash equivalents. A hypothetical 10% increase or decrease in interest rates would not have a material impact on our earnings or loss, or the fair market value or cash flows of these instruments.

Foreign Exchange Rates. All of our sales and inputs are transacted in Renminbi (“RMB”). As a result, changes in the relative values of U.S. dollars and RMB affect our reported levels of revenues and profitability as the results are translated into U.S. dollars for reporting purposes. However, since we conduct our sales and purchase inputs in RMB, fluctuations in exchange rates are not expected to significantly affect our financial stability or gross and net profit margins. We do not currently expect to incur significant foreign exchange gains or losses, or gains or losses associated with any foreign operations.

Our exposure to foreign exchange risk primarily relates to currency gains or losses resulting from timing differences between the signing of sales contracts and the settling of these contracts. Furthermore, we translate monetary assets and liabilities denominated in other currencies into RMB, the functional currency of our operating business. Our results of operations and cash flow are translated at average exchange rates during the period, and assets and liabilities are translated at the unified exchange rate as quoted by the People’s Bank of China at the end of the period. Translation adjustments resulting from this process are included in accumulated other comprehensive income in our statement of shareholders’ equity. We recorded net foreign currency gains of $1,307,671 and $3,097,786 in the second quarter of 2007 and 2008, respectively. We have not used any forward contracts, currency options or borrowings to hedge our exposure to foreign currency exchange risk. We cannot predict the impact of future exchange rate fluctuations on our results of operations and may incur net foreign currency losses in the future. As our sales denominated in foreign currencies, such as RMB, continue to grow, we may consider using arrangements to hedge our exposure to foreign currency exchange risk.

Our financial statements are expressed in U.S. dollars, but the functional currency of our operating subsidiaries is RMB. The value of your investment in our stock will be affected by the foreign exchange rate between U.S. dollars and RMB. A decline in the value of RMB against the U.S. dollar could reduce the U.S. dollar equivalent amounts of our financial results, the value of your investment in our company and the dividends we may pay in the future, if any, all of which may have a material adverse effect on the price of our stock.

ITEM 4. CONTROLS AND PROCEDURES

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to our management, including its chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management necessarily is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

As of June 30, 2008, we carried out an evaluation, under the supervision and with the participation of our management, including our chief executive officer and our chief financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based on the foregoing, our chief executive officer and chief financial officer concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) were effective at the reasonable assurance level.

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended) during the quarter ended June 30, 2008 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

We are not aware of any material existing or pending legal proceedings against us, nor are we involved as a plaintiff in any material proceeding or pending litigation. There are no proceedings in which any of our current directors, officers or affiliates, or any registered or beneficial shareholder, is an adverse party or has a material interest adverse to us.

ITEM 1A. RISK FACTORS

You should carefully consider the risks described below together with all of the other information included in this prospectus before making an investment decision with regard to our securities. The statements contained in or incorporated into this report 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 could decline, and you may lose all or part of your investment.

Risks Relating to Our Business

Our limited operating history makes it difficult to evaluate our future prospects and results of operations.

We have a limited operating history. Our holding company in China, Chuming WFOE, and the companies that form its present subsidiaries were incorporated in 2004. Accordingly, you should consider our future prospects in light of the risks and uncertainties experienced by early stage companies in evolving industries such as the meat industry in China. Some of these risks and uncertainties relate to our ability to:

maintain our market position in the meat business in China;

offer new and innovative products to attract and retain a larger customer base;

attract additional customers and increase spending per customer;

increase awareness of our brand and continue to develop user and customer loyalty;

respond to competitive market conditions;

respond to changes in our regulatory environment;

manage risks associated with intellectual property rights;

maintain effective control of our costs and expenses;

raise sufficient capital to sustain and expand our business;

attract, retain and motivate qualified personnel; and

upgrade our technology to support additional research and development.

If we are unsuccessful in addressing any of these risks and uncertainties, our business may be materially and adversely affected.

If there are any interruptions to or decline in the amount or quality of our live pigs, raw pork or other major raw material supply, our business could be materially and adversely affected.

Live pigs and raw pork are the principal raw materials used in our production. We procure approximately 60% of our live pigs from Group, and the remainder from various third party suppliers who are independent farmers. Our third party suppliers may not continue to be able to supply an adequate number of live pigs to satisfy our present and future production needs. The supply of pigs is dependent on the output of pig farms, which may be affected by outbreaks of diseases or epidemics. Our current suppliers may not be able to provide live pigs of sufficient quality to meet our stringent quality control requirements. Any interruptions to or decline in the amount or quality of our live pig supply could materially disrupt our production and adversely affect our business. In addition to live pigs, we also use additives and packaging in our production, which we source from third party suppliers. Any interruptions to or decline in the amount or quality of our additives or packaging supply, could also disrupt our production or sales and adversely affect our business.

We are vulnerable to increases in the price of live pigs and other operating costs, and we may not be able to entirely offset these increasing costs by increasing the prices of our products, particularly our processed meat products.

We purchase agricultural products, such as live pigs, for use in our production process and for resale. The price of such commodities is subject to fluctuations that are attributable to a number of factors, such as the price of animal feed, diseases and infections, and weather conditions. If for example, worldwide and local grain prices should increase, this would affect the price of animal feed, which may increase the price of live pigs. Higher pig prices may force us to raise the prices we charge our customers for our products, however we may not always be able to pass on the entire amount of price increases to our customers, and/or consumers might cut back on consumption of meat products.

We may be unable to anticipate changes in consumer preferences for processed meat products, which may result in decreased demand for our products.

Our continued success in the processed meat products market is in large part dependent on our ability to anticipate and develop products that appeal to the changing tastes, dietary habits and preferences of customers. If we are not able to anticipate and identify new consumer trends and develop new products accordingly, demand for our products may decline and our operating results may be adversely affected. In addition, we may incur significant costs relating to developing and marketing new products or expanding our existing product offerings in reaction to what we perceive to be a consumer preference or demand. Such development or marketing may not result in the level of market acceptance, volume of sales or profitability anticipated.

If the chilled and frozen pork market in China does not grow as we expect, our results of operations and financial conditions may be adversely affected.

If the chilled and frozen pork market in China does not grow as we expect, our business may be harmed, we may need to adjust our growth strategy and our results of operation may be adversely affected.

We require various licenses and permits to operate our business, and the loss of or failure to renew any or all of these licenses and permits could materially adversely affect our business.

In accordance with PRC laws and regulations, we are required to maintain various licenses and permits in order to operate our business, including, without limitation, a slaughtering permit in respect of each of our chilled and frozen pork production facilities and a permit for production of industrial products in respect of each of our processed meat production facilities. We are required to comply with applicable hygiene and food safety standards in relation to our production processes. Our premises and transportation vehicles are subject to regular inspections by the regulatory authorities for compliance with applicable regulations. Failure to pass these inspections, or the loss of or failure to renew our licenses and permits, could require us to temporarily or permanently suspend some or all of our production or distribution operations, which could disrupt our operations and adversely affect our business.

We are highly dependent on senior management and key research and development personnel.

We are highly dependent on our senior management to manage our business and operations and our key research and development personnel for the development of new processing methods and technologies, food products and the enhancement of our existing products. In particular, we rely substantially on our chairman and chief executive officer, Mr. Shi Huashan, to manage our operations. We also depend on our key research personnel. In addition, we also rely on information technology and logistics personnel for the production, storage and shipment of our products and on marketing and sales personnel, engineers and other personnel with technical and industry knowledge to transport, market and sell our products. We do not maintain key man life insurance on any of our senior management or key personnel. The departure of any one of them, in particular Mr. Shi, would have a material adverse effect on our business and operations. Competition for senior management and research and development personnel is intense and the pool of suitable candidates is limited. We may be unable to locate a suitable replacement for any senior management or key research and development personnel that we lose. In addition, if any member of our senior management or key research and development personnel joins a competitor or forms a competing company, they may compete with us for customers, business partners and other key professionals and staff members of our company.

We note that Mr. Shi Huashan, who is our Chief Executive Officer, is also the Chief Executive Officer of Dalian Chuming Group Co., Ltd., our former parent company. See also, “Certain Relationships and Related Party Transactions” elsewhere in this report. Due to the non-exclusive roles of Mr. Shi as our CEO and the principal executive officer of Dalian Chuming Group Co., Ltd., with whom we conduct business from time to time, potential conflicts of interest may arise. In particular, situations might arise in which we transact business with Dalian Chuming Group Co., Ltd., and certain terms of agreements might be favorable to us, but conversely unfavorable to Dalian Chuming Group Co., Ltd., and vice versa. In order to effectively handle such conflict of interest scenarios, our management intends to submit all related party transactions to our independent board of directors, or appropriate committee of the board, for review and approval. If through these mechanisms we are not able to effectively handle such conflicts of interest to serve the Company’s best interest, our business could be harmed or adversely affected.

We compete for qualified personnel with other food processing companies, food retailers, logistics companies and research institutions. Intense competition for these personnel could cause our compensation costs to increase significantly, which could have a material adverse effect on our results of operations. Our future success and ability to grow our business will depend in part on the continued service of these individuals and our ability to identify, hire and retain additional qualified personnel. If we are unable to attract and retain qualified employees, we may be unable to meet our business and financial goals.

Our growth strategy may prove to be disruptive and divert management resources.

Our growth strategy may involve large transactions and present financial, managerial and operational challenges, including diversion of management attention from existing businesses, difficulty with integrating personnel and financial and other systems, increased expenses, including compensation expenses resulting from newly hired employees, assumption of unknown liabilities and potential disputes. We could also experience financial or other setbacks if any of our growth strategies incur problems of which we are not presently aware. We may require additional financing in the future.

We may need to obtain additional debt or equity to fund future capital expenditures. Additional equity may result in dilution to the holders of our outstanding shares of capital stock. Additional debt financing may include conditions that would restrict our freedom to operate our business, such as conditions that:

	·	limit our ability to pay dividends or require us to seek consent for the payment of dividends;
	·	increase our vulnerability to general adverse economic and industry conditions;
	·	require us to dedicate a portion of our cash flow from operations to payments on our debt, thereby reducing the availability of our cash flow to fund capital expenditures, working capital and other general corporate purposes; and
	·	limit our flexibility in planning for, or reacting to, changes in our business and our industry.

We cannot guarantee that we will be able to obtain any additional financing on terms that are acceptable to us, or at all.

Our operations are cash intensive and our business could be adversely affected if we fail to maintain sufficient levels of working capital.

We expend a significant amount of cash in our operations, principally to fund our raw material procurement. Our suppliers, in particular, third party suppliers of pigs, typically require payment in full within seven days after delivery, although some of our suppliers provide us with credit. In turn, we typically require our customers of chilled and frozen pork to make payment in full on delivery, although we offer some of our long-standing customers credit terms. We generally fund most of our working capital requirements out of cash flow generated from operations. If we fail to generate sufficient revenues from our sales, or if we experience difficulties collecting our accounts receivables, we may not have sufficient cash flow to fund our operating costs and our business could be adversely affected.

We may be unable to maintain our profitability in the face of a consolidating retail environment in China.

We sell substantial amounts of our products to supermarkets and large retailers. The supermarket and food retail industry in China has been, and is expected to continue, undergoing a trend of development and consolidation. As the food retail trade continues to consolidate and our retail customers grow larger and become more sophisticated, they may demand lower pricing and increased promotional programs. Furthermore, larger customers may be better able to operate on reduced inventories and potentially develop or increase their focus on private label products. If we fail to maintain a good relationship with our large retail customers, or fail to maintain a wide offering of quality products, or if we lower our prices or increase promotional support of our products in response to pressure from our customers and are unable to increase the volume of our products sold, our profitability could decline.

Our operating results may fluctuate from period to period and if we fail to meet market expectations for a particular period, our share price may decline.

Our operating results have fluctuated from period to period and are likely to continue to fluctuate as a result of a wide range of factors, including seasonal variations in live pig supply and processed meat products consumption. Our production and sales of chilled and frozen pork are generally lower in the summer, due to lower supply of live pigs. Interim reports may not be indicative of our performance for the year or our future performance, and period-to-period comparisons may not be meaningful due to a number of reasons beyond our control. We cannot assure you that our operating results will meet the expectations of market analysts or our investors. If we fail to meet their expectations, there may be a decline in our share price.

We derive all of our revenues from sales in China and any downturn in the Chinese economy could have a material adverse effect on our business and financial condition.

All of our current revenues are generated from sales in China. We anticipate that revenues from sales of our products in China will continue to represent a substantial proportion of our total revenues in the near future. Any significant decline in the condition of the PRC economy could, among other things, adversely affect consumer buying power and discourage consumption of our products, which in turn would have a material adverse effect on our business and financial condition.

We rely on our exclusive network of showcase stores, network stores and supermarket brand counters for the success of our sales and our brand image, and should they perform poorly, our business and brand image could be materially and adversely affected.

In addition to our sales to wholesale customers, we sell our products through showcase stores, network stores and supermarket brand counters. All of these retail based stores exclusively sell our pork products and display the Chuming logo on our store facades. For the first half of 2008, these retail outlets accounted for approximately 43% of our total revenue. If the sales performance of our retail based stores deteriorates, this could adversely affect the financial results of the company. In addition, any sanitation, hygiene, or food quality problems that might arise from the retail based stores could adversely affect our brand image and lead to a loss of sales. Chuming does not own any of the retail based stores.

We rely on the performance of our wholesaler, retailer and mass merchant customers for the success of our sales, and should they perform poorly or give priority to our competitors’ products, our business could be materially and adversely affected.

In addition to our retail sales channel, we sell our products to supermarkets and large retailers, which in turn sell the products to end consumers. If the sales performance of our wholesale customers deteriorates, this could adversely affect our sales. Furthermore, our wholesale customers also carry products which directly compete with our products for retail space and consumer purchases. There is a risk that our wholesale customers may give higher priority to products of, or form alliances with, our competitors. If our wholesale customers do not continue to purchase our products, or provide our products with similar levels of promotional support, our sales performance and brand imaging could be adversely affected.

The loss of any of our significant customers could have an adverse effect on our business.

Our key customers are principally supermarkets and large retailers in the PRC. We have not entered into long-term supply contracts with any of these major customers. There can be no assurance that we will maintain or improve the relationships with these customers, or that we will be able to continue to supply these customers at current levels or at all. If we cannot maintain long-term relationships with our major customers, the loss of a significant portion of our sales to them could have an adverse effect on our business, financial condition and results of operations. Further, the loss of any one of our top five customers could cause us to suffer a temporary setback in our sales, which could have a short term negative effect on our financial results.

Recent regulatory enforcement crackdowns on food processing companies in the PRC could adversely affect our businesses.

Recently, the PRC government authorities have taken certain measures to maintain the PRC food market in good order and to improve the integrity of the PRC food industry, such as enforcing full compliance with industry standards and closing certain food processing companies in the PRC that did not meet regulatory standards. We cannot assure you that our businesses and operations will not be affected as a result of the deteriorating reputation of the food industry in the PRC due to recent scandals regarding food products.

Environmental regulations and related litigation could have a material adverse effect on our business and results of operations.

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

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

Deterioration of our perishable products may occur due to delivery delays, malfunctioning of freezer facilities or poor handling during transportation, which could adversely affect our business, results of operations and financial condition.

The condition of our food products (being perishable goods) may deteriorate due to shipment or delivery delays, malfunctioning of freezer facilities or poor handling during delivery by shippers or intermediaries. We are not aware of any instances whereby we were made to compensate for delivery delays, malfunctioning of freezer facilities or poor handling during transportation. However, there is no assurance that such incidents will not occur in the future. In the event of any delivery delays, malfunctioning of freezer facilities or poor handling during transportation, we may have to make compensation payments and our reputation, business goodwill and revenue will be adversely affected.

Unexpected business interruptions could adversely affect our business.

Our operations are vulnerable to interruption by fire, power failure and power shortages, floods, computer viruses and other events beyond our control. In particular, China, especially eastern and southern China, is experiencing frequent electricity shortages. In addition, we do not carry business interruption insurance to compensate us for losses that may occur as a result of these kinds of events and any such losses or damages incurred by us could disrupt our production and other operations.

If we fail to develop and maintain an effective system of internal controls, we may not be able to accurately report our financial results or prevent fraud; as a result, current and potential shareholders could lose confidence in our financial reports, which could harm our business and the trading price of our common stock.

Effective internal controls are necessary for us to provide reliable financial reports and effectively prevent fraud. Section 404 of the Sarbanes-Oxley Act of 2002 requires us to evaluate and report on our internal controls over financial reporting and have our independent registered public accounting firm annually attest to our evaluation, as well as issue their own opinion on our internal controls over financial reporting, beginning with our Annual Report on Form 10-K for the fiscal year ended December 31, 2007. We plan to prepare for compliance with Section 404 by strengthening, assessing and testing our system of internal controls to provide the basis for our report. The process of strengthening our internal controls and complying with Section 404 is expensive and time consuming, and requires significant management attention, especially given that we have not yet undertaken any efforts to comply with the requirements of Section 404. We cannot be certain that the measures we will undertake will ensure that we will maintain adequate controls over our financial processes and reporting in the future. Furthermore, if we are able to rapidly grow our business, the internal controls that we will need will become more complex, and significantly more resources will be required to ensure our internal controls remain effective. Failure to implement required controls, or difficulties encountered in their implementation, could harm our operating results or cause us to fail to meet our reporting obligations. If we or our auditors discover a material weakness in our internal controls, the disclosure of that fact, even if the weakness is quickly remedied, could diminish investors’ confidence in our financial statements and harm our stock price. In addition, non-compliance with Section 404 could subject us to a variety of administrative sanctions, including the suspension of trading, ineligibility for listing on one of the Nasdaq Stock Markets or national securities exchanges, and the inability of registered broker-dealers to make a market in our common stock, which would further reduce our stock price.

We will incur increased costs as a public company which may affect our profitability.

As a public company, Chuming will incur significant legal, accounting and other expenses that it did not incur as a private company. We are now subject to the SEC’s rules and regulations relating to public disclosure. SEC disclosures generally involve a substantial expenditure of financial resources. In addition, the Sarbanes-Oxley Act of 2002, as well as new rules subsequently implemented by the SEC, have required changes in corporate governance practices of public companies. We expect that full compliance with these new rules and regulations will significantly increase our legal and financial compliance costs and make some activities more time-consuming and costly. For example, we will be required to create additional board committees and adopt policies regarding internal controls and disclosure controls and procedures. In addition, on December 31, 2007, we increased compensation to our senior executive officers, allocated $250,000 of the proceeds from our recent financing to our investor and public relations program (and shortly thereafter hired an investor relations firm) and expect to increase our financial and accounting staff in order to meet the demands and requirements of being a public reporting company. Such additional personnel, public relations, reporting and compliance costs may negatively impact our financial results.

We have limited business insurance coverage.

The insurance industry in China is still at an early stage of development. Insurance companies in China offer limited business insurance products. We do not have any business liability or disruption insurance coverage for our operations in China. Any business disruption, litigation or natural disaster may result in our incurring substantial costs and the diversion of our resources. In addition, since our business operations are based outside of the U.S. (although we are a Nevada corporation quoted on the OTC Bulletin Board in the U.S.), directors and officers insurance may not be readily available to us at the prices and on terms acceptable to us. If we are not able to secure satisfactory D & O insurance coverage, we may not be able to attract the most qualified directors and officers, and our business could be indirectly adversely affected.

Risks Relating To Our Industry

The pig slaughtering and processed meat industries in China are subject to extensive government regulation, which is in the process of change and development.

The pig slaughtering and processed meat industries in China are heavily regulated by a number of governmental agencies, including primarily the Ministry of Agriculture, the Ministry of Commerce, the Ministry of Health, the General Administration of Quality Supervision, Inspection and Quarantine and the State Environmental Protection Administration. These regulatory bodies have broad discretion and authority to regulate many aspects of the pig slaughtering and processed meat industries in China, including, without limitation, setting hygiene standards for production and quality standards for processed meat products. In addition, the pig slaughtering and processed meat products regulatory framework in China is still in the process of being developed. If the relevant regulatory authorities set standards with which we are unable to comply or which increase our production costs and hence our prices so as to render our products non-competitive, our ability to sell products in China may be limited.

The pig slaughtering and processed meat industries in China may face increasing competition from both domestic and foreign companies, as well as increasing industry consolidation, which may affect our market share and profit margin.

The pig slaughtering and processed meat industries in China are highly competitive. Our processed meat products are targeted at mid- to high-end consumers, a market in which we face increasing competition, particularly from foreign suppliers. In addition, the evolving government regulations in relation to the pig slaughtering industry have driven a trend of consolidation through the industry, with smaller operators unable to meet the increasing costs of regulatory compliance and therefore are at a competitive disadvantage. We believe that our ability to maintain our market share and grow our operations within this landscape of changing and increasing competition is largely dependent upon our ability to distinguish our products and services.

In addition, prior to China’s entry into the World Trade Organization (“WTO”), high barriers to entry existed for many potential competitors in our business through the use of tariffs and restrictive import licensing and distribution practices. China’s admission to WTO has lowered some of the tariffs and other barriers to entry so we can expect that competition will increase.

We cannot assure you that our current or potential competitors will not develop products of a comparable or superior quality to ours, or adapt more quickly than we do to evolving consumer preferences or market trends. In addition, our competitors in the raw meat market may merge or form alliances to achieve a scale of operations or sales network which would make it difficult for us to compete. Increased competition may also lead to price wars, counterfeit products or negative brand advertising, all of which may adversely affect our market share and profit margin. We cannot assure you that we will be able to compete effectively with our current or potential competitors.

The outbreak of animal diseases or other epidemics could adversely affect our operations.

An occurrence of serious animal diseases, such as foot-and-mouth disease, or any outbreak of other epidemics in China affecting animals or humans might result in material disruptions to our operations, material disruptions to the operations of our customers or suppliers, a decline in the supermarket or food retail industry or slowdown in economic growth in China and surrounding regions, any of which could have a material adverse effect on our operations and turnover. There can be no assurance that our facilities or products will not be affected by an outbreak of any disease or outbreak in the future, or that the market for pork products in the PRC will not decline as a result of fear of disease. In either case, our business, results of operations and financial condition would be adversely and materially affected.

Consumer concerns regarding the safety and quality of food products or health concerns could adversely affect sales of our products.

Our sales performance could be adversely affected if consumers lose confidence in the safety and quality of our products. Consumers in the PRC are increasingly conscious of food safety and nutrition. Consumer concerns about, for example, the safety of pork products, or about the safety of food additives used in processed meat products, could discourage them from buying certain of our products and cause our results of operations to suffer.

We may be subject to substantial liability should the consumption of any of our products cause personal injury or illness.

The sale of food products for human consumption involves an inherent risk of injury to consumers. Such injuries may result from tampering by unauthorized third parties or product contamination or degeneration, including the presence of foreign contaminants, chemical substances or other agents or residues during the various stages of the procurement and production process. While we are subject to governmental inspections and regulations, we cannot assure you 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 or is not fully pursued, the negative publicity surrounding any assertions that our products caused personal injury or illness could adversely affect our reputation with customers and our corporate and brand image. Consistent with industry practice in China, we do not maintain product liability insurance. Furthermore, our products could potentially suffer from product tampering, contamination or degeneration or be mislabeled or otherwise damaged. Under certain circumstances, we may be required to recall products. Even if a situation does not necessitate a product recall, we cannot assure you that government sanctions or product liability claims will not be asserted against us as a result. A product liability judgment against us or a product recall could have a material adverse effect on our business, financial condition or results of operations.

Our product and company name may be subject to counterfeiting and/or imitation, which could impact upon our reputation and brand image as well as lead to higher administrative costs.

We regard brand positioning as the core of our competitive strategy, and intend to position our brand, “Chuming™” to create the perception and image of health, nutrition, freshness and quality in the minds of our customers. There have been frequent occurrences of counterfeiting and imitation of products in the PRC in the past. We cannot guarantee that counterfeiting or imitation of our products will not occur in the future or that we will be able to detect it and deal with it effectively. Any occurrence of counterfeiting or imitation could impact negatively upon our corporate and brand image, particularly if the counterfeit or imitation products cause sickness, injury or death to consumers. In addition, counterfeit or imitation products could result in a reduction in our market share, a loss of revenues or an increase in our administrative expenses in respect of detection or prosecution.

Risks Relating To Conducting Business in the PRC

Substantially all of our assets and projects are located in the PRC, and substantially all of our revenue is sourced from the PRC. Accordingly, our results of operations and financial position are subject to a significant degree to economic, political and legal developments in the PRC, including the following risks:

Economic, political and social conditions and government policies in China could have a material adverse effect on our business, financial condition and results of operations.

Economic, political and social conditions and government policies in China differ in many respects from other more fully industrialized nations, and below are examples of such differences.

Structure. Agriculture still plays an important role in Chinese economy and employment. Agriculture still represents around 50% of the employment, which is substantially higher than most developed countries.

Capital re-investment. Compared with more highly developed nations, there may be less availability to Chinese firms of all types of investment capital within China.

Government involvement. China is still transitioning from a centrally planned economic model to that of a free market. As a result, the Chinese government has traditionally had a greater degree of regulatory involvement in the economic affairs and conduct of firms in China, as compared with firms in more advanced market-based economies.

Allocation of resources. Related to the above point, the Chinese government may have greater ability to influence the allocation of capital, labor, materials, and other resources than governments of other advanced market-based economies.

Level of development. Although China’s economy has been rapidly growing in recent years, certain aspects such as public infrastructure, poverty rate, and other measurements of development still lag behind highly developed nations, and this affects how companies must conduct business in China.

Control of foreign exchange. China still maintains strict foreign exchange controls which has been in place since 1979, although steps have been taken to increase the exchangeability of the Chinese Renminbi with other currencies.

Growth rate. For several years, China’s economy has achieved consistent double digit growth rates, and this may put strain on infrastructure, availability on raw materials, and ability of firms to manage growth.

Rate of inflation. According to the Consumer Price Index (CPI) compiled by the National Statistics Bureau of China, the overall rate of inflation (CPI) in August 2007 is 6.5% and the rate of inflation for food in August 2007 was 18.2%, which are substantially higher than most of the developed countries, and these factors affect the local market environment in which Chinese firms must operate.

The economy of China has been transitioning from a centrally 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, a substantial portion of productive assets in China is still owned by the PRC government. In addition, the PRC government continues to play a significant role in regulating industries by imposing industrial policies. It also exercises significant control over China’s economic growth through allocation of resources, controlling payment of foreign currency-denominated obligations, setting monetary policy and providing preferential treatment to particular industries or companies.

Policies and other measures taken by the PRC government to regulate the economy could have a significant negative impact on economic conditions in China, with a resulting negative impact on our business. For example, our financial condition and results of operations may be materially and adversely affected by:

	·	new laws and regulations and the interpretation of those laws and regulations;
	·	the introduction of measures to control inflation or stimulate growth;
	·	changes in the rate or method of taxation;
	·	the imposition of additional restrictions on currency conversion and remittances abroad; or
	·	any actions which limit our ability to develop, produce, import or sell our products in China, or to finance and operate our business in China.

Uncertainties with respect to the PRC legal system could adversely affect us.

We conduct our business primarily through our Chuming Operating Subsidiaries which are located in China, which are governed by PRC laws and regulations. In addition, because the parent companies that hold these entities, namely PSI and Energroup Holdings Corporation, are outside of China, we are generally subject to laws and regulations applicable to foreign investments in China and, in particular, laws applicable to wholly foreign-owned enterprises. The PRC legal system is based on written statutes. Prior court decisions may be cited for reference but have limited precedential value.

Since 1979, PRC legislation and regulations have significantly enhanced the protections afforded to various forms of foreign investments in China. 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 China. In particular, because these laws and regulations are relatively new, and because of the limited volume of published decisions and their nonbinding nature, 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, we may not be aware of our violation of these policies and rules until some time after the violation. In addition, any litigation in China may be protracted and result in substantial costs and diversion of resources and management attention.

You may experience difficulties in effecting service of legal process, enforcing foreign judgments or bringing original actions in China based on United States or other foreign laws against us, our management or the experts named in this prospectus.

We conduct substantially all of our operations in China and substantially all of our assets are located in China. In addition, while we are incorporated in the State of Nevada, all of our senior executive officers reside within China. As a result, it may not be possible to effect service of process within the United States or elsewhere outside China upon our senior executive officers, including with respect to matters arising under U.S. federal securities laws or applicable state securities laws. Moreover, our PRC counsel has advised us that the PRC does not have treaties with the United States or many other countries providing for the reciprocal recognition and enforcement of judgment of courts.

Governmental control of currency conversion may affect the value of your investment.

The PRC government imposes controls on the convertibility of RMB into foreign currencies and, in certain cases, the remittance of currency out of China. We receive substantially all of our revenues in RMB. Under our current structure, our income is primarily derived from payments from Dalian Precious Sheen Investments Consulting Co., Ltd. Shortages in the availability of foreign currency may restrict the ability of our PRC subsidiaries and our affiliated entity to remit sufficient foreign currency to pay dividends or other payments to us, or otherwise satisfy their foreign currency denominated obligations. Under existing PRC foreign exchange regulations, payments of current account items, including profit distributions, interest payments and expenditures from trade-related transactions, can be made in foreign currencies without prior approval from the PRC State Administration of Foreign Exchange by complying with certain procedural requirements. However, approval from appropriate government authorities is required where RMB is to be converted into foreign currency and remitted out of China to pay capital expenses such as the repayment of bank loans denominated in foreign currencies. The PRC government may also at its discretion restrict access in the future to foreign currencies for current account transactions. If the foreign exchange control system prevents us from obtaining sufficient foreign currency to satisfy our currency demands, we may not be able to pay dividends in foreign currencies to our shareholders.

Fluctuation in the value of RMB may have a material adverse effect on your investment.

The value of RMB against the U.S. dollar and other currencies may fluctuate and is affected by, among other things, changes in political and economic conditions. Our revenues and costs are mostly denominated in RMB, while we report our financial results and position in U.S. dollars. Any significant fluctuation in value of RMB may materially and adversely affect our reported cash flows, revenues, earnings and financial position, and the value of, and any dividends payable on, our stock in U.S. dollars. For example, an appreciation of RMB against the U.S. dollar would make any new RMB denominated investments or expenditures more costly to us, to the extent that we need to convert U.S. dollars into RMB for such purposes. An appreciation of RMB against the U.S. dollar would also result in foreign currency translation losses for financial reporting purposes when we translate our U.S. dollar denominated financial assets into RMB, as RMB is our reporting currency.

We face risks related to health epidemics and other outbreaks.

Our business could be adversely affected by the effects of SARS or another epidemic or outbreak. China reported a number of cases of SARS in April 2004. Any prolonged recurrence of SARS or other adverse public health developments in China may have a material adverse effect on our business operations. For instance, health or other government regulations adopted in response may require temporary closure of our production facilities or of our offices. Such closures would severely disrupt our business operations and adversely affect our results of operations. We have not adopted any written preventive measures or contingency plans to combat any future outbreak of SARS or any other epidemic.

Risks Related to Our Corporate Structure

In order to comply with PRC laws limiting foreign ownership of Chinese companies, we conduct our business in the PRC through Chuming by means of certain ownership arrangements. If the PRC government determines that these ownership arrangements do not comply with applicable regulations, our business could be adversely affected and we could be subject to sanctions.

As a result of the share exchange transaction disclosed elsewhere in this report, we own 100% of the equity interest in Precious Sheen Investments Limited, a British Virgin Islands company (“PSI “). PSI owns 100% of the equity in Dalian Precious Sheen Investments Consulting Co., Ltd., a wholly foreign owned enterprise in the PRC (“Chuming”). Chuming is a holding company for the following three operating subsidiaries: (i) Dalian Chuming Slaughter and Packaging Pork Company Ltd., (ii) Dalian Chuming Processed Foods Company Ltd., and (iii) Dalian Chuming Sales Company Ltd., each of which is a limited liability company headquartered in, and organized under the laws of, China (collectively, the “Chuming Operating Subsidiaries”).

The PRC government restricts foreign investment in businesses in China. Accordingly, we operate our business in China through Chuming and the Chuming Operating Subsidiaries, each of which holds the licenses and approvals necessary to operate our business in China.

Although we believe we comply with current PRC regulations, we cannot assure you that the PRC government would agree that these operating arrangements comply with PRC licensing, registration or other regulatory requirements, with existing policies or with requirements or policies that may be adopted in the future. If in the future the PRC government determines that we do not comply with applicable PRC law, it could impose fines on our PRC shareholders, and in extreme cases, the PRC government could take steps to revoke our business and operating licenses, require us to discontinue or restrict our operations, restrict our right to collect revenues, require us to restructure our operations, impose additional conditions or requirements with which we may not be able to comply, impose restrictions on our business operations or on our customers, or take other regulatory or enforcement actions against us that could be harmful to our business. Any of these or similar actions could significantly disrupt our business operations or restrict us from conducting a substantial portion of our business operations, which could materially and adversely affect our business, financial condition and results of operations.

Recent PRC regulations relating to acquisitions of PRC companies by foreign entities may limit our ability to acquire PRC companies and adversely affect the implementation of our strategy as well as our business and prospects.

The PRC State Administration of Foreign Exchange, or SAFE, issued a public notice in January 2005 concerning foreign exchange regulations on mergers and acquisitions in China. The public notice states that if an offshore company controlled by PRC residents intends to acquire a PRC company, such acquisition will be subject to strict examination by the relevant foreign exchange authorities. The public notice also states that the approval of the relevant foreign exchange authorities is required for any sale or transfer by the PRC residents of a PRC company’s assets or equity interests to foreign entities, such as us, for equity interests or assets of the foreign entities.

In April 2005, SAFE issued another public notice further explaining the January notice. In accordance with the April notice, if an acquisition of a PRC company by an offshore company controlled by PRC residents has been confirmed by a Foreign Investment Enterprise Certificate prior to the promulgation of the January notice, the PRC residents must each submit a registration form to the local SAFE branch with respect to their respective ownership interests in the offshore company, and must also file an amendment to such registration if the offshore company experiences material events, such as changes in the share capital, share transfer, mergers and acquisitions, spin-off transactions or use of assets in China to guarantee offshore obligations.

On May 31, 2007, SAFE issued another official notice known as “Circular 106,” which requires the owners of any Chinese company to obtain SAFE’s approval before establishing any offshore holding company structure for foreign financing as well as subsequent acquisition matters in China.

If we decide to acquire a PRC company, we cannot assure you that we or the owners of such company, as the case may be, will be able to complete the necessary approvals, filings and registrations for the acquisition. This may restrict our ability to implement our acquisition strategy and adversely affect our business and prospects. In addition, if such registration cannot be obtained, our company will not be able to receive dividends declared and paid by our subsidiaries in the PRC and may be forbidden from paying dividends for profit distribution or capital reduction purposes.

Chuming is subject to restrictions on making payments to our parent company.

We are a holding company incorporated in the State of Nevada and do not have any assets or conduct any business operations other than our investment in Chuming and their operating subsidiaries in China. As a result of our holding company structure, we rely entirely on payments or dividends from Chuming for our cash flow to fund our corporate overhead and regulatory obligations. The PRC government also imposes controls on the conversion of Renminbi into foreign currencies and the remittance of currencies out of China. We may experience difficulties in completing the administrative procedures necessary to obtain and remit foreign currency. Further, if our subsidiaries in China incur debt on their own in the future, the instruments governing the debt may restrict their ability to make payments. If we are unable to receive all of the revenues from our operations through these dividend arrangements, we may be unable to pay dividends on our shares of common stock.

Risk Relating to an Investment in Our Securities

Generally, we have not paid any cash dividends to our shareholders and no cash dividends will be paid in the foreseeable future.

We do not anticipate paying cash dividends on our common stock in the foreseeable future and we may not have sufficient funds legally available to pay dividends. Even if the funds are legally available for distribution, we may nevertheless decide or may be unable due to pay any dividends. We intend to retain all earnings for our company’s operations.

The application of the “penny stock” rules could adversely affect the market price of our common stock and increase your transaction costs to sell those shares.

As long as the trading price of our common shares is below $5 per share, the open-market trading of our common shares will be subject to the “penny stock” rules. The “penny stock” rules impose additional sales practice requirements on broker-dealers who sell securities to persons other than established customers and accredited investors (generally those with assets in excess of US$1,000,000 or annual income exceeding US$200,000 or US$300,000 together with their spouse). For transactions covered by these rules, the broker-dealer must make a special suitability determination for the purchase of securities and have received the purchaser’s written consent to the transaction before the purchase. Additionally, for any transaction involving a penny stock, unless exempt, the broker-dealer must deliver, before the transaction, a disclosure schedule prescribed by the Securities and Exchange Commission relating to the penny stock market. The broker-dealer also must disclose the commissions payable to both the broker-dealer and the registered representative and current quotations for the securities. Finally, monthly statements must be sent disclosing recent price information on the limited market in penny stocks. These additional burdens imposed on broker-dealers may restrict the ability or decrease the willingness of broker-dealers to sell our common stock, and may result in decreased liquidity for our common stock and increased transaction costs for sales and purchases of our common stock as compared to other securities.

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

We cannot predict the extent to which an active public market for our common stock will develop or be sustained. However, we do not rule out the possibility of applying for listing on the Nasdaq Global Select Market, Nasdaq Global Market, Nasdaq Capital Market (the “Nasdaq Markets”), or other exchanges. Our common stock has historically been sporadically or “thinly traded” on the “Over-the-Counter Bulletin Board,” 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 nonexistent. This situation is attributable to a number of factors, including the fact that we are a small company which is relatively unknown to stock analysts, stock brokers, institutional investors and others in the investment community that generate or influence sales volume, and that even if we came to the attention of such persons, they tend to be risk-adverse 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 become more seasoned and viable. As a consequence, there may be periods of several days or more when trading activity in our shares is minimal or non-existent, as compared to a seasoned issuer that has a large and steady volume of trading activity that will generally support continuous sales without an adverse effect on share price. We cannot give you any assurance that a broader or more active public trading market for our common stock will develop or be sustained, or that current trading levels will be sustained.

The market price of our common stock is particularly volatile given our status as a relatively small company with a small and thinly traded “float” that could lead to wide fluctuations in our share price. The price at which you purchase our common stock may not be indicative of the price that will prevail in the trading market. You may be unable to sell your common stock at or above your purchase price if at all, which may result in substantial losses to you.

The market for our common stock is characterized by significant price volatility when compared to seasoned issuers, and we expect that our share price will continue to be more volatile than a seasoned issuer for the indefinite future. The volatility in our share price is attributable to a number of factors. As noted above, our common stock is sporadically and/or thinly traded. As a consequence of this lack of liquidity, the trading of relatively small quantities of shares by our shareholders may disproportionately influence the price of those shares in either direction. The price for our shares could, for example, decline precipitously in the event a large number of our common shares are sold on the market without commensurate demand, as compared to a seasoned issuer which could better absorb those sales without adverse impact on its share price. The following factors also may add to the volatility in the price of our common stock: actual or anticipated variations in our quarterly or annual operating results; adverse outcomes; additions to or departures of our key personnel, as well as other items discussed under this “Risk Factors” section, as well as elsewhere in this Report. Many of these factors are beyond our control and may decrease the market price of our common stock, regardless of our operating performance. We cannot make any predictions or projections as to what the prevailing market price for our common stock will be at any time, including as to whether our common stock will sustain its current market prices, or as to what effect the sale of shares or the availability of common shares for sale at any time will have on the prevailing market price. However, we do not rule out the possibility of applying for listing on the Nasdaq Markets or another exchange.

Shareholders should be aware that, according to SEC Release No. 34-29093, the market for penny stocks has suffered in recent years from patterns of fraud and abuse. Such patterns include (1) control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer; (2) manipulation of prices through pre-arranged matching of purchases and sales and false and misleading press releases; (3) boiler room practices involving high-pressure sales tactics and unrealistic price projections by inexperienced sales persons; (4) excessive and undisclosed bid-ask differential and markups by selling broker-dealers; and (5) the wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the resulting inevitable collapse of those prices and with consequent investor losses. Our management is aware of the abuses that have occurred historically in the penny stock market. Although we do not expect to be in a position to dictate the behavior of the market or of broker-dealers who participate in the market, management will strive within the confines of practical limitations to prevent the described patterns from being established with respect to our securities. The occurrence of these patterns or practices could increase the volatility of our share price.

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

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

Legislative actions, higher insurance costs and potential new accounting pronouncements may impact our future financial position and results of operations.

There have been regulatory changes, including the Sarbanes-Oxley Act of 2002, and there may potentially be new accounting pronouncements or additional regulatory rulings that will have an impact on our future financial position and results of operations. The Sarbanes-Oxley Act of 2002 and other rule changes, as well as proposed legislative initiatives following the Enron bankruptcy, are likely to increase general and administrative costs and expenses. In addition, insurers are likely to increase premiums as a result of high claims rates over the past several years, which we expect will increase our premiums for insurance policies. Further, there could be changes in certain accounting rules. These and other potential changes could materially increase the expenses we report under generally accepted accounting principles, and adversely affect our operating results.

Past activities of our company and its affiliates may lead to future liability for our company.

Prior to our acquisition of Chuming in December 2007, we engaged in businesses unrelated to our current operations. Although certain previously controlling shareholders of our company are providing certain indemnifications against any loss, liability, claim, damage or expense arising out of or based on any breach of or inaccuracy in any of their representations and warranties made regarding such acquisition, any liabilities relating to such prior business against which we are not completely indemnified may have a material adverse effect on our company.

Future sales of shares of our common stock may decrease the price for such shares.

Actual sales, or the prospect of sales by our shareholders, may have a negative effect on the market price of the shares of our common stock. We may also register certain shares of our common stock that are subject to outstanding convertible securities, if any, or reserved for issuance under our stock option plans, if any. Once such shares are registered, they can be freely sold in the public market upon exercise of the options. If any of our shareholders either individually or in the aggregate cause a large number of securities to be sold in the public market, or if the market perceives that these holders intend to sell a large number of securities, such sales or anticipated sales could result in a substantial reduction in the trading price of shares of our common stock and could also impede our ability to raise future capital.

Mergers of the type we just completed with Chuming are often heavily scrutinized by the SEC and we may encounter difficulties or delays in obtaining future regulatory approvals.

Historically, the SEC and Nasdaq have not generally favored transactions in which a privately held company merges into a largely inactive company with publicly traded stock, and there is a significant risk that we may encounter difficulties in obtaining the regulatory approvals necessary to conduct future financing or acquisition transactions, or to eventually achieve a listing of shares on one of the Nasdaq stock markets or on a national securities exchange. On June 29, 2005, the SEC adopted rules dealing with private company mergers into dormant or inactive public companies. As a result, it is likely that we will be scrutinized carefully by the SEC and possibly by the Financial Industry Regulatory Authority, which could result in difficulties or delays in achieving SEC clearance of any future registration statements or other SEC filings that we may pursue, in attracting FINRA-member broker-dealers to serve as market-makers in our common stock, or in achieving admission to one of the Nasdaq stock markets or any other national securities market. As a consequence, our financial condition and the value and liquidity of your shares of our common stock may be negatively impacted.

Our corporate actions are substantially controlled by our principal shareholders and affiliated entities.

Our principal shareholders and their affiliated entities own approximately 69.5% of our outstanding ordinary shares, representing approximately 69.5% of our voting power. These shareholders, acting individually or as a group, could exert substantial influence over matters such as electing directors and approving mergers or other business combination transactions. In addition, because of the percentage of ownership and voting concentration in these principal shareholders and their affiliated entities, elections of our board of directors will generally be within the control of these shareholders and their affiliated entities. While all of our shareholders are entitled to vote on matters submitted to our shareholders for approval, the concentration of shares and voting control presently lies with these principal shareholders and their affiliated entities. As such, it would be difficult for shareholders to propose and have approved proposals not supported by management. There can be no assurances that matters voted upon by our officers and directors in their capacity as shareholders will be viewed favorably by all shareholders of our company.

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

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

The market price for our stock may be volatile.

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

	·	actual or anticipated fluctuations in our quarterly operating results;
	·	changes in financial estimates by securities research analysts;
	·	conditions in agricultural markets;
	·	changes in the economic performance or market valuations of other meat processing companies;
	·	announcements by us or our competitors of new products, acquisitions, strategic partnerships, joint ventures or capital commitments;
	·	addition or departure of key personnel;
	·	fluctuations of exchange rates between RMB and the U.S. dollar;
	·	intellectual property litigation; and
	·	general economic or political conditions in China.

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

We may need additional capital, and the sale of additional shares or other equity securities could result in additional dilution to our shareholders.

We believe that our current cash and cash equivalents, anticipated cash flow from operations and the net proceeds from a recent offering will be sufficient to meet our anticipated cash needs for the near future. We may, however, require additional cash resources due to changed business conditions or other future developments, including any investments or acquisitions we may decide to pursue. If our resources are insufficient to satisfy our cash requirements, we may seek to sell additional equity or debt securities or obtain a credit facility. The sale of additional equity securities could result in additional dilution to our shareholders. The incurrence of indebtedness would result in increased debt service obligations and could result in operating and financing covenants that would restrict our operations. We cannot assure you that financing will be available in amounts or on terms acceptable to us, if at all.

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

The following exhibits are included in this report or incorporated by reference into this report:

Exhibit Number		Description

2.1		Share Exchange Agreement by and among the Energroup Holdings Corporation, PSI and PSI and Energroup Shareholders dated December 31, 2007 (1)

2.2		Articles and Plan of Merger (change in domicile from Utah to Nevada) (2)

3.1		Articles of Incorporation of Great Lakes Funding, Inc. (Utah) (1)

3.2		Bylaws of Great Lakes Funding, Inc. (1)

3.3		Articles of Amendment to Articles of Incorporation of Great Lakes Funding, Inc. (Name Change) (1)

3.4		Articles of Amendment to Articles of Incorporation of Energroup Technologies, Inc. (Reverse Split) (2)

3.5		Articles of Incorporation of Energroup Holdings Corporation (Nevada) (2)

3.6		Bylaws of Energroup Holdings Corporation (2)

3.7		Certificate of Amendment to Articles of Incorporation of Energroup Holdings Corporation (3)

4.1		Registration Rights Agreement dated December 2007 among Energroup and the investors signatory thereto (1)

4.2		Common Stock Purchase Warrant issued to Placement Agent (December 2007) (2)

10.11		Short-term Loan Agreement between Shanghai Pu Dong Development Bank Dalian Branch and Dalian Chuming Meat Co. (English summary translation) (4)

10.12		Short-term Loan Agreement between Bank of China Liao Ning Branch and Dalian Chuming Food Co. (English summary translation) (4)

10.13		Short-term Loan Agreement between Bank of China Liao Ning Branch and Dalian Chuming Meat Co. (English summary translation) (4)

10.14		Guarantee Agreement between Dalian Chuming Food Co. and Bank of China Liaoning Branch. (English summary translation) (4)

31.1		Rule 13a-14(a) / 15d-14(a)(4) Certification by the Company’s Chief Executive Officer.*

31.2		Rule 13a-14(a) / 15d-14(a)(4) Certification by the Company’s Chief Financial Officer.*

32.1		Section 1350 Certification by the Company’s Chief Executive Officer.*

32.2		Section 1350 Certification by the Company’s Chief Financial Officer.*

*	Filed herewith.
(1)	Previously filed with our Current Report on Form 8-K on January 7, 2008 and incorporated herein by reference.
(2)	Previously filed with our Current Report on Form 8-K on August 22, 2007 and incorporated herein by reference.
(3)	Previously filed with our Current Report on Form 8-K on December 14, 2007 and incorporated herein by reference.
(4)	Previously filed with our Quarter Report on Form 10-Q on May 20, 2008 and incorporated herein by reference.

SIGNATURES

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

	ENERGROUP HOLDINGS CORPORATION

Dated: September 2, 2008	By:	/s/ Shi Huashan
		Shi Huashan
		President and Chief Executive Officer
		(Principal Executive Officer)

Dated: September 2, 2008	By:	/s/ Wang Shu
		Wang Shu
		Chief Financial Officer
		(Principal Financial and Accounting Officer)