- Quarterly Report (10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

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

Securities Exchange Act of 1934

For the period ended: June 30, 2009 .

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

Exchange Ac of 1934

For the transition period from to

Commission File Number: 333-52472

SHANDONG ZHOUYUAN SEED AND NURSERY CO., LTD .

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

Delaware 58-2258912

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

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

incorporation or organization)

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

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

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

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

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

Large accelerated filer [ ] Accelerated filer [ ]

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

check if smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

As of August 18, 2009 the number of shares outstanding of the Registrant’s common stock was 84,001,200 shares, $.001 par value.

TABLE OF CONTENTS

TO QUARTERLY REPORT ON FORM 10-Q

FOR QUARTER ENDED JUNE 30, 2009

Part I – FINANCIAL INFORMATION

Page

Item 1. Financial Statements

Consolidated Balance Sheets

Consolidated Statement of Operations

Consolidated Statement of Cash Flows

Condensed Notes to Consolidated Financial Statement

Item 2. Management's Discussion And Analysis Of Financial

Condition And Results Of Operation

Item 3. Quantitative And Qualitative Disclosure About Market Risk 26

Item 4T. Controls and Procedures

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

Item 2. Unregistered Sale of Equity Securities and Use of Proceeds 27

Item 3. Defaults Upon Senior Securities

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

Item 5. Other Information

Item 6. Exhibits

Part I – FINANCIAL INFORMATION

Item 1. Financial Statements

SHANDONG ZHOUYUAN SEED AND NURSERY CO., LTD.

CONSOLIDATED BALANCE SHEETS

FOR THE PERIOD ENDED June 30, 2009 AND DECEMBER 31, 2008


				June 30,		December 31,
				2009		2008
				(unaudited)
ASSETS
Current Assets:
Cash and cash equivalents			$	324,350	$	514,139
Accounts receivable, net (Note 4)		188,956		484,627
Inventory (Note 5)				170,008		142,616
Other receivable			23,440		34,629
Advance to suppliers				214,980		32,607
Total current assets			921,734		1,208,618

Property, Plant, and Equipment, net (Note 6)	1,525,612		1,557,325

Other Assets
Land use right, net (Note 7)				232,731		235,039
Acquired seed patents, net (Note 8)		354,755		430,184
Receivable from sale of land use right (Note 9)				310,878		348,370
Total other assets			898,364		1,013,593

Total Assets		$	3,345,710	$	3,779,536

LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:


Short-term loans					$	18,617		18,650
Accounts payable and accrued expenses			344,316		679,924
Pension and employee benefit payable						81,626		75,677
Taxes payable					581,865		581,066
Deferred revenue					113,232		32,907
Due to employees					45,587		52,092
Due to an officer(Note 10)						71,692		76,804
Customer security deposit				98,778		103,870
Total Current Liabilities						1,355,713		1,620,990


Commitments and contingencies (Note 14 )			-
Stockholders' Equity:
Preferred stock, $0.001 par value, 5,000,000 shares authorized;
none issued and outstanding as of June 30, 2009, and December 31, 2008								-
Common stock, $0.001 par value, 150,000,000 shares authorized;
84,001,200 shares issued and outstanding as of June 30, 2009
77,001,200 shares issued and outstanding as of December 31, 2008		84,002	77,002
Common stock to be inssued						15,750		15,750
Additional paid-in capital				3,356,316		3,290,185
Accumulated deficiency						(2,330,899)		(2,117,238)
Deferred compensation					(6,991)		(91,801)
Accumulated other comprehensive income						123,700		121,866
Stockholders' Equity					1,241,878		1,295,764
Noncontrolling Interest						748,119		862,782
	Total Shareholders' Equity			1,989,997		2,158,546
Total Liabilities and Stockholders' Equity					$	3,345,710	$	3,779,536

See Notes To Consolidated Financial Statements

SHANDONG ZHOUYUAN SEED AND NURSERY CO., LTD.

CONSOLIDATED STATEMENT OF OPERATIONS AND OTHER COMPREFENSIVE INCOME (LOSS)

FOR THE THREE AND SIX MONTHS PERIOD ENDED JUNE 30 OF 2009 AND 2008


			For the Three Months Ended				For the Six Months Ended
			June 30,				June 30,
			2009		2008		2009		2008
			(unaudited)		(unaudited)		(unaudited)		(unaudited)
Revenues
Sale of seeds		$ 19,498		$ 541,636		$ 132,523		$ 809,691
Total revenue			2,923		-		2,923		-
			22,421		541,636		135,446		809,691
Cost of good sold
Cost of seeds sold		13,891		357,982		100,287		552,199
Amortization of plant variety protections			38,036		37,206		76,036		73,570
Total cost of sales		51,927		395,188		176,323		625,769

Gross Profit			(29,506)		146,448		(40,877)		183,922

Governmental subsidy for one plant variety protection	-				552,092

Operating Expenses
Selling expenses			8,720		4,431		18,906		14,701
Payroll			36,730		12,119		45,644		31,559
Pension and employee benefit			8,666		8,198		19,016		16,406
Depreciation expenses		16,588		29,155		33,159		57,581
Amortization of land use rights			1,315		2,770		2,630		5,478
Professional fees		8,463		19,899		17,487		24,539
Consultant fees			-		114,334		77,000		228,667
R&D expenses		30,585		-		38,665		-
Travel and entertainment			3,609		9,989		7,288		18,751
Office expenses		20,689		6,981		34,268		13,270
Other general and administrative			217		1,587		1,129		19,582


Total Operating Expenses		135,582		209,463		295,192		430,534

Income (Loss) from Operation		(165,088)		(63,015)		(336,069)		305,480

Other Income (Expenses)
Interest income				4		4,064		4,812		9,070
Interest expenses			(5,797)		(43,219)		(6,577)		(98,885)
Other income (expenses)				798		9,284		3,321		5,492
Total other income (expenses)		(4,995)		(29,871)		1,556		(84,323)

Income (Loss) before provision
for Income Tax				(170,083)		(92,886)		(334,513)		221,157

Provision for Income Tax				-		-

Income before Minority Interest				(170,083)		(92,886)		(334,513)		221,157

Minority Interest				4,978		-		4,978		-

Net Income (loss)				(165,105)		(92,886)		(329,535)		221,157

Less: Net income attributable to noncontrolling interest				73,358		(7,001)		115,874		(178,205)

Net Income attributable to
Shandong Zhouyuan Seed and Nursery Co., Ltd.	$ (91,747)		$ (99,887)		$ (213,661)	$	$ 42,952

Basic and fully diluted earnings (loss) per share	$ (0.00)		$ 0.00		$ (0.00)		$ 0.00

Weighted average shares outstanding		84,001,200		70,001,635		83,417,867		70,001,635

See Notes to Consolidated Statements of Income

SHANDONG ZHOUYUAN SEED AND NURSERY CO., LTD.

CONSOLIDATED STATEMENT OF CASH FLOW

FOR THE THREE MONTHS PERIOD ENDED JUNE 30 OF 2009 AND 2008


						For the Six Months Ended
						June 30,
						2009		2008
						(unaudited)		(unaudited)
Operating Activities

Net income (loss)					$ (213,661)		$ 42,952
Adjustments to reconcile net income (loss) to
net cash provided (used) by operating activities:
Minority interest						$ (115,874)		178,205
Depreciation					33,159		57,581
Amortization of land use rights and plant variety protections						78,666		79,048
Amortization of costs of common stocks issued for consultant service	77,000		228,667
Common stocks to be issued for compensation of officer and directors						7,810		-
Increase in court judgment payable				-		8,062
Gain on disposal of Tianzhe						(4,978)		-
Changes in operating assets and liabilities:
(Increase)/Decrease in accounts receivable			296,405		(8,126)
(Increase)/Decrease in inventory						(27,202)		31,974
(Increase)/Decrease in other receivable			11,239		2,124
(Increase)/Decrease in advance to suppliers						(182,370)		85,323
(Increase)/Decrease in contract security deposit			-		(133,019)
Increase/(Decrease) in accounts payable and accrued expenses						(336,619)		(210,080)
Increase/(Decrease) in pension and employee benefit payable		5,846		8,873
Increase/(Decrease) in taxes payable
Increase/(Decrease) in interest payable			-		16,764
Increase/(Decrease) in deferred revenue						80,299		10,328
Increase/(Decrease) in customer security deposit			(5,236)		(1,649)


Net cash provided (used) by operating activities			(295,516)		397,026

Investing Activities

Purchase of fixed assets			-		(741)
Net cash (used) by investing activities	-		(741)

Financing Activities

Payback of bank loans		-		(285,608)
Short-term loans			(59)		41,019
Payback of loans from employees	(6,578)		(354)
Loans from officers			(5,219)		-
Proceeds from capital contribution	73,131		-
Net cash provided (used) by financing activities			61,276		(244,942)

Increase (decrease) in cash			(234,240)		151,343
Effects of exchange rates on cash	44,451		24,188
Cash at beginning of period			514,139		11,345
Cash at end of period		$ 324,350		$ 186,876

Supplemental Disclosures of Cash Flow Information:
Cash paid (received) during year for:
Interest			(780)		(75,438)
Income taxes			-		-

SHANDONG ZHOUYUAN SEED AND NURSERY CO., LTD.

F/K/A PINGCHUAN PHARMACEUTICALS, INC.

NOTES TO FINANCIAL STATEMENTS

Note 1-

BASIS OF PRESENTATION

The accompanying unaudited financial statements as of June 30, 2009 and for the three and six months ended June 30, 2009 and 2008 have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information. They do not include all of the information and footnotes for complete financial statements as required by GAAP. In management's opinion, all adjustments (consisting only of normal recurring adjustments) considered necessary for a fair presentation have been included. The results of operations for the three and six months ended June 30, 2009 and 2008 presented are not necessarily indicative of the results to be expected for the full year. These financial statements should be read in conjunction with the Company’s audited financial statements and notes thereto for the fiscal year ended December 31, 2008.

Note 2 - ORGANIZATION AND OPERATIONS

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

The structure of the Company is illustrated as following:

[SH2Q09002.GIF]

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

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

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

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

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

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

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

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

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

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

GOING CONCERN

As reflected in the accompanying consolidated financial statements, the Company has a working capital deficiency of $433,979 and $412,373 as of June 30, 2009 and December 31, 2008, respectively; and an accumulated deficit of $2,330,898 and $2,117,238 at June 30, 2009 and December 31, 2008, respectively. These factors raise substantial doubt about its ability to continue as a going concern. In view of the matters described above, recoverability of a major portion of the recorded asset amounts shown in the accompanying consolidated balance sheet is dependent upon continued operations of the Company, which in turn is dependent upon the Company's ability to raise additional capital, obtain financing and succeed in its future operations. The financial statements do not include any adjustments relating to the recoverability and

classification of recorded asset amounts or amounts and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

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

Note 3-SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

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

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

Translation adjustments resulting from this process are included in accumulated other comprehensive income (loss) in the consolidated statement of shareholders’ equity and amounted to $123,700 as of June 30, 2009, as compared to $121,866 as of December 31, 2008. The balance sheet amounts with the exception of equity at June 30, 2008 were translated at 6.84 RMB to $1.00 USD as compared to 6.85 RMB at December 31, 2008. The equity accounts were stated at their historical rate. The average translation rates applied to income statement accounts for the six months ended June 30, 2009 and 2008 were 6.84 RMB and 7.07 RMB, respectively .

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results when ultimately realized could differ from those estimates.

Cash and Cash Equivalents

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

Statement of Cash Flows

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

Accounts Receivable

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

Concentrations of Credit Risk

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

Fair Value of Financial Instruments

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

Advance to Suppliers

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

Inventories

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

Valuation of Long-Lived Assets

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

Note 3-SIGNIFICANT ACCOUNTING POLICIES (continued)

Accounts Receivable

Concentrations of Credit Risk

Fair Value of Financial Instruments

Advance to Suppliers

Inventories

Valuation of Long-Lived Assets

Property, Plant and Equipment

Property, plant and equipment are carried at cost. The cost of repairs and maintenance is expensed as incurred; major replacements and improvements are capitalized.When assets are retired or disposed of, the cost and accumulated depreciation are removed from the accounts, and any resulting gains or losses are included in income in the year of disposition.Depreciation is calculated on a straight-line basis over the estimated useful life of the assets. The percentages or depreciable life applied are:



Property and plant				30 years
Machines and equipment				7 years
Officeequipment				5 years
Motor vehicles				5 years

Land Use Right

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

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

Acquired Plant Variety Protections, net

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

Short-term Loans

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

Due to Employees

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

Revenue Recognition

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

Governmental subsidy for one plant variety protection

In February 2008, Zhouyuan received governmental subsidy of $552,092 (RMB 3,950,000) for one of its plant variety protections, named H8723, which is a wheat variety and was cultivated by one of Zhouyuan's predecessor, Laizhou Agriculture Science Research and Development Ltd.

Research and Development Costs

Research and development costs relating to the development of new products and processes, including significant improvements and refinements to existing products, are expensed as incurred. The Research and development cost was $38,655 and $0 for the six months ended June 30, 2009 and 2008, respectively.

Advertising Costs

Advertising costs are expensed as incurred and included as part of selling and marketing expenses. Advertising expenses were $623 and $3,768 for the six months ended June 30, 2009 and 2008, respectively.

Pension and Employee Benefits

Full time employees of the PRC entities participate in a government mandated multi-employer defined contribution plan pursuant to which certain pension benefits, medical care, unemployment insurance, employee housing fund and other welfare benefits are provided to employees. Chinese labor regulations require the Company to accrue for these benefits based on certain percentages of the employees' salaries. The total provisions for such employee benefits were $17,108 and $16,406 for the three months ended June 30, 2008 and 2007, respectively.

Statutory Reserves

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

Income Taxes

The Company accounts for income taxes in interim periods as required by Accounting Principles Board Opinion No. 28 "Interim Financial Reporting" and as interpreted by FASB Interpretation No. 18, "Accounting for Income Taxes in Interim Periods". The Company has determined an estimated annual effect tax rate. The rate will be revised, if necessary, as of the end of each successive interim period during the Company's fiscal year to its best current estimate.

The estimated annual effective tax rate is applied to the year-to-date ordinary income (or loss) at the end of the interim period.

Earnings (Loss) Per Share

The Company reports earnings per share in accordance with the provisions of SFAS No. 128, “Earnings Per Share.” SFAS No. 128 requires presentation of basic and diluted earnings per share in conjunction with the disclosure of the methodology used in computing such earnings per share. Basic earnings (loss) per share is computed by dividing income (loss) available to common shareholders by the weighted-average number of common shares outstanding during the period. Diluted earnings per share is computed similar to basic earnings per share except that the denominator is increased to include the number of additional common shares that would have been outstanding if the potential common shares

had been issued and if the additional common shares were dilutive. There are no potentially dilutive securities for the six months ended June 30, 2009 and 2008, respectively.

Comprehensive Income

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

Segment Reporting

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

Related Parties

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

Recent Accounting Pronouncements

In April 2009, the FASB issued FSP FAS 141(R)-1, “Accounting for Assets Acquired and Liabilities Assumed in a Business Combination That Arise from Contingencies.” This FSP requires that assets acquired and liabilities assumed in a business combination that arise from contingencies be recognized at fair value if fair value can be reasonably estimated. If fair value cannot be reasonably estimated, the asset or liability would generally be recognized in accordance with SFAS No. 5, “Accounting for Contingencies” and FASB Interpretation No. 14, “Reasonable Estimation of the Amount of a Loss”. Further, the FASB removed the subsequent accounting guidance for assets and liabilities arising from contingencies from SFAS No. 141(R). The requirements of this FSP carry forward without significant revision the guidance on contingencies of SFAS No. 141, “Business Combinations”, which was superseded by SFAS No. 141(R). The FSP also eliminates the requirement to disclose an estimate of the range of possible outcomes of recognized contingencies at the acquisition date. For unrecognized contingencies, the FASB requires that entities include only the disclosures required by SFAS No. 5. This FSP was adopted effective January 1, 2009. There was no impact upon adoption, and its effects on future periods will depend on the nature and significance of business combinations subject to this statement.

In April 2009, the Financial Accounting Standards Board (FASB) issued FASB Staff Position (FSP) Financial Accounting Standard (FAS) 157-4 “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly”. Based on the guidance, if an entity determines that the level of activity for an asset or liability has significantly decreased and that a transaction is not orderly, further analysis of transactions or quoted prices is needed, and a significant adjustment to the transaction or

quoted prices may be necessary to estimate fair value in accordance with Statement of Financial Accounting Standards (SFAS) No. 157 “Fair Value Measurements”. This FSP is to be applied prospectively and is effective for interim and annual periods ending after June 15, 2009 with early adoption permitted for periods ending after March 15, 2009. The Company will adopt this FSP for its quarter ending June 30, 2009. The Management does not expect that the adoption of this FSP would have a material effect on the Company’s financial position and results of operations.

In April 2009, the FASB issued FSP FAS 115-2 and FAS 124-2 “Recognition and Presentation of Other-Than-Temporary Impairments”. The guidance applies to investments in debt securities for which other-than-temporary impairments may be recorded. If an entity’s management asserts that it does not have the intent to sell a debt security and it is more likely than not that it will not have to sell the security before recovery of its cost basis, then an entity may separate other-than-temporary impairments into two components: 1) the amount related to credit losses (recorded in earnings), and 2) all other amounts (recorded in other comprehensive income). This FSP is to be applied prospectively and is effective for interim and annual periods ending after June 15, 2009 with early adoption permitted for periods ending after March 15, 2009. The Company will adopt this FSP for its quarter ending June 30, 2009. The Management does not expect that the adoption of this FSP would have a material effect on the Company’s financial position and results of operations.

Note 4-ACCOUNTS RECEIVABLE

Accounts receivable consists of the following:

June 30, 2009 December 31, 2008

(unaudited)

Accounts receivable $ 468,431 $ 708,577

less: Allowance for bad debt 279,475 223,930

Accounts receivable, net $ 188,956 $ 484,627

We use indirect method to write off accounts receivable. The bad debt expenses were $270 and $ 0 for the six months ended June 30, 2009 and 2008, respectively.

Note 5-INVENTORIES


		June 30,		December 31,
		2009		2008
		(unaudited)

Finished goods	$	121,317	$	99,538
Supply and packing materials		48,691		43,078


			$	170,008	$	142,616

Note 6-PROPERTY AND EQUIPMENT

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


		June 30,		December 31,
		2009		2008
		(unaudited)

Property and plant	$	1,709,544	$	1,707,671
Machines and equipment		203,077		202,797
Office equipment		20,692		20,665
Motor vehicles		104,955		104,812
Total		2,038,268		2,035,945

Less: Accumulated depreciation		(512,656)		(478,620)

Total	$	1,525,612	$	1,557,325

Depreciation expense charged to operations was $33,159 and $57,581 for the six months ended June 30, 2009 and 2008, respectively.

Note 7-LAND USE RIGHT

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


		June 30,		December 31,
		2009		2008
		(unaudited)

Land use right	$	262,973	$	262,613
less: Amortization		(30,242)		(27,574)
Accounts receivable, net	$	232,731	$	235,039

Amortization expense charged to operations was $2,630 and $5,478 for the six months ended June 30, 2009 and 2008, respectively .

Note 8- ACQUIRED PLANT VARIETY PROTECTIONS

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


	June 30,		December 31,
	2009		2008
	(unaudited)

Acquired plant variety protections	1,520,380	$	1,518,295
less: Amortization	(1,165,625)		(1,088,111)
Accounts receivable, net	354,755		430,184

Amortization expense charged to operations was $76,036 and $73,570 for the three months ended June 30, 2009 and 2008, respectively .

Note 9- RECEIVABLE FROM SALE OF LAND USE RIGHT

In 2004, the Company sold land use rights to a real estate development company for $1,228,858. The real estate development company owes the Company $309,025 as of December 31, 2004. The parties agreed that the real estate development company would pay interest annually at 7.488% on $126,817 (RMB 1,000,000) of the $309,025 and the rest of the balance bears no interest. Beginning from April 1, 2009, the parties agreed that no interest would bear on the total balance. As of June 30, 2009, the outstanding balance of interest due from the real estate development company was $28,972;

Note 10- DUE TO OFFICERS

Due to officers consists of the following:


	June 30,		December 31,
	2009		2008
	(unaudited)

Due to Mr. Zhigang Wang, CEO	71,692	$	76,804
Due to Ms. Yuqun Liu, CFO	-		-
Accounts receivable, net	71,692		76,804

Due to Mr. Zhigang Wang, CEO

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

Due to Ms. Yuqun Liu, CFO

In January 2009, Ms. Liu, Yiqun, CFO of the Company, lent $148,700 to the Company to finance its operation. The loan is for the period January 1, 2009 through May 30, 2009, secured by the Company's seed inventory, and the monthly interest is $1,022. The Company paid interest of $5,110 in the six months ended June 30, 2009.

Note 11- COMMON STOCK

In January 2009, the Company issued 7,000,000 shares of common stock to two individuals for $73,131 (RMB 500,000).

Note 12- STATEMENT OF CONSOLIDATED COMPREHENSIVE INCOME


	For the Six Months Ended
	June 30,
	2009	2008
	(unaudited)	(unaudited)

Net income	$ (329,535)	$ 221,157
Other comprehensive income, net of tax:
Effects of foreign currency conversion	3,045	72,338
Total other comprehensive, not of tax	3,045	72,338
Comprehensive income	(326,490)	293,495
Comprehensive income attributable to
the noncontrolling interest	(114,663)	213,889
Comprehensive income attributable to
Shandong Zhouyuan Seed and Nursery Co., Ltd.	$ (211,827)	$ 79,606

13. SEGMENT REPORTING

Major Products

The major products consist of following


			For the Six Months Ended
			June 30,
			2009		2008

	Kind of the	Name		Percentage of		Percentage of
	Seed	of the Seed	Amount	Total Revenue	Amount	Total Revenue

	Revenue

1	Corn seed	Ludan 981	$ 40,525	29.62%	$ 202,945	24.23%
2	Corn seed	zhouyu No.1	37,209	27.20%	1,321	0.16%
3	Corn seed	Huiyuan No. 20	24,743	18.09%	136,756	16.32%
4	Corn seed	Yedan No.23	17,497	12.79%	71,956	8.59%
5	Corn seed	Nongda 108	14,081	10.29%	136,709	16.32%
6	Corn seed	Others	2,748	2.01%	288,040	34.38%
	Total		$ 136,803	100.00%	$ 837,727	100.00%

Costs of Sales:


1	Corn seed	Ludan 981	$ 58,479	33.18%	$ 204,760	32.83%
2	Corn seed	zhouyu No.1	42,084	23.88%	1,309	0.21%
3	Corn seed	Huiyuan No. 20	24,714	14.02%	84,971	13.62%
4	Corn seed	Yedan No.23	21,870	12.41%	55,620	8.92%
5	Corn seed	Nongda 108	20,334	11.54%	117,760	18.88%
6	Corn seed	Others	8,777	4.98%	159,307	25.54%
	Total		$ 176,259	100%	$ 623,726	100%

Gross Profit:


1	Corn seed	Ludan 981	$ (17,955)	45.51%	$ (1,815)	-0.85%
2	Corn seed	zhouyu No.1	(4,875)	12.36%	12	0.01%
3	Corn seed	Huiyuan No. 20	29	-0.07%	51,785	24.20%
4	Corn seed	Yedan No.23	(4,373)	11.08%	16,336	7.63%
5	Corn seed	Nongda 108	(6,254)	15.85%	18,949	8.85%
6	Corn seed	Others	(6,029)	15.28%	128,732	60.16%


	Total				$ (39,456)		100%		$ 213,999		100%

Major Customers

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


		For the Six Months Ended June 30,
		2009			2008
Major			Percentage of			Percentage of
Customer		Revenue	Total Revenue		Revenue	Total Revenue

Anhui Linquan Shuguang Seed Co., Ltd.	$	23,881	15.99%	$	-	-
Anhui Delong Seed Co., Ltd.		17,531	11.74%
Shanghai Chongming Seed Co., Ltd.		16,943	11.34%		33,545	4.16%
Henan Zhengzhou Zhongyi Technology Co., Ltd.		16,359	10.95%		32,937	0.04
Jiangshu Binhai Tianlong Seed Co., Ltd.		12,790	8.56%		8,806	0.01

Total	$	87,503	58.58%	$	75,287	9.33%

Major Suppliers

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


		For the Six Months Ended June 30,
		2009			2008
Major			Percentage of			Percentage of
Suppliers		Revenue	Total Revenue		Revenue	Total Revenue

Gansu Province Jinxibei Seed Co., Ltd.	$	60,468	48.72%	$
Mr. Ren, Hongzhang-Zuocun Zhuwang Town, Laizhou City		19,073	15.37%		-	-
Mr. Liu, Penghui-Shahe luwang Town, Laizhou City		7,529	6.07%		28,700	5.72%
Total	$	87,071	70.15%	$	28,700	5.72%

Note 14-COMMITMENTS AND CONTINGENCIES

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

___________________________________________________________________________________________________________

Item 2. Management's Discussion And Analysis Of Financial Condition And Results Of Operation:

The revenue in the second quarter of 2009 was $22,421, major generated from seed sale of $19,498, reduced from $541,636 of the same period of last year. The main reason of the revenue reduction is due to the sufficient storage of the corn seeds in the wholesale agencies. In the fourth quarter of 2008, the wholesale agencies of corn seeds already stored enough corn seeds for the sale of the past six months of 2009.

The total costs of sale were $13,891 compared with $357,982 of the same period of last year. The operation loss was ($165,088) compared with loss of ($63,015) of the same period of last year. The comprehensive loss was ($ 91,747) compared with loss of ($99,887) of the same period of last year.

The average loss per share was $0 compared with loss $0 per share of the same period of last year.

Liquidity and Capital Resources

On June 30, 2009, the company had cash and cash equivalent of $ 324,350 compared with $186,876 on June 30, 2008. The account receivable was reduced for $296,405, and the advance to suppliers increased $182,370 on

June 30 compared with those on March 31, 2009. The increase of the advance to suppliers was due to that the managers wanted to guarantee the seed suppliers for the rest of the year.

In past six months, the company paid interest of $5,110 for one manager's loan of $148,700.

Although, the Company has a working capital deficiency of $433,979 and $412,373 as of June 30, 2009 and December 31, 2008 respectively, the managers believe that it will meet its capital requirement in the rest of the year through generating income from operation and financial activities.

Item 3. Quantitative And Qualitative Disclosure About Market Risk

Not Applicable

Item 4T. Controls and Procedures

Evaluation of Disclosure Controls :

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

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

Conclusions:

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

It should be noted that any system of controls is based in part upon certain assumptions designed to obtain reasonable (and not absolute) assurance as to its effectiveness, and there can be no assurance that any design will succeed in achieving its stated goals. Notwithstanding this caution, the CEO and CFO have reasonable assurance that the disclosure controls and procedures were effective as of June 30, 2009.

PART II - OTHER INFORMATION

Item 1. Legal Proceedings

From time to time we may be named as a party to various litigation proceedings arising in the ordinary course of our business, such as contractual rights and obligations, employment matters etc., none of which, in the opinion of management, is likely to have a material adverse effect on our financial condition or results of operations.

Item 2. Unregistered Sale 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

31 - Certification of Chief Executive Officer and Chief Financial Officer filed pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32 - Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

Signature:

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

Shandong Zhouyuan Seed and Nursery Co., Ltd

Dated: August 19, 2009 By: /s/ Zhigang Wang

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

Zhigang Wang, CEO

August 19, 2009

/s/Yiqun Liu

Yiqun Liu, CFO